European Commission President Ursula von der Leyen wants to cap the revenue of electricity producers that are making extraordinary profits because of the effects of the war in Ukraine and climate change
BRUSSELS (AP) — A top European Union official unveiled a plan Wednesday to cap the revenue of electricity producers that are making extraordinary profits because of the effects of Russia's war in Ukraine and climate change, saying the proposal could raise $140 billion to help people hit by spiraling energy prices.
It's one of several proposals aimed at containing an energy crisis in Europe that could lead to rolling blackouts, shuttered factories and a deep recession this winter. Others include slashing energy use and reforming the electricity market, which all need approval by the 27 EU countries. As the bloc supports Ukraine, Russia has reduced or cut off natural gas to 13 member nations, surging gas and electricity prices that are expected to go higher as demand peaks during the cold months.
“Russia keeps actively manipulating our energy market," European Commission President Ursula von der Leyen told EU lawmakers in Strasbourg, France. "So, this market is not functioning anymore.”
“These companies are making revenues they never accounted for, they never even dreamt of,” von der Leyen said. “In these times, it is wrong to receive extraordinary record revenues and profits benefiting from war and on the back of consumers."
During her State of the European Union address to the EU assembly, attended by Olena Zelenska, wife of Ukrainian President Volodymyr Zelenskyy, von der Leyen said company “profits must be shared and channeled to those who need it the most.”
“Our proposal will raise more than 140 billion euros ($140 billion) for member states to cushion the blow directly,” she said.
Most of the money would come by setting a price cap on electricity produced through renewable energy sources and nuclear power of 180 euros per megawatt hour, less than half the current price. EU countries would also collect a “solidarity contribution” from oil, gas and coal refineries earning 20% more profit than they averaged over the last three years.
The commission's goal is to reduce electricity consumption in the bloc by at least 5% during peak use hours.
Von der Leyen, sporting Ukraine’s national colors with a blue top and yellow jacket, also said the bloc’s electricity market must be reformed to properly tackle the energy crisis.
She said a “deep and comprehensive reform of the electricity market” is required to reduce the influence of natural gas on the way that prices are set.
Even before Russia started its war against Ukraine, many EU member states had been calling for reform of the bloc’s energy market because they believe that the influence of gas in setting wholesale electricity prices is disproportionate.
However, EU countries are deeply divided over what approach to take, and it remains unclear whether they will approve the commission's proposals. The bloc's energy ministers held emergency talks last week, without any real results, and they are due to meet again at the end of the month.
“The next winters – not just this one – the next winters will be difficult, make no mistake about that," commission Executive Vice-President Frans Timmermans told reporters after the plan was unveiled. "But I am confident that these measures will bring progress.”
Associated Press writer Raf Casert in Brussels contributed to this report.