EU Parliament Approves Emergency Package to Combat Rising Energy Prices

The rapid rise in electricity prices began last summer, as the global economy began to recover following the lifting of COVID-19 restrictions. Now, following Russia’s invasion of Ukraine, electricity and gas prices across Europe have risen to record levels. They have recently been at levels significantly higher than those of the past decades. The dramatic rise in electricity prices is putting households, small and medium-sized enterprises, and industry under enormous pressure and threatens to cause significant social and economic damage. It is likely that energy prices will remain high—a further increase in gas prices cannot be ruled out.

EU-wide measures to provide relief to households and businesses

Against this backdrop, the European Commission proposed a package of measures in early September designed to mitigate the impact of rising energy prices, particularly on citizens and small and medium-sized enterprises. The draft package, which was approved by the energy ministers of the EU member states at the end of September, includes the following measures:

• Reducing electricity demand: EU member states are to reduce electricity consumption by 5% during peak hours.
• Revenue cap for low-cost electricity producers: So-called “windfall profits” of energy companies will be skimmed off, and the expected €140 billion will flow into aid programs for citizens and small and medium-sized enterprises.
• Solidarity levy on oil, coal, and gas companies: A solidarity levy will be imposed on oil, gas, and coal companies for profits that exceed the average of the past three years by more than 20%.
• Possibility of regulated electricity prices

In addition to these measures, the European Parliament advocates for the adoption of further emergency measures. These include, for example, a windfall tax and a price cap on gas imports via pipelines. Windfall profits should benefit consumers and businesses.

Timeline of the measures

The regulation is a binding legal act and officially entered into force on October 8, 2022. It is initially binding on all EU member states for a period of one year. An evaluation of the measures is planned for next February, on the basis of which the Commission may propose to extend the regulation’s validity period

Some articles of the regulation (Art. 3: Reduction of gross electricity consumption, Art. 4: reduction of gross electricity consumption during peak-price hours, Art. 5: measures to achieve demand reduction, Art. 6: mandatory cap on market revenues, Art. 7: Application of the cap on market revenues to electricity generators, Art. 9: Distribution of surplus revenues, and Art. 10: Agreements between Member States) – will take effect on December 1, 2022.