Energy security: EU Parliament approves reform of the electricity market

The European Parliament has decided on more rights for consumers when concluding electricity contracts. A majority of MEPs voted for a reform of the EU’s common electricity market, which, among other things, should ensure more contracts with a fixed electricity price. This is intended to stabilize the markets in the long term and protect consumers and companies from sudden price increases.

Consumers therefore have the right to choose between fixed and market-oriented contracts when concluding a contract electricity prices to choose. According to the reform, electricity suppliers are no longer allowed to unilaterally change the contract terms or the contract. EU countries can also prohibit energy companies from turning off their customers’ electricity.

Long-term contracts between governments and electricity producers are also intended to provide a buffer between market fluctuations and prices for electricity customers. The reform is a response to the sharp rise in electricity prices last year after the start of Russia’s war of aggression against Ukraine. The new regulations are intended to make the price of electricity more independent of the price of gas and to increase the share of renewable energy in electricity generation in the EU more quickly.

Investments in renewable energies

The law provides for state aid for investments in renewable energies or nuclear power in the form of so-called contracts for difference. If companies invest in renewable energies and nuclear power, states guarantee a minimum price for the electricity. If the price of electricity on the market is lower, the state pays compensation to the energy companies. If the market price is above the limit, the additional profits of the electricity producers flow to the state treasury.

According to an agreement between the EU states and parliament, the member states are flexible in distributing the profits from the contracts for difference. They can redistribute it to end consumers and businesses or subsidize electricity producers, who then lower their prices. If electricity prices are persistently high, a crisis mechanism should take effect; member states could then use their own additional measures to reduce electricity prices.

The negotiators from the European Parliament and the EU countries had already agreed on the reform in December. At France’s insistence, the law also allows subsidies for existing nuclear plants. Germany originally advocated in Brussels for only promoting renewable energies, but was overruled.