The EU is planning an electricity price cap that must not be called that

Next Friday, Robert Habeck (Greens) and his counterparts responsible for energy will meet at an emergency summit in Brussels to discuss measures against the rapidly increasing electricity prices. Whether the ministers will come to an agreement is anything but certain, as the proposals are very controversial.

Ursula von der Leyen, President of the European Commission, has her own ideas as to where she wants to start in order to relieve the burden on electricity customers in Europe. "It is important that we siphon off the exuberant profits of the electricity companies that they have today and that they never expected, that we partially skim them off in order to support lower income and vulnerable companies in a targeted manner," said the Commission President.

Previously, your authority had already made known mind games on emergency measures against the high electricity prices. The paper, which is also available to WELT AM SONNTAG, recommends a mix of measures to relieve electricity customers.

In addition to the EU-wide coordinated saving of electricity, the idea of ​​a revenue cap for certain electricity producers is also very central. You shouldn't be left with such high profits. Rather, the EU wants to use the money raised to provide financial support to those electricity consumers who need it most urgently.

The intervention would affect companies that produce electricity particularly cheaply from sources such as solar, wind, hydro, nuclear and coal. You are currently making particularly high profits due to the peculiarities of the electricity market. Because on the electricity exchange, the price depends on the operating costs of the most expensive power plant that is currently supplying electricity.

Because the gas price has skyrocketed because of the Ukraine war, the expensive gas-fired power plants are currently determining the price. All other providers who produce electricity more cheaply earn a lot of money as a result. This is especially true for renewable energies, because sun and wind are free.

The fact that the EU would rely on such a profit skimming model, which is sometimes referred to as an excess profit tax, had already been indicated at the end of August, when both Robert Habeck and Federal Chancellor Olaf Scholz (SPD) made it clear that they were ready to intervene in the electricity market.

"Von der Leyen must have assured him and Habeck that only minor interventions were involved," said an EU diplomat. Scholz had always been the one who had defended himself against interventions in the energy market in the past few months.

In fact, from the point of view of energy economists such as Simone Tagliapietra from the Bruegel think tank, such a vehicle, which starts with the income of the companies, is a less massive intervention than a price cap for electricity.

A price cap that would artificially lower the price of electricity could even increase demand for electricity. Differently high price caps in the EU could also destabilize the EU electricity market because subsidized, cheaper electricity could flow out of one country into neighboring countries.

The EU Commission plans to present its proposals to energy experts from the 27 member states on Wednesday. The Czech Council Presidency is expected to send its draft for Habeck and his ministerial colleagues to the member states at the beginning of the week. However, it is far from clear whether the ministers will agree on specific measures.

Traditionally economically liberal countries such as the Netherlands or the Nordic countries could oppose the EU levy model. "The only common denominator is that something has to be done," says an EU diplomat. "I wouldn't expect a great decision next week. But we will at least see where the journey can go.”

Especially since the energy companies, which are often close to the state, could use the national governments to resist the skimming off of profits. In the former EU country Great Britain, a large utility has already announced that it will donate ten percent of its profits to the energy crisis. Observers see the offer as an attempt to avoid a kind of excess profit tax, which is also being discussed there.

The EU Commission has already planned: Mandatory measures for all states are not necessary, according to the mind games. It would be sufficient if the Commission made appropriate recommendations to the states or if the EU states agreed on rules that would allow all states to take austerity measures or skim profits.

Nevertheless, von der Leyen's authority uses a trick to sell its model, which it wants to use to profit from companies, to as many states as possible: it is sold as a price cap - a concept that is very popular in some member states. The internal Commission paper speaks of a price cap for power plants that produce cheaper than the most expensive one that is connected to the grid.

However, the Commission paper does not describe a price cap, but a levy on revenue - it is therefore based on sales, not on price. What a big difference. In fact, the authors even warn against a price cap for electricity.

However, the “price cap” label would make it easier to adopt corresponding EU rules. In turn, enforcing a tax is considered impossible. Because in tax matters, the EU countries must decide unanimously. A majority is sufficient on energy issues.

However, a new push by the Leyens could complicate the agreement: on Friday she called for a price cap for Russian gas. One more point that could cause disputes among the ministers.

"Everything on shares" is the daily stock exchange shot from the WELT business editorial team. Every morning from 7 a.m. with our financial journalists. For stock market experts and beginners. Subscribe to the podcast on Spotify, Apple Podcast, Amazon Music and Deezer. Or directly via RSS feed.