EU Energy Ministers Clash on Soaring Costs as Winter Arrives

(Bloomberg) -- European Union energy ministers clashed again over what to do about soaring power and natural gas prices as consumers and businesses brace for a tough winter.

At a meeting on Thursday, countries including Spain, France, Italy, Greece and Romania proposed to amend existing laws on how prices in the 27-nation bloc are set. Germany, Austria, the Netherlands, Denmark and others are against any measures that depart from the “competitive principles of our electricity and gas market design,” according to a statement from the group.

“The evolution of energy prices is causing many worries in a certain number of European countries,” Barbara Pompili, French minister for ecological transition, said before the meeting in Brussels. We want “to try and find another way to approach the energy market so that consumers aren't victims to the increases, and decreases as well, which can come in a very brutal way.”

Surging energy prices are an unwelcome distraction for the EU, which is negotiating green legislation designed to set the course for climate neutrality by 2050. While some member states say the crisis shows the shift to cheaper renewable energies should be accelerated, others warn the transition should be gradual to help prevent any price spikes.

The divergent positions set the stage for another fierce debate as gas prices rise this week in anticipation of a bout of cold weather across the region. In October, the EU put forward a toolbox of measures that member states could use to shield vulnerable citizens and businesses from price rises, but there is concern that tax cuts and direct support may not be enough. The talks will likely be a prelude to a meeting of leaders at an EU summit starting Dec. 16.

Wholesale Prices

The current electricity market operates on a “pay as you clear” model where wholesale prices are set according to the last unit of energy bought. Proponents say that incentivizes investment in renewable technologies like wind and solar. 

The group of nations including France wants to see member states allowed to enforce mechanisms that ensure consumers pay electricity prices that “reflect the costs of the generation mix used to serve their needs,” it said in a separate statement. It added that this would not affect the functioning of the wholesale market. The countries also advocate the common procurement of gas to help secure supply and reduce prices, and long-term electricity contracts for as long as 10 years.

Energy Commissioner Kadri Simson said that the EU would propose measures including an “enabling framework” for the joint procurement of strategic gas stocks, as she warned that storage levels in the bloc were at around 68% of capacity.

“Russian imports in October, November are 25% lower compared to the same period last year,” she said at the meeting. “Rising energy prices will have repercussions on the macro economy.”

Energy ministers were also due to debate the EU Commission's Fit for 55 package to reduce emissions by 55% by 2030 from 1990 levels, with a particular focus on renewables and energy savings.

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