EU Council and European Parliament negotiators agreed informally Thursday, 14 December 2023 on a deal to reform the EU electricity market, with a view to making it more stable, affordable, and sustainable.
The deal is to help the EU build a renewables-based energy system, lower energy bills and better protect consumers from price spikes and empower them to benefit from the transition.
Energy prices have been rising since mid-2021, initially in the context of the post-COVID-19 economic recovery. However, energy prices rose steeply due to gas supply problems following Russia’s war against Ukraine in February 2022.
To protect consumers against volatile prices, they will have the right to access fixed-price contracts, dynamic price contracts, and receive key information on the options they sign up to, banning suppliers from being able to unilaterally change the terms of a contract. This should ensure that all consumers, as well as small businesses, benefit from long-term, affordable and stable prices and to mitigate the impact of sudden price shocks.
There is now a possibility that EU countries prohibit suppliers from cutting the electricity supply of vulnerable customers, including during disputes between suppliers and customers.
The agreed text provides for so-called « Contracts for Difference » (CFDs), or equivalent schemes with the same effects, to encourage energy investments. In a CfD, a public authority compensates the energy producer if market prices fall too steeply, but collects payments from them if prices are too high. The use of CfDs will be allowed in all investments in new electricity production, whether from renewable or nuclear energy.
The deal also stipulates that Power Purchase Agreements (PPAs) may guarantee stable prices for consumers and reliable revenues for renewable energy providers. The European Commission will set up a marketplace for PPAs.
The Commission will have to assess the possibility of using the EU’s Renewable Energy Financing Mechanism to organise EU-wide renewable energy auctions to help achieve the 2.5% share of energy from renewable sources, in addition to the binding EU level target of 42.5 %.
The agreed text sets out a mechanism to declare 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 set electricity prices for SMEs and energy intensive industrial consumers.
The provisional agreement now needs to be approved by both Parliament and Council to become law.
Source: EUbusiness
