To protect consumers against volatile prices, MEPs made sure they 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 is to 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.
MEPs also secured the possibility that EU countries prohibit suppliers from cutting the electricity supply of vulnerable customers, including during disputes between suppliers and customers.
Contracts for Difference
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 shall also 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 %.
Electricity price crisis
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.
Quote
“With this agreement, Europe will have a socially just electricity market that will better protect citizens, especially the most vulnerable, with measures to ensure affordable prices for citizens and businesses, and accelerate the energy transition. Parliament has achieved a market design that takes a step forward in the democratisation of energy. We have been able to work at lightning speed to achieve an agreement that responds to many of the failures exposed by the energy crisis and to the expectations of citizens,” lead MEP Nicolás González Casares (S&D, ES) said.
Next steps
The provisional agreement now needs to be approved by both Parliament and Council to become law. The Industry, Research and Energy committee will vote on the file during a forthcoming meeting.
Background
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. High gas prices had an immediate effect on electricity prices, as they are linked together under the merit order system, where the most expensive (usually fossil fuel-based) energy source sets the overall electricity price.
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