EU plans 'emergency intervention' on electricity price

Details of the plan are not yet clear, but pressure on the EU to formulate a general response to the extreme price surge is mounting.

Wholesale day-ahead electricity prices — the prices energy companies pay for that day's electricity — breached €700 per megawatt-hour in some countries on Monday, including France and Austria, compared to an average of €20 and €50 per MWh last year.

German benchmark power prices for 2023 breached 1,000 euros per megawatt hour for the first time on Monday.

To alleviate pressure on individual member states, German chancellor Olaf Scholz on Monday urged the European Union to take swift action in reforming its electricity market.

"We are in complete agreement that rapid action has to be taken" on reforming the market," he said at a press conference with Czech prime minister Petr Fiala, whose country holds the rotating presidency of the EU.

Czech industry and trade minister Jozef Sikela announced a special meeting of energy ministers on 9 September. Maximising the gas price is one of the proposals that the Czech Republic wants to put on the table, Sikela said.

Another proposal could be the decoupling of gas prices and electricity prices.

Even though renewable energy has never been cheaper, electricity prices are determined by the most expensive generator, which currently is gas.

Critics say that this disincentivises the move to renewables as a replacement for gas.

"One of the proposals we are making is to cap the price of gas used for electricity generation," Sikela told reporters in Prague on Monday. The decoupling of gas and electricity prices could therefore only be partial. "It is not a question of completely separating the markets, but of removing the gas intended for the production of electricity from the system."

"Our current electricity market design was developed under completely different circumstances and for completely different purposes. It is no longer fit for purpose," von der Leyen also said on Monday.

Bailouts

As lawmakers are starting to realise energy security can not be left solely in the hands of markets, European utilities are calling on governments for bailouts.

Already in July, France announced it would nationalise debt-laden EDF, at a cost of nearly €10bn.

On Monday, Düsseldorf-based energy giant Uniper asked the German government for an additional bail-out of €4bn (on top of the €15bn bail-out deal already agreed on in July), as it reported cash losses of "well over €100m per day."

On Sunday, Austrian finance minister Magnus Brunner said Wien Energy, the country's biggest energy supplier, was in "financial distress."

Although he didn't mention a specific figure, Heute newspaper reported on Monday that €1.7bn could be needed to cover short-term costs.

Initially sceptical of the idea, Austrian Chancellor Karl Nehammer on Sunday said he would support an EU-wide price cap on electricity prices.

"We must finally stop the madness that is taking place in energy markets. I call on all the EU 27 (member states) to stand together to stop this price explosion immediately," he said in a statement issued by his office.