The Commission Evaluates the Emergency Measures in Regulation No 2022/1854 Set Out To Address the Energy Crisis

On June 5, 2023, the European Commission submitted its report on the review of emergency interventions to address high energy prices in accordance with Council Regulation (EU) 2022/1854.[1]

The Report evaluates the emergency measures—namely (i) electricity demand reduction measures; (ii) inframarginal revenue cap; and (iii) retail price setting rules—introduced last year which were aimed at calming the European energy markets.  The Report concludes that the measures overall have contributed to a stabilisation of the energy markets and finds a prolongation of the emergency measures not necessary.

As a result of the rapidly increasing energy prices in 2021, Regulation 2022/1854 was adopted to mitigate the effects on EU citizens and companies.  Pursuant to Article 20 of the Regulation, the Report evaluates the effectiveness of the three temporary measures it introduced.

First, as regards the electricity demand reduction,[2] the Commission has found that although Member States respected the binding target of reducing electricity consumption by 5% at peak hours, the indicative target of 10% was not met in light of external factors such as weather dependency.  Given that electricity price spikes are less likely to occur in the winter and, inter alia, because of higher gas storage levels and better availability of nuclear as well as hydro power, the Commission does not see a current need to prolong the demand reduction measures.

Second, concerning the inframarginal revenue cap,[3] the Report concludes all Member States have not implemented the set level of the revenue cap as well as the temporal scope of the measures.  Considering that the revenues generated were below what was expected and since the differences in implementation among Member States have created regulatory uncertainty—which may have affected existing PPAs[4] and discouraged  the conclusion of new ones—the Commission reckons that a prolongation is not desirable.

Third, in the case of retail price regulation,[5] Member States were given the opportunity to intervene in retail markets by temporarily setting below-cost retail prices for end-customers, i.e., for households and SMEs.[6]  In view of the expected future electricity supply and price conditions, the Report considers that it is not necessary to prolong these provisions in Regulation 2022/1854.

The recent Commission proposal on a reform of the EU electricity market[7] inter alia suggests national measures to support the PPA market as well as an enabling framework for energy sharing and better customers’ protection. It is likely that these suggestions are better fitted to accommodate the need for a long-term regulation of the European electricity markets.

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Written with assistance from Thomas Harbor. 

[1]              Report from the Commission to the European Parliament and the Council on the review of emergency interventions to address high energy prices in accordance with Council Regulation (EU) 2022/1854, June 5, 2023, available here.

[2]              Articles 3–5 in Council Regulation (EU) 2022/1854 of 6 October 2022 on an emergency intervention to address high energy prices.

[3]              Articles 6–8 in Council Regulation (EU) 2022/1854 of 6 October 2022 on an emergency intervention to address high energy prices.

[4]              Power purchase agreements (“PPAs”).

[5]              Articles 12–13 in Council Regulation (EU) 2022/1854 of 6 October 2022 on an emergency intervention to address high energy prices.

[6]              Small and medium-sized companies (“SMEs”).

[7] Commission staff working document concerning the Reform of Electricity Market Design, of March 14, 2023, accompanying the Proposal for a Regulation of the European Parliament and the Council of March 14, 2023, amending Regulations (EU) 2019/943 and (EU) 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), and the Proposal for a Regulation of the European Parliament and the Council of March 14, 2023, amending Regulations (EU) No 1227/2011 and (EU) 2019/942 to improve the Union’s protection against market manipulation in the wholesale energy market (COM(2023) 147 final).