How will this short-term reform benefit consumers?

By Nicolás González Casares, MEP (S&D Group -Spain), Rapporteur on the reform of the electricity market design

The recent record level energy prices dealt a significant blow to European citizens. Russian aggression towards Ukraine has further emphasized the importance of reducing our reliance on fossil fuels and preparing the European energy system for decarbonization. It has become clear that shifting away from fossil fuels is not only essential for addressing the climate crisis, but it also presents an opportunity to benefit from domestic, cost-effective, and safe clean energy sources.

The electricity sector plays a crucial role in the process of decarbonization. It is a sector where integrating renewable energy and eliminating fossil fuels can be done more quickly and cost-effectively.

Therefore, a significant increase in the electrification of the supply and demand is essential for achieving climate neutrality. However, the unprecedented energy price crisis has exposed the deficiencies of the current Union regulatory framework and the need to reform the design of the electricity market.

Considering these circumstances and the available time, the Commission has put forward valuable proposals to respond to the abovementioned challenges. Nevertheless, it is important to note that some of these measures, such as the promotion of contracts for differences (CfDs) or power purchase agreements (PPAs) to prevent price volatility, while appropriate, may not have a significant impact – if a sufficient volume of deployment is not achieved – in the first years of implementation. Therefore, taking short-term solid measures to respond to new possible price turbulence is essential.

The European Parliament agreed to provide citizens and companies with more tools to handle potential price shocks. Building on the Commission’s proposal, we have ensured that the reform has a truly European vision that benefits all Member States, regardless of their budget or starting position. This unifying approach will prevent market fragmentation and strengthen the internal market. In order to ensure that consumers benefit from the very beginning of the implementation, it is crucial to have instruments that support this goal. To achieve this, we have reinforced the proposal to provide consumers with immediate benefits. The Parliament has worked on three key points to improve the Commission’s proposal in this regard:


Empowering consumers

We are committed to empowering consumers by implementing measures that encourage the use of PPAs through aggregation, as well as promoting more active consumer participation in the electricity system.

Our efforts to establish these measures include promoting flexibility and demand response. Furthermore, we are committed to ensuring that consumers have the right to share energy.

This means that they can sell surplus renewable electricity, like solar power generated from their roofs, to other active consumers, not just their supplier.


Better consumer protection

The crisis has highlighted the need to strengthen the protection of consumers of electricity, especially the more vulnerable ones. In this regard, the Parliament has strengthened the proposal by adding that Member States must prohibit any disconnection of vulnerable customers, including those affected by energy poverty. In addition, while the Commission’s proposal to introduce a fixed-price electricity supply contract for consumers is a step in the right direction, it is crucial to complement this measure by including obligations to ensure that suppliers do not unilaterally change the terms of the contract or the conditions.


Obligatory electricity price crisis measures

The price crisis has shown that the current market design’s protection and stabilization measures are insufficient in the face of severe disturbances. Therefore, it is a positive step that the Commission is proposing conditions under which an “electricity price crisis” can be declared, along with measures for such periods e.g. the possibility of introducing regulated tariffs, even if the prices are below cost. However, the conditions outlined by the Commission are not specific enough.

The Parliament has made the crisis declaration mandatory when the criteria are met and introduced clearer criteria. As a complement, the Parliament proposes that the Commission shall evaluate different options for establishing a “temporary relief valve mechanism” by June 2024 at the latest and present a legislative proposal.

The proposed reform is a step towards addressing the defects in the system that were exposed during the recent crisis. While it does not challenge the foundations of the system, it entails a crucial and necessary reform that will help to prevent similar crises from occurring in the future.

Ensuring that the EU electricity market is more resilient, sustainable, and secure by the end of this legislature will be challenging given the scope and complexity of the reform and the time we have left to achieve it. However, as the Parliament’s Rapporteur on this regulation, I believe that is possible and I’m committed to making it happen.