Winter is coming and in Europe there is alarm over the prices that families will have to pay for electricity and gas

The bull caught them. The European Commission has been dragging its feet for months making sure the European electricity market is functioning properly. Also in July, with the price of gas reaching record levels which then continued to rise due to cuts in Russian supply, the European Commission saw no rush and promised a reform proposal by March 2023.

Governments have twisted his arm and the proposal, which is already circulating in Brussels, will arrive at the table of ministers on Friday.

Electricity is sky high. With the exception of France, where the government establishes the prices per kilowatt by decree and the public giant EDF assumes the losses, which go to public debt, in the rest of the countries the prices are updated (in some months, in others in quarters or semesters or at the beginning of the year) and the blow will be brutal in the coming months.

An average Dutch or Belgian family who pays just under € 200 per month for electricity and gas for hot water and heating it could pay three to four times more this European winter.

Prices

This increase accounts for practically half of European inflation (the Eurozone average has already exceeded 9%) and can cause social tensions, as well as putting the block industry on the ropes to the point that the six-monthly European presidency, held by the Czech Republic, speaks of the continent’s “deindustrialization” if the measures are not implemented.

The functioning of the electricity market explains part of the soaring bills. National electricity regulators buy the megawatts they estimate needed for the next day from power plants every day.

They buy the cheapest ones first. (Basically those generated by nuclear, hydroelectric and renewable). When that’s not enough, they buy those generated in gas and coal plants.

Gas is the most expensive and now its price has multiplied. The rule says that all megawatts must be paid for at the price of the most expensive megawatt, so gas sets the price. It is the well-known marginal system, useful for the formation of prices in normal times and crazy in times of lack of gas.

To complicate the situation more than half of French nuclear reactors (the first in Europe and the second in the world) are not workinghydroelectric production is at negligible levels due to drought and little wind produced in recent months due to the general lack of wind.

How does it come full circle? Last week, President Úrsula Von der Leyen promised “emergency intervention” and “structural reform”. The first stage is the urgent one and this Friday, when the ministers meet again, they will already have a first document with options on the table.

shopping

At the bottom of the plans is the sharing of the cost of increasing energy prices: how much should be charged to households and industry, What part should states play in the form of public spending? and how these two plates are reduced, subtracting part of the extraordinary benefits from the electricity companies.

The Commission is preparing a document with several options ranging from decoupling and limiting the impact of gas prices on electricity by placing a cap on the price of gas used for electricity generation and another limit on how much is paid for gas. Russian, in addition to excluding it from the formation of prices.

It also seeks to increase liquidity in the markets to control possible speculation with energy futures, reduce demand, help the most vulnerable families and to companies in the most precarious situation, setting them special rates and extorting the “fallen from the sky” benefits that owners of nuclear, renewable or hydroelectric power plants have with taxes or price limits, which are paid as if they consumed the gas they do not use .

The Commission wants measures that are quick and easy to implement and that can be coordinated at European level even if they are not exactly the same for all countries. They need to be so that Europeans can pay their electricity and heating bills without spending too much and so that the sector remains competitive.

Because electricity bills for the next few months in much of Europe will be unsustainable for tens of millions of homes.