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Factbox-EU proposes Russian gas price cap, further energy cost measures

·3-min read
FILE PHOTO: Pipes at the landfall facilities of the 'Nord Stream 1' gas pipeline in Lubmin, Germany

BRUSSELS (Reuters) - The European Union's executive proposed on Wednesday capping the price of Russian gas imports, among a series of emergency measures designed to limit consumers' energy bills.

European Commission President Ursula von der Leyen outlined five proposals she said could immediately affect "astronomical" prices. Energy ministers from the bloc's 27 member states will discuss them on Friday.

1. PRICE CAP ON RUSSIAN GAS

Von der Leyen said Russia was weaponising energy markets to punish EU for Western sanctions imposed on Moscow over its invasion of Ukraine.

"We must cut Russia's revenues which Putin uses to finance this atrocious war against Ukraine," she said.

The EU executive is proposing a price cap on Russian gas, without specifying a figure.

Hours earlier, Russian President Vladimir Putin threatened to halt all supplies if Europe took such a step.

The Commission is also seeking to reduce gas prices from other suppliers, such as through coordinated EU negotiations.

2. REVENUE CAP FOR LOW-COST PRODUCERS

The Commission will propose a cap of 200 euros per megawatt hour on the price of electricity generated at low cost from renewables and low carbon sources, according to a draft document seen by Reuters.

Von der Leyen said extra revenues made could be channelled by EU countries to support struggling households and businesses.

"It is now time for consumers to benefit from the low costs of low carbon energy sources, like renewables," she said.

3. 'SOLIDARITY CONTRIBUTION' FROM FOSSIL SECTOR FIRMS

The Commission has highlighted the extraordinarily large profits by companies in the oil, gas and coal sectors. EU countries would collect a 'solidarity contribution' to support vulnerable consumers or to accelerate a shift to green energy.

The funds could, for example, help energy-intensive sectors such as fertiliser production.

4. LIQUIDITY FOR UTILITIES

Record-high prices are threatening energy suppliers with possible defaults. The volatility of gas prices has increased risk as a whole for market participants, leading to demands from banks or brokers for higher margins.

Some of the suppliers have sought state guarantees to cover the margin calls and the EU executive wants to allow EU countries to provide them more rapidly.

The Commission plans to discuss with regulators the possibility of accepting a wider range of assets as collateral and with futures exchange operators the possibility of "circuit breakers" to reduce intra-day price volatility.

5. REDUCING DEMAND

The Brussels-based Commission will propose binding targets for EU countries to reduce electricity use during peak hours.

According to a Commission proposal, which has not been made public, EU countries would need to cut electricity use 10% per month compared with the same period in the last five years, and by an extra 5% during peak price periods.

One path during peak demand could be an auction in which consumers submit bids on the financial compensation they would need to cut consumption, this being funded by national budgets.

EU members would also identify means to decrease overall electricity consumption.

(Compiled by Gabriela Baczynska and Philip Blenkinsop, Editing by William Maclean)