The EU opens for the first time to a review of the electricity market

Moved by the unbridled blow of energy prices, and with a war in Ukraine that has already caused the disconnection of Russian gas from two Member States, the EU opens for the first time to a review of the electricity market. The system “is not designed for an emergency situation” like the one the community bloc is currently experiencing, acknowledges a report by the Agency for the Cooperation of Energy Regulators (ACER) published this Friday. But, at the same time, he asks to undertake possible touch-ups with great caution. “Interventions in the functioning of the market should be considered with caution”, expresses the report in which some “structural measures” are evaluated that could help alleviate “future periods of sustained high energy prices”.

Among the mechanisms proposed by ACER is the inclusion of a “temporary escape valve”, which would mean placing a maximum cap on prices at times when they shoot up “unusually quickly” (a mechanism that already exists in Texas and Australia, and also outlined by Spain among the different proposals that it has launched to Brussels since last summer), or risk coverage for certain groups of consumers who are especially vulnerable when the bill exceeds a certain threshold for a long period of time.

The analysis of the European regulators also assesses the different emergency mechanisms to intervene in the “short-term” market, which were proposed by Brussels in early March, such as taxing the so-called “profits from heaven” or imposing a cap on the prices of fuel used by electricity generation plants: the latter is precisely the tool devised by Portugal and Spain to decouple the blow of gas from inflation in the electricity bill, which this week has received a provisional approval from the European Commission, in the absence of filing the final fringes.

The ACER report, in any case, breaks a spear in favor of the current market design, to the point that sometimes the text seems to have been written by two different brains, one technical and institutional and the other more political, aware of the spirit of the times. The current system “is not to blame for the crisis”, value the European regulators. “On the contrary,” he adds, “the current market rules have contributed to a certain extent to mitigate the current crisis, thus avoiding electricity cuts or even blackouts in some sectors.” And it concludes: “The current design of the wholesale electricity market guarantees an efficient and secure supply of electricity under relatively ‘normal’ market conditions. Therefore, ACER’s assessment is that it is worth maintaining the current design of the market”.

Although it is open to the incorporation of extraordinary emergency measures, ACER also warns that “the more interventionist the mechanism, the greater the potential to distort the market”, which could endanger the integration and competitiveness of the European energy market and weigh down the benefits accumulated for users so far, which it values ​​at 34,000 million euros in the last decade.

The in-depth review of the system was commissioned by the Community Executive last October, as a result of the political battle caused by a rise in energy prices that Spain, at the head of an entente of affected countries, had managed to place on the community schedule. But in the initial attacks, the community institutions showed a direct rejection of any reform or intervention. In a preliminary report, published in November, the regulators were closed in band to any change, considered counterproductive the Spanish proposals to modify the price formation system and even saw it as dangerous for the stability of the market to allow, exceptionally, each country You could opt for your own system. That report valued the rise in prices as a passing storm.

Today, however, the final report acknowledges that energy inflation has become a vertiginous and unpredictable cyclone: ​​”Russia’s invasion of Ukraine has exacerbated the crisis, which has led to gas and electricity prices unprecedented electricity that have severely affected consumers, retail providers and market participants, ”he says. And it recognizes that the system, as it has been conceived, is not prepared to deal with extraordinary situations such as the current one.

One of the points in the report calls for “preparing for future high energy prices in times of peace” and calls for “being very cautious regarding intervention in the wholesale market in times of war.” To which he adds: “The need to intervene in the functioning of the market must be considered with prudence and care in situations of extreme pressure and, if carried out, the ideal would be to try to address the root causes of the problem (currently prices of the gas).

The words of the regulators therefore show a shift in criteria, also to the beat of a Brussels more open to changes since the beginning of this year. The European Commission must now take this report into account in view of the presentation of the so-called Repower EU, an action plan with which the Community Executive intends to deal with the energy crisis. The proposal, which Brussels plans to put on the table on May 18, will attack different fronts and one of them is the review of the electrical system, to which the Twenty-seven committed themselves at the last European Council held in March, the same in the that Spain and Portugal managed to be recognized as Iberian exception, giving rise to the presentation of a proposal to intervene in the gas market with the approval of the European institutions.