29th Mar 2023

EU wants to redirect €40bn to help families, firms pay energy bills

  • The support scheme would come from structural funds from the 2014-2020 EU budget which are currently available, said commissioner for cohesion and reforms Elisa Ferreira (left) (Photo: European Parliament)
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EU institutions have proposed to re-channel €40bn from the bloc's budget to help households and small companies struggling with high energy bills.

The initiative, pushed for by the European Parliament's regional affairs committee, immediately won the EU Commission's support in ongoing talks on 'REpower EU' energy laws, which are currently being discussed with member states.

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"We have to take action to help households and the most vulnerable in society, who are facing major difficulties today to pay their electricity bills," said French left-wing MEP Younous Omarjee in Strasbourg on Tuesday (18 October) when presenting the proposal.

The €40bn support scheme would come from structural funds from the 2014-2020 EU budget which are currently available, said commissioner for cohesion and reforms Elisa Ferreira.

"We want to avoid mass bankruptcies amongst SMEs because we have seen this happening in some member states," said Ferreira.

"The situation is so critical … there is such a discrepancy between the situation of different member states," she said.

Support measures have become a strain on public finances, especially among less wealthy countries.

While Germany has put forward a controversial €200bn programme to help households and businesses facing difficulties to pay their energy bills, France and Italy, the bloc's next biggest economies, have only distributed a fraction of that amount.

The Portuguese commissioner said that the €40bn proposals will not require any change of legislation because it is based on small amendments to the REpower EU package, which was originally designed to diversify supplies and help the transition to a greener economy.

The €40bn will come on top of the €26.9bn from the 2021-2027 cohesion funds proposed by the commission to finance renewables and energy infrastructure under REpower EU.

Meanwhile, the EU Commission, also on Tuesday, unveiled a wholly new package of emergency measures to tackle the energy crisis.

These include proposals aimed at curbing speculation in gas markets, securing supplies for the next gas-storage filling season, and guaranteeing solidarity.

Controlling excessive prices

While efforts continue to be focussed on reducing energy consumption, the commission wants to create a "price correction mechanism".

Once EU countries agree on the principle of establishing a "dynamic" price cap, the commission will come forward with a limited price and further details.

The limit would apply to transactions on the Dutch Title Transfer Facility (TTF), Europe's hub for gas trading — which the commission no longer considers to be representative of current market dynamics.

The price cap would be in place until a new benchmark for liquid natural gas (LNG) prices is put in place in March.

This new tool would be offered to market operators and they will voluntarily decide whether to use it or not.

EU leaders will discuss the proposal later this week during the summit in Brussels.

Until now, they have remained split on whether and how to limit gas prices, given their role as a price-setting mechanism for the final price of electricity.

"The commission is right to be cautious about a wholesale gas price cap ... A cheaper and safer alternative is to reduce consumption first, and cap only gas used in electricity production," said Luxembourg energy minister Claude Turmes on Tuesday.

The Iberian model in Spain and Portugal, which sets a cap on the price of gas for the production of electricity, "merits to be considered for introduction at the EU level", but there are still "open questions," EU commission president Ursula von der Leyen also said, while pointing out that this is not part of the current package.

'Solidarity should be non negotiable'

But the Commission has also proposed a system to make possible joint purchases of gas — while ensuring that EU countries share gas supplies in case of shortages.

Making joint gas purchases possible is "a no-regret option" as buying together gives EU countries and companies more leverage on prices, said EU energy commissioner Kadri Simson.

The EU, Simson said, should not exclude "a real supply crisis" or "shortages" of gas next winter, when reduced gas supplies and higher prices will make filling gas storage tanks more complicated.

After the request of at least two member states, the EU can trigger an "emergency situation" where solidarity commitments are put in place.

How this would work in practice remains to be seen since the commission is expected to prepare a separate proposal on this.

In such an emergency situation, EU countries can either have bilateral agreements in place or be subjected to a standardised contract made by the commission where allocation and price conditions are detailed.

This would trigger "automaticity" in case of an emergency, an EU official said.

"Solidarity should be non-negotiable," Simson added.

Currently, there are several bilateral agreements on solidarity in place: one between Germany and Denmark, five between Germany and Austria, one between Estonia and Latvia, one between Italy and Slovenia and one between Finland and Estonia.

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