Von der Leyen announces reform of the electricity market and an end to dependence on Russia

European Commission President Ursula von der Leyen emphasized on Wednesday that the EU should have listened more to those who have been warning for years about the dangers of Russian President Vladimir Putin‘s regime.

– One of the lessons from this war is that we should have listened to those who know Putin. Anna Politkovskaya (the murdered Russian journalist) and Russian journalists who uncovered crime and paid for it with their lives. Our friends in Ukraine, Moldova, Georgia, and the opposition in Belarus. We should have listened to the voices within our Union, in Poland, the Baltic states, and across Central and Eastern Europe – said von der Leyen in her State of the Union address.

– They have been telling us for years that Putin will not stop – she pointed out.

She added that these countries not only warned but also acted to end their dependence on Russia, investing in renewable energies, LNG terminals, and interconnectors.

– We must free ourselves from Russian dependence across Europe – said the Commission President.

Von der Leyen stated that the war initiated by Russia is not only a war against Ukraine but also a war against European energy, economy, values, and future.

– This is not just a war that Russia has started against Ukraine. This is a war against our energy, a war against our economy, a war against our values, and a war against our future. This is about autocracy against democracy – said Ursula von der Leyen in her State of the Union address, dressed in a combination of yellow and blue, the colors of the Ukrainian flag.

Other Commission members present at the plenary session of the European Parliament were also dressed in yellow and blue.

Limiting the revenues of energy companies

Von der Leyen proposed a limit on the revenues of energy companies that do not use gas for electricity production and redirecting excess revenues to consumers, saving during peak loads, and announced a reform of the electricity market to end the dominant role of gas.

– Companies that produce electricity at low costs never dreamed they would have such profits. That is why we propose a limit on their revenues – she said in her State of the Union address.

The excess profits would be directed to consumers and the economy. She added that member states could collect 140 billion euros to mitigate the impact of rising energy prices.

– In our social market economy, profits are good, but in such times it is wrong to extract extraordinary record profits, profiting from war and on the backs of consumers. Profits must be shared in such times and directed to those who need it most – she said.

Another proposal is a binding target for reducing electricity consumption, especially during peak loads, which will require sacrificing some comfort. As an example, she mentioned ceramic factories in Italy that have shifted their working hours to early morning to take advantage of times when electricity is cheaper.

– Imagine parents among those workers who leave their homes early while their children are still asleep because of a war they did not choose. That is one of a million examples of how Europeans are adapting to a new reality – von der Leyen stated.

And the industry that uses fossil fuels, oil and gas companies, refineries, coal mines, etc., are making large profits due to the current circumstances. Therefore, they will have to pay a solidarity tax.

Ending dependence on Russia

The Commission President emphasized the need to end dependence on Russia and diversify gas supplies from reliable partners such as Norway, the United States, Algeria, and others. She also announced a ‘thorough reform’ of the electricity market, where prices are determined by the most expensive energy source used for production, which has long been gas.

– While we deal with the current crisis, we must look ahead. The current concept of the electricity market is not fair to consumers; they should reap the benefits of cheap renewable energy sources – she explained.

– We will have to separate the dominant influence of gas from the price of electricity. Therefore, we will implement a deep and comprehensive reform of the electricity market – added the President of the European Commission.

She also announced that the Commission will work on new rules for the gas market to limit significant price volatility within a single day.

– This is a very complex and not trivial issue – says von der Leyen.