Reform of the electricity market in the EU. There is an informal agreement

Negotiators from the European Parliament and the Council of the European Union have reached an informal agreement on electricity market reform.

“To protect consumers from volatile prices, Members of the European Parliament have ensured that they have the right to access fixed price and dynamic price contracts and receive important information about the options they sign up for, helping suppliers are prohibited from unilaterally changing the terms of the contract. This is to protect consumers from volatile prices. guarantee all consumers, as well as small businesses, the benefits of affordable and stable prices in the long term and mitigate the impact of sudden price shocks,” we read in the press release.

The Members of the European Parliament also assured the possibility for Member States of the European Union to prohibit suppliers from disconnecting electricity supplies to so-called sensitive customers, including in the event of disputes between suppliers and customers.

Energy market reform in the EU

The agreed text provides for so-called Contracts for Difference (CFDs) or equivalent schemes with the same effects to encourage energy investments. With CFDs, the government compensates the energy producer if market prices fall too much, but collects payments from the producer if prices are too high. The use of CFDs will be allowed in all investments in new electricity production, whether from renewable energy or nuclear energy.

The agreement also stipulates that power purchase agreements (PPAs) can guarantee stable prices for consumers and reliable revenues for renewable energy suppliers. The European Commission will create a market for PPAs.

“The Commission will also assess the possibility of using the EU renewable energy financing mechanism to organize EU-wide renewable energy auctions to help achieve the 2.5% renewable energy share, in addition to the binding target at EU level of 42.5%.” – we are reading.

The document also defines the mechanism for announcing an electricity price crisis. In a situation of very high prices and under certain conditions, the EU may declare a regional or EU-wide electricity price crisis, allowing Member States to take temporary measures to fix electricity prices for small and medium-sized businesses and energy-intensive industrial users.

“With this agreement, Europe will have a socially fair electricity market that better protects citizens, especially the most vulnerable, through measures that guarantee affordable prices for citizens and businesses and accelerate the energy transition,” the report said.

New agreement

The provisional agreement must now be approved by both Parliament and the Council before it becomes law. The Committee on Industry, Research and Energy will vote on this issue at one of its upcoming meetings.

Energy prices have increased since mid-2021, initially in the context of economic recovery following the COVID-19 pandemic. However, energy prices skyrocketed due to gas supply problems following Russia’s war with Ukraine in February 2022. High gas prices had an immediate impact on electricity prices as they are interconnected within the system. merit orderwhere the most expensive (usually fossil fuel-based) energy source determines the total electricity price.

Source: Do Rzeczy