Energy crisis: EU Commission creates basis for gas cartels

In the energy crisis, the EU Commission wants to take countermeasures with gas cartels and further billions in relief for citizens.

Energy crisis: EU Commission creates basis for gas cartels

In the energy crisis, the EU Commission wants to take countermeasures with gas cartels and further billions in relief for citizens. "It is logical that Member States and energy companies should use their combined purchasing power instead of outbidding each other," said Commission President Ursula von der Leyen on Tuesday in Strasbourg on proposals for joint gas purchases. She also outlined a reform of the gas wholesale market. She made no concrete proposals for an EU-wide gas price cap, as many countries had called for.

40 billion for relief

The EU Commission proposed reallocating almost 40 billion euros from the Community budget, which were planned for regional development, to relieving the burden on companies and citizens, among other things. However, the EU states and the European Parliament still have to negotiate on this. Von der Leyen said the Commission is also examining what additional funds are needed to advance the energy transition and avoid fragmentation of the EU internal market.

Previously, several EU countries had asked for help to protect their population and industry from the high prices - especially after Germany had announced the up to 200 billion euros "double boom" against the high gas prices. Some members of the EU Commission and countries like Italy had proposed taking on debt at European level, as in the Corona pandemic.

Joint gas purchases

The concentrated market power of the EU should ensure lower prices. The gas storage tanks are to be filled in a coordinated manner in the coming year. Specifically, according to the EU Commission's proposal, companies must notify a central office of how much gas they need - this should be mandatory for at least 15 percent of the prescribed storage levels. Offers are then obtained for this and the companies can decide whether they want to join one or more consortia to buy the gas together. According to the Commission, the system should be operational in the spring. Russian gas would be exempt from purchases.

However, the project is not new - the EU countries had already agreed in March to buy gas together in the future. A joint coordination platform was set up, but brought no results. Instead, the EU states filled their gas storage facilities on their own and in some cases outbid each other - the Federal Republic in particular was accused of this. The proposal now stipulates that the Commission should be informed about transactions in excess of 500 million cubic meters of gas and be able to make an assessment of them.

The EU Commission is also working on a new price index for liquefied natural gas (LNG) to supplement the gas price index of the wholesale center TTF. Many purchase contracts in the EU are based on the TTF, which fluctuates greatly due to the interrupted gas supplies from Russia. For LNG deliveries, which are relatively stable, there should therefore be a different benchmark on the market from the end of March 2023. Economics Minister Robert Habeck (Greens) is hoping that prices will go down. In addition, daily price peaks in short-term transactions with gas on energy exchanges are to be cushioned by a mechanism.

In an emergency gas price cap

However, a concrete proposal for a gas price cap, as demanded by more than half of the EU countries, is still a long way off. Instead, the EU Commission merely held out the prospect that, in the event of extreme prices, a flexible price cap on the TTF could be proposed as a last resort. Other trading places in the EU would then be linked to the price of the TTF via price corridors.

A key element in overcoming the crisis is also saving energy. In August and September, gas consumption fell by 15 percent compared to the past five years, according to the commission. In order for this to continue, the authority has now proposed that states should also reduce the consumption of protected consumers - especially households - when it comes to "non-essential consumption", such as heating private swimming pools.

Next, Chancellor Olaf Scholz and his EU colleagues will deal with the ongoing topic of energy at the summit at the end of the week. Some of Tuesday's proposals, such as joint gas purchases, could then be adopted at a ministerial meeting in November. For others, such as the price cap, the EU Commission has to submit legislative proposals that then have to be negotiated.

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