‘Euro – bra de fer’ for the proposal that will reduce energy prices by 30%

Of Thanks to Floudopoulos

At a time when inflation is being derailed by rapid energy price hikes and consumers are starting to receive their electricity and gas bills with huge increases, a power game is unfolding in Brussels around the French proposal for energy market reforms.

It is a proposal tabled jointly by five southern European countries, Greece, Italy, Spain and Romania, who joined forces with France during the EU Energy Council.

Specifically, the French plan consists of 9 sub-proposals, the most important of which concerns the change of the mode of operation of the wholesale electricity market.

This is a proposal that, according to market estimates, could immediately lead to a reduction in wholesale electricity prices by at least 30%. What is this proposal? Today, the wholesale prices based on the operating model of the market, are determined based on the latest offer of the most expensive unit that entered the system.

So since at this time the gas units, due to the fuel prices, are very expensive, the wholesale electricity prices are affected accordingly. The French proposal proposes to amend Article 5 of the Electricity Directive to allow Member States to implement regulatory mechanisms to ensure that consumers pay electricity prices that reflect the costs of the production mix used to cover their consumption.

Simply put, France’s proposal is for prices to be based on the average cost of operating units and not on the most expensive offer.

Alternatively or in parallel with the previous proposal, it is proposed to amend Article 9 of the Electricity Directive, so that Member States can ensure that consumers have access to a competitive zero-emission electricity supply that reflects production costs.

The five countries are also proposing to consult with the European regulator ACER to identify the necessary reforms in the electricity market so that it can adapt and be sustainable in the face of the 55% RES target.

The proposal also includes measures to protect and better inform consumers, facilitate long-term contracts based on zero-emission energy.

Finally, the proposal includes measures for natural gas, ensuring the maximum utilization of storage space to enhance security of supply and finally for the joint central supply of natural gas at European level.

The five-nation bloc, however, is facing resistance from both Brussels and the European Regulator ACER, which reports to the Commission, and calls into question the need to reform the market model, as well as from the north and especially Germany, which wish for change.

This is because the current market model is the basis on which the coupling of European markets has taken place, which is a cornerstone of EU energy policy.