The European leaders continue fighting the increasing inflation caused by the Russian gas supply shortage in their nations. The European Union has, however, devised a strategy to relieve businesses and households of the pains of soaring gas prices.
Excess Revenue Recoup
The EU intended to impose a price ceiling on Russian oil earlier. There may be no need for price caps again as European leaders intend to reduce energy consumption and recover excess profits from power firms in their member countries.
European leaders have pumped billions into fighting the ongoing increase in energy prices. They have tried tax reduction, financial aid, and subsidies to curtail the energy crisis before winter comes.
The EU will announce a union-wide proposal to replace several individual measures tried by their member countries to ease the pains caused by the energy crises. This plan will be implemented by all 27 members of the European Union.
According to the preliminary sketch of their plans, European firms who rely on non-gas fuel will remit their unexpected revenues to the union. These revenues will, in turn, assist European citizens and firms affected by the crises.
Although the draft might still change before final publication on Wednesday, it reveals a $180 cap on incomes received by nuclear factories and also wind & solar farms on every megawatt hour generated. The gains left will then be channeled by the EU to assist consumers.
Meanwhile, Germany hit an all-time high price for front-year electricity in August. The price was over €1000/MWh. Although the price dropped to around €400/MWh on Tuesday, the commission’s proposal will slash generators’ incomes to half the current market prices.
Fossil fuel companies are also affected by the excess profit recouping plans. Their extra gains will help in the fight against the power crisis. Also, coal, oil, gas, and refining firms will contribute about 33% of their excess earnings in the current financial year.
Temporary Suspension Of The Proposed Price Cap
The European Union has suspended the proposed price ceiling on Russian oils. However, the Union hasn’t agreed on the possible effects of the suspension in ensuring a stable power distribution in the coming winter.
The temporary suspension will require further deliberations before the complete scheme are disclosed. The representatives of some member nations believe a final decision will emerge when the energy ministers of EU countries meet at the end of this month.
Reduction In Energy Usage
Also, in the European Union’s draft, the union will enforce a compulsory reduction in energy usage. The reduction will amount to about 5% in the 10% of the hours in which the highest volume of electricity is required monthly. This is to reserve as much energy as possible for the coming winter.
Reports have it that member countries of the EU have filled up 84% of their energy reservoir. Although this percentage is more than expected, there will be a need to reduce energy usage during the winter to avoid running the stored energy down.
The EU also plans to assist energy firms affected by the increased fuel costs by offering them Emergency Liquidity Assistant (ELA). The EU will disclose its plans on Wednesday.