By Kate Abnett and Tom Käckenhoff
BRUSSELS/DUESSELDORF (Reuters) – The European Union executive announced on Wednesday plans to raise more than $140 billion from energy companies to help protect households and businesses from soaring prices that threaten recession economy and insolvency.
European gas and electricity prices have soared this year as Russia cut fuel exports to retaliate against Western sanctions following its invasion of Ukraine, leaving many struggling to pay their bills and public services in the grip of a liquidity crisis.
The European Central Bank’s chief economist said higher prices remain a “dominant driver of inflation” in the euro zone.
European governments have responded with measures ranging from caps on consumer electricity and gas prices to offering credit and guarantees to electricity suppliers threatened with collapse.
“EU member states have already invested billions of euros to help vulnerable households. But we know that will not be enough,” European Commission President Ursula von der Leyen told the European Parliament.
In separate steps to try to protect consumers from record inflation, France announced new caps on energy prices for 2023 and Denmark prepared its own temporary caps on energy bills.
And in Germany, Uniper, its biggest importer of Russian gas, said the government could take a majority stake to help it weather the crisis, and a local utility group warned of insolvency. electricity companies.
The European Commission’s proposal includes capping the revenues of electricity producers who have benefited from higher prices but are not dependent on gas. It also included measures to force fossil fuel companies to share windfall profits from energy sales.
“In these times, it is wrong to receive extraordinary record revenues and profits benefiting from war and on the backs of our consumers,” von der Leyen said.
National governments would be responsible for recovering excess revenue and redirecting it towards measures that could include reducing electricity bills or helping consumers invest in energy-saving measures such as insulating homes.
The EU plan did not include an earlier idea to cap Russian gas prices, after Russia warned it could cut off all fuel supplies if one was introduced.
The Commission said it was still considering a Russian gas price cap and discussing the idea of broader gas price caps, which also divided member states and were not included in Wednesday’s proposals.
Europe’s benchmark gas price rose to around 208 euros per megawatt-hour (MWh), well below August’s record high above 343 euros, but up more than 200% from a year ago.
Europe has rushed to fill its storage facilities and has already achieved the goal of 80% full by November. But Russian supply cuts, which it says are due to sanctions hampering maintenance, make the winter outlook uncertain.
Moscow played down the impact of lost gas sales in Europe, saying other countries were ready to buy its energy as Europe sought to reduce its dependence on Russia.
“Months of geopolitical wrangling have left the European gas market whipped, with volatile prices resulting from a lack of supply, potential market intervention and wider uncertainty,” the analyst said. by Rystad Zongqiang Luo.
As part of the broad package of measures, the European Union’s securities watchdog will issue temporary market fixes by September 22 to help ease the liquidity crunch faced by energy companies, said the European Commission.
Utilities often sell electricity in advance but must offer a guarantee to compensators in the event of default before supplying the electricity. As gas prices have skyrocketed, warranty claims have also increased.
“We will work with market regulators to mitigate these issues by changing collateral rules – and taking steps to limit intra-day price volatility,” von der Leyen said.
Earlier, German local utility group VKU warned of possible insolvencies. Several utilities in the EU and Britain have already collapsed as they have often been unable to fully pass on the impact of rising gas prices to consumers.
“If individual companies are allowed to go bankrupt, it could become more difficult to fund everyone’s business,” VKU chief executive Ingbert Liebing told Reuters, adding that the group was in talks with the German government.
Meanwhile, Uniper shares fell 20% after the company, which has already secured 13 billion euros in state credit lines, most of which have already been drawn down, said the government could take a majority stake.
The Commission said it was also working on a transaction-based price benchmark that more accurately reflects the gas import market.
In France, network operator RTE said there was no risk of a blackout in winter but did not rule out some power cuts at peak times, saying the reduction in demand was essential.
“As a last resort, organised, temporary and rotating load shedding can be activated to avoid a generalized incident”, specifies RTE.
And the French government has said electricity price increases for households will be capped at 15% at the start of next year.
The government has said the caps – which allow for a much bigger increase than this year – mean that households with gas heating will pay an average of €25 more per month instead of around €200 more without any ceiling, and 20 euros instead of 180 with electricity. heater.
“We are determined, as at the start of the crises we have faced, to act, adapt and protect the French people and our economy,” said Prime Minister Elisabeth Borne.
(Reporting by Reuters offices; Writing by Ingrid Melander; Editing by Edmund Blair and Alexander Smith)
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