France and Spain demand changes in EU energy market

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France and Spain have joined forces to demand sweeping changes to EU energy market rules in the face of ‘unbearable’ increases in electricity prices that are hitting consumers and driving up inflation .

The calls for reform from Paris and Madrid come after a surge in gas prices that raised fears of a winter energy crisis in the EU.

“The European energy market is not suited to what we want to achieve,” said Bruno Le Maire, French Minister of the Economy before a meeting of euro zone finance ministers in Luxembourg on Monday. “It is time to take a look at the European energy market. It has a major drawback, which is the alignment of electricity prices with the price of gas.

The Mayor said the crisis was “unfair, inefficient and costly” for citizens and businesses. He said he and his Spanish counterpart, Nadia Calviño, would ask the European Commission for better regulation of the bloc’s natural gas stocks and reform of EU rules to reduce price volatility.

The EU’s common energy market was created in the 1990s to help liberalize market access for electricity providers and ensure some price harmony. Governments retain full control over their national energy mixes.

Spain has been asking since July for a change in the EU’s marginal pricing system – whereby tariffs are set by the highest prices national networks are willing to pay. Last month he demanded a common European approach, including purchases of natural gas to counter sellers’ market power and the building of strategic reserves.

“European challenges require a European response,” Calviño, number two in the Spanish government, said in an interview with the FT ahead of the meeting. She argued that a strategic gas reserve “would learn a lesson from the pandemic response and centralized procurement of vaccines.”

Speaking after the Eurogroup ministerial meeting, EU economy commissioner Paolo Gentiloni said Brussels would present in December an energy policy package that would explore the bloc’s role in the joint purchase of natural gas and options for increased storage.

Gentiloni added that national policy responses should be “temporary and targeted to comply with single market and state aid rules”.

Spain’s Calviño has opposed the challenge by power companies of Madrid’s € 3 billion tax on their “windfall profits” – one of the left government’s main reactions to the crisis. Madrid says the funds will be used to reduce the prices facing consumers – currently driven by high gas and carbon costs – but utilities say the move could deter green investment and violate EU law .

“It is essential that this increase in wholesale prices is not fully passed on to customers and businesses and therefore we must use all possible legal instruments to reduce elements of the energy bill,” Calviño said. She added that the Spanish tax, most of which has already become law, was “absolutely and fully in line with EU law”.

In Spain, where electricity tariffs paid by more than a third of households are linked to high spot market prices, the energy crisis dominated the political agenda for months.

But price hikes have added to the sense of urgency elsewhere in the EU, with some leaders calling on the bloc to reconsider decarbonization plans that could further increase pressure on households.

Brussels is resisting calls for changes to its electricity pricing rules, with officials saying much of the surge in prices will dissipate in early 2022. However, the commission will soon release a document outlining the options available to consumers. governments to deal with the crisis.

Officials told the FT that the commission is assessing whether government measures in response to the price hike comply with EU electricity market and state aid rules.

An EU competition expert said Spain’s windfall profits raid would be assessed to see if it unfairly targeted certain companies and sectors over others, thus breaking the bloc’s rules on windfall. state aid.

A further sign of concern about this, José Manuel Albares, Spain’s foreign minister, visited Algeria, traditionally the country’s largest gas supplier, last week to seek assurances that he would maintain the Spain supplied at market prices, despite the planned closure of a pipeline through Morocco.

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