At the beginning of the week, Commission President Ursula von der Leyen announced an emergency instrument to cushion the high electricity prices.

How exactly it intends to fulfill the promise to prevent extreme fluctuations and speculation on the electricity market in the short term has so far remained unclear.

However, the FAZ now has an informal discussion paper from the EU Commission – in EU jargon one speaks of a “non-paper” – which shows for the first time which approach the Brussels authorities are pursuing.

The Commission is therefore counting on skimming off the currently particularly high profits of the operators of nuclear power plants, wind energy and solar parks.

The Member States should then redistribute the revenue to consumers, for example in the form of direct income support for needy households.

Henrik Kafsack

Business correspondent in Brussels.

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Johannes Pennekamp

Responsible editor for economic reporting, responsible for "The Lounge".

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Exactly how this is to be done is not spelled out in the paper.

The EU Commission speaks of a "price cap" for all electricity producers that have lower operating costs than gas-fired power plants.

Unlike a “genuine price cap”, this would not lower the wholesale price.

Rather, the difference between the price cap and the market price would be skimmed off by the EU states afterwards.

This would avoid an important negative effect of the various other price caps discussed: the reduction in electricity prices artificially achieved by these caps almost inevitably results in an increase in demand for gas and electricity.

This in turn is a risk to security of supply, as the European Commission emphasizes in the non-paper.

Gas power plants are currently indispensable

For the same reason, the Commission rejects other ideas for lowering electricity prices.

This applies to the extension of the price cap introduced by Spain and Portugal for the gas used for power generation, which is also being considered in Berlin.

A cap on the wholesale price for electricity, the direct coupling of the electricity price to the generation costs as in Greece or even the suspension of wholesale electricity trading are not viable options according to the Commission's assessment.

The idea of ​​siphoning off the profits of producers with low operating costs is similar to the approach presented in the FAZ by economist Axel Ockenfels, an expert on electricity markets.

The director of the Cologne Laboratory for Economic Research proposes that electricity that is not generated in gas-fired power plants be taxed more heavily than that from gas-fired power plants.

A look at the design of the electricity market helps to understand the idea behind Ockenfels' and the Commission's approach.

The high gas prices make the electricity produced in gas-fired power plants extremely expensive.

It is precisely these that are currently indispensable for securing the power supply, because there is too little (French) nuclear power and hydropower and the high temperatures have driven up the demand for electricity for cooling.

Provider with the highest price sets the standard

Since there is only one electricity market, no separate ones depending on the type of generation, the provider with the highest price sets the level for the overall market.

This is a normal and proven mechanism (merit order).

It also determines the price in markets for other products.

At the moment, however, this mechanism is leading to operators of coal-fired power plants, nuclear power plants, wind farms and solar parks generating exceptionally high profits due to the large price differences.

Most recently, one megawatt hour of electricity cost more than 1000 euros at times due to the high price of gas for delivery in 2023 - fifty times more than in the previous year.

The EU Commission is also bringing into play a reduction in electricity demand, as has already been agreed for gas.

This could be done through direct compensation for not using electricity for private consumers and companies.

The Commission stresses that the proposals are not yet a political proposal.

The paper should now first be discussed further with the member states at a technical level, it is said.

The EU energy ministers could then deal with the proposals at the end of next week.

The Czech EU Council Presidency has invited him to a special meeting on September 9th on the high electricity prices.

The Commission expects this meeting to provide important insights into what solution could be acceptable to Member States.

The proposal for the approach now being considered by the Commission would also be that it would not necessarily have to be applied by all Member States at the same time.

The states would thus have a certain flexibility.

However, the non-paper emphasizes that the approach cannot be reconciled with the levying of an excess profit tax for electricity companies.