Opinion of the European Economic and Social Committee on the proposal for a Regulation of the European Parliament and of the Council amending Regulations (EU) 2019/943 and (EU) No 2019/942 as well as Directives (EU) 2018/2001 and (EU) 2019/944 to improve the Union’s electricity market design (COM(2023) 148 final — 2023/0077 (COD))

Opinion // 14/06/2023 // 13 min read
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18.8.2023

EN

Official Journal of the European Union

C 293/112

Opinion of the European Economic and Social Committee on the proposal for a Regulation of the European Parliament and of the Council amending Regulations (EU) 2019/943 and (EU) No 2019/942 as well as Directives (EU) 2018/2001 and (EU) 2019/944 to improve the Union’s electricity market design

(COM(2023) 148 final — 2023/0077 (COD))

(2023/C 293/17)

Rapporteur:

Jan DIRX

Co-rapporteur:

Christophe QUAREZ

Referral

Council of the European Union, 31.3.2023

European Parliament, 29.3.2023

Legal basis

Article 304 of the Treaty on the Functioning of the European Union

Section responsible

Section for Transport, Energy, Infrastructure and the Information Society

Adopted in section

16.5.2023

Adopted at plenary

14.6.2023

Plenary session No

579

Outcome of vote

(for/against/abstentions)

209/11/9

1. Policy recommendations

1.10. 2. Substantiation of the policy recommendations

General aspects

2.12. A government facility

2.19. Electricity bank

2.22. The need for green gas, flexibility and security of supply

2.27. Energy poverty

2.29. 3. Amendments to the legislative proposal

3.1. Regulation (EU) 2019/943 of the European Parliament and of the Council (6)

Amendment 1

Insert a new recital 21a after recital 21:

Text proposed by the Commission

Amendment

(21a) Since 1996, the EU has been committed to the liberalization of the electricity market, a process that started with Directive 96/92/EC of 19 December 1996 concerning common rules for the internal market in electricity. However, in the context of electricity market reform, this liberalization should be viewed from the perspective of sustainability, affordability and security of supply. Past and future developments in the electricity market must be taken into account, including major changes in production facilities with widely varying cost prices. In order to achieve these goals, the Member States have to provide an appropriate regulatory framework. This includes legal requirements for companies in the energy sector. The requirements shall be non-discriminatory. One way in which this can be achieved is a government-established ‘E-facility’ that buys electricity from producers and sells it to distributors and major consumers; the three objectives would thereby function as a framework for decision-making. This facility would conclude long-term contracts with electricity producers based on tenders, such as power purchase agreements and two-way contracts for difference. Such a model is already possible under the actual legislation.

Reason

See point 2 paragraphs 2.18 — 2.21.

Amendment 2

Insert a new recital 50a after recital 50:

Text proposed by the Commission

Amendment

(50a) The right to share electricity is an important incentive for consumers and other small market parties to invest in generating their own electricity. A further incentive will be to organize the market in such a way that consumers who generate their own electricity (prosumers) or other small market participants can profit as much as possible from the electricity they generate themselves, even if they supply it first to the grid. Electricity companies in several Member States already have schemes that make this possible.

Reason

See point 2 paragraphs 2.22 — 2.24.

Amendment 3

Article 1 is amended as follows:

Text proposed by the Commission

Amendment

(a) ensure that energy is not a commodity like any other, but an essential basis of our economic and social system. Therefore, energy supply is classified as a service of general interest. The main task of the energy sector is a secure, affordable, and sustainable supply of energy.

Reason

See point 2 paragraphs 2.5 and further.

Amendment 4

Article 1 is amended as follows:

Text proposed by the Commission

Amendment

(b) Create a system where consumer prices for electricity must reflect actual production costs (plus an appropriate profit mark-up). This means that the wholesale price must correspond to the average costs of all types of electricity production and not the maximum price, as is currently the case. In order to ensure appropriate remuneration for electricity producers, investment security, and the expansion of renewable energy, technology-dependent prices are necessary.

Reason

See point 2 paragraph 2.13.

Amendment 5

Article 19b is amended as follows:

Text proposed by the Commission

Amendment

  1. […]

(c) For the ‘two-way contracts for differences’, technology-specific maximum prices are to be set in each Member State. The maximum prices shall be based on the costs required to operate a cost-efficient, state-of-the-art plant. The costs shall include depreciation and an appropriate return on equity and debt capital for the investment.

Reason

See point 2 paragraph 2.19.

Amendment 6

Article 7a point 2(c) is amended as follows:

Text proposed by the Commission

Amendment

(c) the procurement of the peak shaving product shall take place using a competitive bidding process, with selection based on the lowest cost of meeting pre-defined technical and environmental criteria;

(c) the procurement of the peak shaving product shall take place using a competitive bidding process, with selection based on the lowest cost of meeting pre-defined technical and environmental criteria, competitive bids can both rely on fixed and variable prices ;

Reason

See point 2 paragraph 2.11.

Amendment 7

Article 19b 3. is amended as follows:

Text proposed by the Commission

Amendment

(c) Member States shall define minimum and maximum remuneration of two-way contract for differences which have to reflect the technology specific actual production costs so that power producers are encouraged to optimize their production. The strike price of two way contracts is determined by the Member States considering the levelized cost of energy of the specific state-of-the-art technology object of the contract. The costs shall include depreciation and an appropriate return on equity and debt capital for the investment.

Reason

See point 2 paragraph 2.19.

3.2. Directive (EU) 2019/944 of the European Parliament and of the Council (7)

Amendment 8

Article 4 is amended as follows:

Text proposed by the Commission

Amendment

Member States shall ensure that all customers are free to purchase electricity from the supplier of their choice. Member States shall ensure that all customers are free to have more than one electricity supply contract at the same time, and that for this purpose customers are entitled to have more than one metering and billing point covered by the single connection point for their premises.

Member States shall ensure that consumer prices for electricity reflect actual production costs (plus an appropriate profit mark-up) and that all customers are free to purchase electricity from the supplier of their choice. Member States shall ensure that all customers are free to have more than one electricity supply contract at the same time, and that for this purpose customers are entitled to have more than one metering and billing point covered by the single connection point for their premises.

Reason

See point 2 paragraph 2.9.

Amendment 9

Article 4b 1. is amended as follows:

Text proposed by the Commission

Amendment

Member States shall ensure that the national regulatory framework enables suppliers to offer fixed-term, fixed-price contracts and dynamic electricity price contracts. Member States shall ensure that final customers who have a smart meter installed can request to conclude a dynamic electricity price contract and that all final customers can request to conclude a fixed-term, fixed-price electricity price contract of a duration of at least one year, with at least one supplier and with every supplier that has more than 200 000 final customers.

Member States shall ensure that the national regulatory framework enables suppliers to offer fixed-term, fixed-price contracts and dynamic electricity price contracts. Member States shall ensure that final customers who have a smart meter installed can request to conclude a dynamic electricity price contract and that all final customers can request to conclude an affordable fixed price and fixed term electricity price contract of a duration of at least one year, with at least one supplier and with every supplier that has more than 200 000 final customers.

Reason

See point 2 paragraph 2.9.

Amendment 10

Article 27a 1. is amended as follows:

Text proposed by the Commission

Amendment

Member States shall appoint suppliers of last resort at least for household customers. Suppliers of last resort shall be appointed in a fair, open, transparent and non-discriminatory procedure.

Member States shall appoint suppliers of last resort at least for household customers. Suppliers of last resort shall be appointed in a fair, open, transparent and non-discriminatory procedure. All energy suppliers must be available as suppliers of last resort in accordance with their market share.

Reason

It is fair that all energy suppliers can be appointed as supplier of last resort.

Amendment 11

Article 27a 2. is amended as follows:

Text proposed by the Commission

Amendment

Final customers who are transferred to suppliers of last resort shall not lose their rights as customers, in particular those rights laid down in Articles 4, 10, 11, 12, 14, 18 and 26.

Final customers who are transferred to suppliers of last resort shall not lose their rights as customers, in particular those rights laid down in Articles 4, 10, 11, 12, 14, 18 and 26.

The contractual conditions of a supplier of last resort must not be discriminatory or deterrent. The contract conditions must reflect the actual production costs (plus appropriate mark-up).

Reason

This is necessary for fair treatment of customers.

Amendment 12

Article 66a is amended as follows:

Replacing paragraphs 1-4 as follows:

Text proposed by the Commission

Amendment

  1. The Commission may by decision declare a regional or Union-wide electricity price crisis, if the following conditions are met:

(a) very high prices in wholesale electricity markets at least two and a half times the average price during the previous 5 years which is expected to continue for at least 6 months;

(b) sharp increases in electricity retail prices of at least 70 % occur which are expected to continue for at least 6 months; and

(c) the wider economy is being negatively affected by the increases in electricity prices.

  1. If the following conditions are met:

very high prices in wholesale electricity markets: an average price of at least euro 100 per megawatt hour for two consecutive months.

  1. The Commission shall specify in its decision declaring a regional or Union-wide electricity price crisis the period of validity of that decision which may be for a period of up to one year.

  2. Member States may for the duration of condition in 1. met exceptionally and temporarily set a price for the supply of electricity which is below cost provided that the following conditions are fulfilled:

(a) the price set for households only applies to at most 80 % of median household consumption and retains an incentive for demand reduction;

(b) the price must not exceed 10 cent per kilowatt hour.

(c) there is no discrimination between suppliers;

(d) if suppliers can prove that they are supplying below cost, suppliers are compensated for that.

(e) all suppliers are eligible to provide offers for the price for the supply of electricity which is below cost on the same basis.

  1. Where the Commission has adopted a decision pursuant to paragraph 1, Member States may for the duration of the validity of that decision apply targeted public interventions in price setting for the supply of electricity to small and medium sized enterprises. Such public interventions shall:

(a) be limited to at most 70 % of the beneficiary’s consumption during the same period of the previous year and retain an incentive for demand reduction;

(b) comply with the conditions set out in Article 5(4) and (7);

(c) where relevant, comply with the conditions set out in Paragraph 4.

  1. Where the Commission has adopted a decision pursuant to paragraph 1, Member States may for the duration of the validity of that decision, by way of derogation from Article 5(7), point (c), when applying targeted public interventions in price setting for the supply of electricity pursuant to Article 5(6) or paragraph 3 of this Article, exceptionally and temporarily set a price for the supply of electricity which is below cost provided that the following conditions are fulfilled:

(a) the price set for households only applies to at most 80 % of median household consumption and retains an incentive for demand reduction;

(b) there is no discrimination between suppliers;

(c) suppliers are compensated for supplying below cost; and

(d) all suppliers are eligible to provide offers for the price for the supply of electricity which is below cost on the same basis.

  1. The compensation in 2. (d) must be financed by the revenues of cap on market revenues for the generation of electricity from inframarginal technologies.

Reason

Current energy prices have shown that in the event of corresponding market distortions, measures are necessary to ensure the basic supply of energy for private households, but also business enterprises. However, the mechanism proposed by the Commission under Article 66a is complicated and ineffective. At the same time, the co-financing of the measure is completely excluded.

We propose a simple but effective mechanism, modelled on the Austrian ‘Stromkostenzuschussgesetz’. This could come into force automatically and should be financed by skimming off windfall profits.

—

The electricity price for the purchase of a basic supply quantity may not exceed the price of 10c net per kWh.

—

If the average electricity exchange price in two consecutive months is more than 100 euros/MWh, suppliers who have to offer below their actual procurement costs have the right to compensation for their differential costs.

—

The energy suppliers have to prove the costs.

—

This ‘price brake’ is financed by skimming off excess revenues in the area of inframarginal generation.

Brussels, 14 June 2023.

The President of the European Economic and Social Committee

Oliver RÖPKE

(1) Opinion of the European Economic and Social Committee on the Public investment in energy infrastructure as part of the solution to climate issues (own-initiative opinion) (OJ C 486, 21.12.2022, p. 67) and Opinion of the European Economic and Social Committee on Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions — Short-Term Energy Market Interventions and Long-Term Improvement to the Electricity Market Design — a course for action (COM(2022) 236 final) (OJ C 75, 28.02.2023, p. 185).

(2) https://www.eca.europa.eu/Lists/ECADocuments/INSR23_03/INSR_Energy_Union_EN.pdf

(3) Merit order: the order of power plants based on the level of their marginal costs, starting with the lowest marginal costs and ending with the highest marginal costs. So, power plants with higher marginal costs are added until the demand is met. The order is: renewable energy, nuclear energy, coal, oil and gas. In today’s electricity market design, the last power plant from the merit order (mostly gas) sets the price using its marginal costs.

(4) https://ec.europa.eu/commission/presscorner/detail/en/IP_23_1591

(5) A small market participant is, for example, a municipality, energy cooperative or region that generates electricity by means of wind and/or sun and that supplies part of that electricity to the grid rather than using it all directly.

(6) Regulation (EU) 2019/943 of the European Parliament and of the Council of 5 June 2019 on the internal market for electricity (OJ L 158, 14.6.2019, p. 54).

(7) Directive (EU) 2019/944 of the European Parliament and of the Council of 5 June 2019 on common rules for the internal market for electricity and amending Directive 2012/27/EU (OJ L 158, 14.6.2019, p. 125).

ANNEX

Benefits of a central governmental E-facility

—

Buys at various prices depending on sourcing

—

Allow market parties to tender and provides certainty in the market

—

Sells at a long term fixed pricing

—

Good for the market and good for consumers

—

Ensures Security of Supply based on an appropriate E mix

—

Consider and steer international fuel sourcing

—

Ensure E demand can be met in view of the forecasted 2-3 fold increase in E demand (electrification)

—

Fund, introduce and manage new technologies in the context of the existing and anticipated growth towards sustainability

—

Leaves government in control and ensures market freedom.

price of energy , consumer protection , market stabilisation , single market , security of supply , market supervision , energy cooperation , electricity supply , energy efficiency , renewable energy , Approximation of laws , Internal market - Principles , Energy , 12.30.00.00 Energy / Electricity