The European Parliament’s Energy Committee Backs Reforms for Stable and Affordable Electricity Prices in the EU

The European Parliament’s Energy Committee Backs Reforms for Stable and Affordable Electricity Prices in the EU / Press conference by Nicolás GONZÁLEZ CASARES, rapporteur on the reform of the electricity market design

(IN BRIEF) The Energy Committee has backed reforms to create a more affordable and consumer-friendly electricity market. The proposed changes aim to enhance consumer protection against volatile prices, encourage energy investments, and provide safeguards for vulnerable households. The amendments include granting consumers the right to fixed-price and dynamic contracts, along with comprehensive information. Suppliers will be prohibited from unilaterally changing contract terms. MEPs also propose prohibiting electricity suppliers from cutting off power to vulnerable customers and mandating the use of prepayment systems. The committee supports the use of Contracts for Difference (CFDs) and Power Purchase Agreements (PPAs) to stimulate investments and provide stable prices. Flexibility in the power grid and demand-side management are also emphasized. The reforms received support from the Energy Committee and will proceed to negotiations with the Council. The final decision will be made in the forthcoming plenary session. The reforms aim to create a stable, affordable, and sustainable electricity market that prioritizes consumer interests.

(PRESS RELEASE) BRUSSELS, 19-Jul-2023 — /EuropaWire/ — The Energy Committee has given its endorsement to reforms aimed at creating a more stable, affordable, and sustainable electricity market. The proposed changes focus on enhancing consumer protection, encouraging energy investments, and providing safeguards for vulnerable households.

MEPs have put forward amendments to strengthen consumer protection against volatile prices. The amendments include granting consumers the right to fixed-price and dynamic price contracts, along with comprehensive information on their options. Suppliers will be prohibited from unilaterally changing contract terms. These measures aim to ensure long-term affordability and stability for all consumers, including small businesses, while mitigating the impact of sudden price shocks.

Additionally, MEPs propose that EU countries prohibit electricity suppliers from cutting off the power supply to vulnerable customers, even during disputes. Suppliers will also be prevented from mandating the use of prepayment systems for these customers.

The Energy Committee supports the wider use of “Contracts for Difference” (CFDs) to encourage energy investments. MEPs suggest maintaining flexibility for equivalent support schemes, subject to approval by the Commission. CFDs involve public authorities compensating energy producers during periods of steep market price declines, while collecting payments from them during periods of high prices.

MEPs also emphasize the significance of Power Purchase Agreements (PPAs) in providing consumers with stable prices and renewable energy providers with reliable revenues. The European Commission is tasked with establishing a marketplace for PPAs by the end of 2024.

The criteria for declaring an electricity price crisis have been adjusted to ensure concrete measures are in place for better protection of citizens and businesses.

Furthermore, the committee advocates for “non-fossil flexibility,” which refers to the ability of the power grid to adjust to changes in supply and demand without relying on fossil fuels. They also highlight the importance of demand-side flexibility, such as utilizing home battery systems, to balance the electricity grid, reduce price fluctuations, and empower consumers to adapt their energy consumption according to prices and needs.

Lead MEP Nicolás González Casares (S&D, ES) stated, “This agreement places citizens at the heart of the electricity market design. It prohibits power cuts for vulnerable consumers, promotes energy sharing, reduces price spikes, and ensures affordable prices for citizens and businesses. We have made Contracts for Difference the benchmark for transitioning the electricity sector to a renewable-based, zero-emission system. This system will enhance the competitiveness of companies through clean electricity at competitive and stable prices.”

The electricity market reform was supported by 55 MEPs on the Industry, Research and Energy Committee, with 15 voting against and 2 abstentions. MEPs also voted to initiate negotiations with the Council, with 47 votes in favor, 20 against, and 5 abstentions. The final decision on the reform will be made during the upcoming plenary session, subject to approval by the full House.

In recent times, energy prices have been on the rise, driven initially by post-COVID-19 economic recovery. However, a severe energy crisis ensued following gas supply problems triggered by Russia’s conflict with Ukraine in February 2022. High gas prices directly impacted electricity prices due to their interdependence within the merit order system. The system attributes the overall electricity price to the costliest energy source, usually fossil fuel-based.

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