EU Lawmakers Seek Revenue Cap On Power Firms If Energy Prices Soar

By Tsvetana Paraskova - May 15, 2023

The European Parliament is proposing a cap on the revenues of electricity generators in case energy prices surge again, according to a draft proposal of the Parliament's lead negotiator on the EU electricity market reform seen by Reuters.

Nicolas Gonzalez Casares—the European Parliament's lead negotiator on the reform proposed by the European Commission earlier this year – has drafted the Parliament's position on the Commission's proposals for market reforms. According to Gonzalez Casares and the Spanish Socialist Members of the European Parliament, the reform of the EU's electricity market should cap the extraordinary profits that power-generating companies reap when energy prices spike in a crisis.

"Social justice has to be above the profits of few," the Spanish Socialist MEPs say.

Gonzalez Casares's draft report, seen by Reuters, proposes a cap that would recover 90% of any revenue over $196 (180 euros) per megawatt-hour (MWh). The cap would include producers of electricity from wind, solar, and nuclear power, as well as coal. 

The money raised from the revenue cap would go to government measures to support the most vulnerable consumers, including temporary cuts in electricity tariffs for households and businesses.

"It's very important to use these revenues in order to reduce bills for people," Gonzalez Casares told Reuters, commenting on his proposal.

The European Commission in March presented a proposal to revise the rules for electricity market design and for improving the EU protection against market manipulation in the wholesale energy market.

The Commission says that the market reform is aimed at making the EU energy market more resilient and making the energy bills of European consumers and companies more independent from the short-term market price of electricity.  

The proposal has now passed to the Council and the European Parliament for debate and negotiation, with the market reform expected to be voted on later this year.  

By Tsvetana Paraskova for Oilprice.com