Economy

EU must act now on ‘catastrophic’ energy price spike, says European Council chief | European Commission

The EU must “make up for lost time” in finding urgent answers to an energy price spike that is a “catastrophe” for households and businesses, the head of the European Council, Charles Michel, has said.

Michel, who chairs EU leader summits, said the bloc needed to address the question of price caps, an idea backed by many EU member states.

In scarcely veiled criticism, he said the European Commission had been too late in coming up with proposals on the price crisis despite repeated calls from EU leaders for action.

“There is not a day to lose,” said Michel, who urged the EU executive to put “concrete proposals on the table” as soon as possible and not wait until 14 September when the European Commission president, Ursula von der Leyen, is due to give her annual state of the union speech.

On Monday Von der Leyen said the commission was preparing plans to separate power prices from the soaring cost of gas, in an effort to ensure electricity prices reflected cheaper renewable energy. Her remarks triggered a sharp fall in the wholesale price of gas.

EU energy ministers will hold emergency talks on 9 September, but it is not expected they will have official proposals to discuss.

Michel, who has chaired several EU debates on energy, made clear his dissatisfaction with the timing in an interview with European newspapers, including the Guardian.

“We have to address the question of the price caps,” he said. “That is not new, we do not start this debate today. That is why we invited the commission several times in the past to put concrete proposals on the table to help the member states decide.

“An ideological debate on instruments is not enough. We need concrete and operable proposals on the table in order to deliver.”

Commission insiders suggested the European Council leader was not in the picture on recent developments and his comments reflected the inbuilt tensions between the two presidents of sometimes rivalrous EU institutions.

Michel also said it was time to discuss decoupling gas from electricity prices. In the EU, electricity prices are determined by the price of the most expensive fuel, usually gas. This arrangement has generated profits for renewable energy firms that can generate cheaper electricity from wind and solar power.

A leaked paper proposes a price cap on “inframarginal electricity generation technologies” – renewables that have lower costs than gas – as part of a series of measures to confront all-time record gas and electricity prices.

The windfall generated by this policy (the difference between the cap and market rate) would be used to subsidise poorer households. The paper also calls for measures to reduce electricity demand.

The document, seen by the Guardian, carries a disclaimer that it is not a European Commission policy note, nor approved by top officials in charge of EU energy policy.

The surge in energy prices has been triggered by a drastic cut in gas supplies from Russia: in June 2022 these were less than 30% of the average between 2016 and 2021.

Michel warned that EU institutions risked losing support without urgent action. “It is really important that we do not forget that for our citizens, our families, our businesses, our SMEs – for them, the increase of the price of gas and electricity is a catastrophe.”

Fears of a hard winter ahead have raised concerns about potential waning EU support for Ukraine, as the brutal war against the Russian invasion grinds on while Kyiv goes bankrupt.

Michel said he was confident the EU would soon agree €9bn (£7.8bn) of financial assistance for Ukraine, which falls far short of Kyiv’s estimated €5bn a month funding needs.

So far the EU has released €1bn of the promised €9bn, after internal wrangling over how to share the cost between member states, and the right balance between grants and loans. “This is urgent for us to deliver,” Michel said, adding that he was confident “we will be able to implement what we have promised”.

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