Power prices and the war in Ukraine

Cyprus

Key drivers of price increase:

• Rising fuel cost, rising cost of greenhouse gas emission allowances (ETS)

Most impacted customers?

• All customers are equally impacted

Mitigation measures?

• Reduction of TUoS and DUoS by 65%. Impact on final bill, about 10% for LV customers, 6.2% for MV customers and 1.8% for HV customers

Impact on power sector (producers, suppliers)

• No impact on dominant participant (pass through costs for both generation and supplier)
• Positive impact on independent producers (all RES) and suppliers

Industry reaction

• Mitigation measures were welcomed but were not deemed adequate.

Any other relevant info / data

• Although electricity price of Cyprus has not increased as much as in the rest of Europe, there was a strong public reaction when comparing prices with last year’s prices. Last year a 10% discount was in effect due to COVID measures. Comparison showed a 38% increase, whereas, without last year’s discount, increase was 26%.

Czech Republic

Mitigation measures?

• Government does not plan any short-term or long-term interventions in the price formation (or regulated prices that have been explicitly rejected), they see solution in construction of new stable power plants (=nuclear and gas in the short term, especially for heating).
• Additional supportive measures may be subject of further political debate
• For vulnerable households there are special social contributions for housing available and extraordinary social support as well.

Denmark

Key drivers of price increase:

• Rising fossil fuel prices.
• Low reservoir levels in Scandinavia.
• Rising ETS price and lesser power production from wind turbines than normal.

Impact on power sector (producers, suppliers)

• As most of Denmark’s power production come from RE-sources like wind, solar and biomass, most Danish producers are experiencing higher margins on their production. 

Industry reaction

• Both consumer and producer organisations have called for more and faster deployment of wind and solar to mitigate future price peaks.

Any other relevant info / data

• + 30% yoy in Danish household electricity price in September 2021.
• Share of the different electricity bill components for Danish households in Q3 2021 is: 50% Tax and VAT, 35% wholesale electricity and 15% transport and system security tariffs.

Estonia

Key drivers of price increase:

• Increase of natural gas price
• Increase of CO2 price
• Reduced production volumes from RES
• Impact of the Industrial Emission Directive requirements (600 MW of dispatchable capacities have been closed but not replaced by new generation capacities)

Most impacted customers?

• Energy intensive industry and growing part of vulnerable retail customers as higher energy prices have significantly started to impact price level of goods and services in Estonia (inflation rate in December was 12%).

Mitigation measures?

• Postponement of already planned tax increases (including on energy);
• Compensations to vulnerable families on high electricity and gas prices (funds will be taken from the sales revenues of CO2 quotas);
• Partial (50%) compensation of power grid tariff to electricity consumers and full compensation of power grid tariff to business consumers;
• Full compensation of gas grid tariff to all consumers;
• The Government has set a price cap to all household electricity consumers. If the cap will be exceeded, then the Government will compensate the costs above the cap to consumers (price cap for electricity is set at 12 cents per kWh (based on monthly average price without taxes) for the quantity of up to 650 kWh);
• The Government has set a price cap to all household gas consumers. If the cap will be exceeded, then the Government will compensate the costs above the cap to consumers (price cap for gas is set at 65 €/MWh (based on monthly average price without taxes) for the quantity of up to 2,75 MWh).
• Described measures will remain in effect until the end of March of 2022.

Impact on power sector (producers, suppliers)

• Energy intensive industry is impacted by most.  Some suppliers continue to renegotiate their fixed-price supply contracts in order to increase the sales price or terminate respective fixed-price supply contracts.

Industry reaction

• Expressions of concern about imminent need to pass the impact of higher prices to consumers
• High prices are expected to remain until at least springtime but maybe also for longer time.
• Views have been expressed among government and parliament officials regarding:
• amending functioning of EU ETS (introduction of price cap on CO2 price, increasing flexibility of MSR, strengthening price control mechanism of EU ETS);
• amending power market mode or leaving power spot market altogether (no hasty decisions are expected to be made, there is more noise than action)l;
• increasing the speed of developing new renewable capacities.
• Discussions continue and most probably concrete proposals will be formulated regarding given subject matters if high prices persist. These discussions will definitely impact also Estonia’s negotiating positions in the framework of FF 55 package

Any other relevant info / data

• About 60% of consumers have fixed-price supply agreements and 40% spot-price supply agreements hence. Nevertheless, as very significant price increases are emerging throughout the economy, nobody is any longer protected from impact of high inflation.

Finland

Key drivers of price increase:

• Exporting power to (importing prices from) Continental Europe and Baltic countries.
• Increased prices of coal and gas. (The impact on Finland is more due to increased demand for electricity elsewhere, which has contributed to changing the balance between power exports and imports. Finland has traditionally imported power from different directions, but now exports a lot of power to the Baltics and occasionally to central Sweden. However, this is coming to ease with new wind power and nuclear power (OL3) capacity).
• Increased CO2 prices have impacted on peat production costs.
• Limitations in the transmission capacity from Finland to SE3. (Swedish TSO Svenska Kraftnät is limiting transmission capacities in the borders of bidding zone SE3)
• Ei’s report was finalized on 10^th Nov. Ei has concluded that SvK did not fully comply with the 70% rule during the monitoring period and that SvK did not have an exemption during that period, meaning SvK has breached the 70% minimum requirement in that regard. Therefore, Ei will continue the investigation and request further clarification from SvK.

Most impacted customers?

• Energy-intensive industry (depending on the level of hedged).
• Households with direct electricity-based heating ( Due to the increased risks and volatility hedging possibilities have deteriorated and, as a result, the supply of fixed-price contracts has decreased, and additional fees have been added to minimize risks.)

Mitigation measures?

• There are ongoing discussions on the price situation in the media and with the politicians. However, politicians are under pressure to stop importing fossil fuels and electricity from Russia as soon as possible. The use of gas is relatively low in Finland, but it is challenging and expensive to replace especially in industrial use.
• On energy poverty: In Finland there is a social welfare system that supports household consumers not able to pay e.g. their electricity bill. In addition, the percentage of distribution obligation for biofuels will be temporarily reduced (expected to reduce prices by more than 10 cents per liter), and the use of domestic wood fuels will be increased through additional investments to provide sufficient fuel for district heating (and electricity) production for the coming winter. Other actions are also being explored, focusing mainly on transport.

Impact on power sector (producers, suppliers)

• The most impacted customers are energy-intensive industry (depending on the level of hedged), households with direct electricity-based heating (depending on the type of electricity contract, less than 10% of domestic customers have spot-price contract)
• Both producers and suppliers in the power sector apply a rather high level of hedging. Hedging possibilities have deteriorated due to the increased collateral requirements.
• Increased collateral demands also have an impact on electricity retailers’ liquidity.

Industry reaction

• Energy industry participates in the public discussions and provides analysis on the underlying fundamentals. Energy intensive industry follows the situation and has mainly concentrated on ETS practices.

Any other relevant info / data

• The derivatives markets expects high prices to continue until the end of the year and over next winter.
• Electricity prices in Finland can befound from Statistic Finland’s database. 
• Electricity bill components for household consumers(see graph in Finnish contribution)
• The Finnish Competition and Consumer Authority (KKV) insists that a maximum reasonable price rise is 15 % or 150 € p.a. for a consumer. Some consumers have complained suppliers’ price increasing announcements. The dispute is valid at least for “traditional” tariff contracts (neither fixed term & fixed price nor dynamic price). However, several consumers are taking the matter to the Consumer Disputes Board. The industry sees that the KKV claim is not based on law.

Consumers have also raised some other issues related to increasing prices and other contract features, against suppliers in dispute settlement.

France

Key drivers of price increase:

• Gas Price increase, increasing the variable cost of gas power plants:
• Gas price has been dramatically increased since September 2021, notably on short maturities, impacting the variable cost of gas power plants. Over 2021 the price of gas has increased fivefold in the last year compared to 2020. 
•  In mid-December 2021, a significant price drop had been observed, due to the increase of LNG imports to Europe (stemming from a lower Asian appetite for LNG and favorable weather conditions (closing the gap in current EU storages levels compared to historical levels).
• Since February 2022, the war in Ukraine has raised fears of disruptions to exports from Russia, which supplies more than 40% of the European Union's gas imports. If the Russian-Ukrainian war caused gas prices to soar, however, Russian gas flows remain at high levels for the time being. The absence of a European embargo on Russian gas exports and the announcement of an additional 15 bcm of US LNG for 2022 seem to reassure the markets.

• EU ETS carbon price increase, increasing the total variable cost of gas, coal, fuel power plants (accounting for 20% of the increase according to Frans Timmermans, First Vice-President of the European Commission). After approaching 100 €/t in February, the CO2 price fell sharply to 55 €/t in early March, caused by stock market prices and the liquidation of many speculative positions. It then rose again in mid-March to reach 80 €/t against the trend of gas prices. Prices have remained stable since then, as market participants await signals and the implementation of the Carbon Border Adjustment Mechanism.

• Coal price increase, increasing the variable cost of coal power plants.   Prices have increased as main coal producers reduced coal exports due to rail constraints or weather impacts. Prices soared as Russian 1st exporter, Suek, declared force majeure in February, and  because of the reliance of European countries on Russian coal. Europe declared the 7th of April an embargo on Russian coal, starting on August 22.
• Winter 2021-2022 & early Spring 2022: particular vigilance on the security of the electricity supply in France for the winter/early spring period, in case of a cold wave, due to a lower availability of the French nuclear production fleet  linked to the maintenance of the fleet (in particular to treat the stress corrosion cracking phenomenon). Coupled with the uncertainties related to the war in Ukraine, such projections and uncertainties affect electricity forward prices, which quote in a ~ 180-220 €/MWh range over 2023 and a ~120-140 €/MWh range for 2024.

Most impacted customers?

Household customers and small companies (less than 10 employees and 2 M€ turnover):

Most customers have a contract with a regulated electricity price (TRV[1]) or TRV-indexed offers. Alongside with fixed-price market-based offers, this tariff is designed to limit the volatility of market prices with the use of smoothed sourcing and a share of regulated fixed price due to the ARENH mechanism.  In the absence of government intervention, the TRV would have increased by 35% (including all taxes) in February 2022, as proposed by the French NRA to reflect the rising costs of supplying electricity in a context of soaring wholesale electricity prices. In September 2021, the government committed to limiting this TRV increase to 4%.

Consumers who are not under regulated prices (TRV), index-TRV offers or fixed term prices do not necessarily benefit from a smoothed sourcing. However, government measures aiming at capping the TRV will also apply to them (see section “Mitigation Measures”).

The few suppliers offering dynamic pricing contracts have suspended them, with one supplier advising its customers to switch supplier.

[1] TRV (tarifs réglementés de vente) : regulated electricity prices

Non-household customers (industry, tertiary, SMEs…):

They benefit, through their energy supplier, from a part of the regulated fixed price of nuclear energy share from the ARENH, in proportions that depend on their load curve.

Exposure to the current price increase varies greatly among consumers, depending on whether they have a pluriannual fixed price contract, or a contract indexed to the forward or spot markets, and on the expiry date of their contract.

Price increases are expected to be very significant for all consumers (including household customers) who have to renegotiate their contracts on the date of expiry (many contracts are renewed on January 1st). As  the non-household customers have a lower tax share than private customers, the size of the increase is more significant.

Mitigation measures?

Household and Non-household customers:

Early January 2022, the French government limited the increase of the regulated tariff (TRVE) applicable to households and very small enterprises to 4%, by deciding on two measures:

• Reducing the TICFE[2] in 2022 from 22.50 €/MWh to 1 €/MWh for individual consumers and to 0.50 €/MWh for businesses, which are the minimum levels allowed by the European Regulation. The measure, which will be in force from February 1, 2022 to January 31, 2023, represents a cost of 8 billion euros for the State.
• Increasing the ceiling of the electricity volume sold by EDF under the ARENH[3] mechanism from 100 TWh to 120 TWh for 2022. The price of these additional volumes of ARENH have been fixed to 46.20 €/MWh (whereas the first 100 TWh have been sold to the historical price of 42€/MWh). Eligible suppliers will have to sell to EDF at a price of €257/MWh (the average price of the 2022 calendar prices for France between 2 and 23 December 2021) a volume equivalent to that which will be transferred to them. The French NRA (Commission de Régulation de l’Energie) will ensure that the gain resulting from these additional volumes is fully redistributed to consumers if they have been affected by the price increase based on their level of exposure to rising prices - with however the possibility for suppliers to keep a part to cover the costs to which they may have incurred.

According to EDF, these measures represent a cost for EDF of 10.2 billion euros.

Consequently, the measure related to the reduction of the TICFE will apply to all customers, including B2C and B2B, whether they are under regulated tariff or not. However, its impact will be lower for the biggest non-residential customers who already benefit from reduced TICFE tax rates (electricity intensive consumers).

[2] Taxe Intérieure sur la consommation finale d’électricité (Domestic tax on final electricity consumption)

[3] ARENH, or Regulated access to historic nuclear electricity, is a regulated mechanism which allows alternative (non-historic) electricity suppliers to have access to part of EDF’s nuclear electricity production at a regulated price.

Household customers:

• Increase of the energy cheque:the government has introduced an additional aid of 100 euros for the 5.8 million households already benefiting from the energy cheque. This sum was paid in December 2021 and can be used to pay electricity, gas, and fuel bills. This support represents an aid of nearly 600 million euros.
• An additional 100€ inflation premium will be sent to all household consumers net earning less than 2 000€/month (~38 million people) between December 2021 and February 2022 and represents an additional state support of 3.8 billion euros. That premium will be directly added to salaries and can be spent without restriction (the premium was decided to reduce the overall burden of inflation, not specifically to reduce house energy consumption bills).

Non-household customers:

• For energy intensive consumers deemed to be exposed to a genuine risk of carbon leakage due to significant indirect emission costs, an advance of 150 million euros in 2022 was adopted on the aid to be paid in 2023 to compensate for increases in electricity prices resulting from the inclusion of the costs of GHG emissions due to the EU ETS. This advance is intended to be perpetuated until 2030.
• As part of its economic and social resilience plan, the French government announced on March 16 the establishment of a temporary aid for companies without size or sector conditions, and which could bear losses due to exceptionally severe increases in energy prices. The 3 conditions to benefit from it are the following: (1) gas and electricity expenditure represents at least 3% of the turnover, (2) this expenditure has increased by at least 40% since the beginning of the war, (3) the company shows operating losses. The State could then cover half of the surplus of their energy expenditure (capped at €25 million). This support would represent a cost of about 3 billion euros for the State.

Impact on power sector (producers, suppliers)

• Producer:the increase of wholesale electricity market prices has an impact on the part of the electricity production which is exposed to them. This excludes the volumes already hedged and the production sold through the ARENH mechanism in France. As producers hedge their production volumes in advance, market prices have a moderate impact in the short  This may be different in the long run. The increase is likely to generate more benefits for the part of the production exposed to market prices, yet depending on the type of production assets, this may be mitigated by the increase of production costs (e.g. commodity prices and impact of the EU ETS price increase on fossil fuel-fired power plants). 
• Supplier: customers could switch suppliers to get a new offer (TRV, indexed-TRV or fixed-price market based offers This could be costly for suppliers who did not anticipate the coverage of these unforeseen volumes. By addressing the entire retail market (both regulated and non-regulated contracts), the mitigation measures should contribute to reduce this risk.

Industry reaction

UFE is currently analysing the situation.

In the short term: target immediate effort to low-income and vulnerable households through social aids and the implementation of the UE Toolbox measures.

In the long term:

• Electricity Taxation: at EU level, reduce taxes and levies via the Energy Taxation Directive review.
• Develop energy efficiency.
• Make changes to the retail market to guarantee consumers access to contracts that provide visibility and price stability
• Hedge against fossil fuels’ price volatility by accelerating the deployment of storage and renewable and low carbon production sources in Europe.
• Call for an improvement of the power market design, looking for an efficient and comprehensive framework for long term arrangements that would complement the wholesale market and its short run optimization price signals, and give visibility on generators’ revenues and end-users’ bills.

Any other relevant info / data

French Minister of the Economy called for a profound reform of the European electricity market (letter to Eurogroup, September 2021)

Non-paper from France on Energy prices (ECOFIN, 8 November 2021). French government reaffirmed its “support for a fully integrated internal wholesale market for electricity” but nonetheless stressed that “it can fail to bring market operators enough visibility [which] is critical for consumers and for investors”. Therefore, the French Government called on the EC to explore solutions to “stabilize market retail prices, limit volatility for consumers and provide the right incentive to decarbonize the economy through the use of electricity” by:

(1) Promoting a “stronger link between the price paid by consumers and the costs of the underlying low-carbon component of the national energy mix […] by allowing ex-post regulated compensatory transfers between producers and suppliers”

(2) Supporting “long term contracts based on low-carbon energies, as mentioned in the EU Toolbox”

(3) Providing consumers a better access to electricity contracts with price stability and better informing them of the risks associated with contracts based on the spot market, strengthening supplier resilience “to adverse market conditions”

(4) Supporting a “better coordination of national gas storage regulations” across Europe.

(5) Asking to focus on achieving EU “energy independence by boosting public and private investment in energy efficiency and all decarbonized means of energy production”.

Non-paper on energy and electricity & gas markets from France (French Minister of the Energy) with Spain, Italy, Romania and Greece (30 November 2021): It has been presented at the EU Energy council (2 December 2021). Amendments to the Electricity Directive are proposed (1) to cushion the impacts for end consumers of situations where prices on the wholesale markets are high and (2) to facilitate investment in low carbon assets, in particular by reducing the risk for investors and expanding the possibilities of long-term contracts, without affecting the functioning of the wholesale markets.

European Commissioner on Energy Kadri Simson said the EU Commission was willing to "explore solutions to mitigate price volatility, particularly in the retail market".

On January 22, following the meeting of the Energy Ministers in Amiens, French Energy Minister Barbara Pompili declared that "A majority of States consider that the retail market must evolve”.  Energy Commissioner Kadri Simson added that the EC is "discussing how to broaden the options" presented in October 2021 in its toolbox, "including looking at the functioning of the electricity market”. Such a reform will have to wait for the ACER assessment of the current wholesale electricity market design scheduled for April 2022.

Regarding the options for short-term interventions proposed by the European Commission on 23. March, the French Government has made the following statements: 

• On Capping or modulating the gas price through regulatory means: At a hearing before the Finance and Economic Affairs Committees of the National Assembly on 18. March, Bruno Le Maire suggested a "cap on gas prices at the EU level".
• On Common gas purchases at EU level: During the summit of 24. and 25. March, EU Member States gave the Commission a mandate for joint purchases of gas, LNG and hydrogen for the coming winter. They refer to the joint purchasing platform proposed by the Commission in the "REPowerEU" communication of 8. March. "With a common approach, we will have a much greater ability to set prices," French President Emmanuel Macron declared.
• On Ensuring that existing storage infrastructure are filled up to at least 80% of their capacity by 1 November 2022 and then to 90% in subsequent years:  France is focusing its efforts on filling gas storage this summer. Minister Le Maire declared on march 8 that it is necessary to "accelerate the storage of gas from this summer" […] to a 90%-target for filling and storage to face the winter of 2022. […] The challenge is not for now, the challenge is the winter of 2022-23."

Germany

Key drivers of price increase:

The main drivers behind the power prices may differ from one country to another. In Germany, the following reasons play a role:

• On the supply side - increase of the price of raw materials due to the ending COVID-19 pandemic, linked with a world-wide shortage of raw materials.
• On the demand side - higher energy demand due to the important parallel economic growth world-wide linked to the ending COVID-19 pandemic.
• In addition, especially since February 2022, geopolitical uncertainty is another driver of price increase.

Most impacted customers?

The impact differs largely, depending on the type of customers and the type of energy supply contracts:

Household customers:

• The long-term procurement strategy of most energy supply companies has buffered a direct spillover of the high wholesale prices to the end customer prices. Price drivers are primarily increased wholesale prices. This leads to price increases that are perceived particularly strongly by customers in comparison with the comparatively low energy prices in 2020 and in connection with the sales tax, which was temporarily lowered in 2020.
• In the medium term, it can be expected that retail prices will be raised across the board. This possible trend will become established in the long term because of the indirect effect of wholesale prices mentioned above.
• Some companies still have to procure additional quantities for 2022 which may result in these companies having to raise their prices far above the average level, terminate contracts or even cease supply. In the latter two cases, customers will look for new tariffs with other utilities or fall into the substitute supply of their responsible basic supplier. In the event that companies supply far more new customers than forecasted as a result of these circumstances, energy at the current high prices will have to be procured. This can have an impact on the current offer prices or lead to prices having to be adjusted in the substitute/basic supply. Similarly, a temporary "lull" in competition can be the result, because an above-average number of new customers makes the subsequent procurement of currently very expensive energy necessary and thus influences the profitability of the portfolios.

Industrial customers:

• The high wholesale prices also have a strong impact on non-household customers. This leads to considerable burdens on businesses. Depending on the energy supply contracts that a company concluded, it is more or less impacted. A certain share of industrial customers is risk-averse with regard to energy prices and procures energy well in advance. However, if energy is procured on the spot market or the short-term forward market, some industrial customers might have to consider the reduction of their production. However, these have been exceptions so far.
• It can be assumed that rising prices will affect the economic efficiency of production in the medium term, especially if these cannot be passed on 1:1 via higher product prices.

Mitigation measures?

When weighing the intended and unintended short- and long-term consequences of an intervention in the market, the disadvantages of such an intervention still outweigh the benefits. The current evolution of wholesale market prices does not call for a change of the market design as they are the result of supply and demand which is reflected in the recent increase of wholesale market prices (c.f. reasons mentioned above). In a market system, price signals are the decisive mechanism to induce adjustments of capacity (in this case investments). Price interventions would damage the trust of investors and, in the long run, lead to higher, not lower prices. In contrast to that, price peaks or periods of higher prices lead to investments in new capacities and demand-side flexibilities that, in the long run, lead to lower prices. Moreover, for this objective, it is necessary to strengthen the internal energy market, not to weaken it through diverging regulation in different Member States. As energy trading is performed at European level (day-ahead and intraday market coupling), it is crucial to apply the same rules in the internal energy market.

Mitigation measures could be the reduction of energy taxation and the reduction of levies (in Germany, in particular, the "EEG levy" in connection with the use of renewable energies will be reduced to zero as of 1 July 2022). Further relief such as electricity tax and VAT should be examined. Targeted social policies of the member states for vulnerable customers (e.g. increase of subsidies for energy costs, etc.) are as well essential. In Germany, the focus primarily lies on increases in "energy shares" and the unbureaucratic processing of transfer payments.

The federal government has taken various measures to reduce the impact of increased energy prices on consumers without intervening in price formation on the wholesale and retail markets.

Impact on power sector (producers, suppliers)

The impact on the power sector is high, see reasons listed under the key drivers.

Industry reaction

Currently, BDEW is continuing to analyse the situation and advising its members with regard to possible questions of customers and/or media. BDEW also issued press releases on the Commission’s Toolbox and the debates on energy prices at the various meetings of the European Council and the Council of the EU. As regards guiding messages, see comments above regarding mitigation measures.

Any other relevant info / data

It is very important to call for an acceleration of the deployment of renewables. In more general terms, renewable and decarbonised gases will play a crucial role toward climate neutrality.

Greece

Mitigation measures?

• €150m fund to compensate price rise through the end of the year 

Ireland

Key drivers of price increase:

• Prices rising due to rising price of gas (22c/tm in Aug 2020 vs 150c/tm in Aug/September 2021); Carbon price increase; low renewable output (lowest wind year since 1960’s); system tightness in both SEM and UK.
• Wholesale cost=40% of final bill (Ref 2019 EC study).
• Natural Gas as the marginal fuel and dominant fuel sources.

Most impacted customers?

• Regulator estimates €500 increase to average annual bill for domestic bill for electricity and gas.
• Price increases confirmed across all 14 suppliers in ROI.
• Regulated tariff increases approved in NI.

Mitigation measures?

• No new mitigation measures in ROI as of yet.
• Increase to fuel allowance this winter confirmed in recent budget.
• Existing Regulatory Measures; Switching; 500k customers with Smart Meter/prepayment.
• Suppliers’ Energy Engage Code available here.
• Additional protection for vulnerable customers available in ROI here
• Additional protection for vulnerable customers available in NI here
• In NI the Regulator has approved a reduction in network gas costs, which will reduce the impact of wholesale gas price rises to an average household by £20 a year.
• NI Regulator is also increasing the levels of contracts, known as directed contracts, directly accessible to smaller suppliers to help during this period of high wholesale prices.

Impact on power sector (producers, suppliers)

• Price increases confirmed across all 14 suppliers in ROI.
• Regulated tariff increases approved in NI.
• Note ongoing system tightness factor and significant increase in peak demand in ROI.
• Upward pressure on prices, but impact limited by effective price caps in markets.
• e.g. €500 strike price for Reliability Option holders
• Note this strike price has been increased temporarily based on expectation of future gas prices and will be reviewed again on 01/11

Industry reaction

• See Electrification Alliance Statement
• Suppliers engaging with Regulators and Consumer Stakeholder Groups

Any other relevant info / data

• No retail price caps in ROI
• Statement from NI Utility Regulator here

Italy

Key drivers of price increase:

• Lower-than-average renewable energy production.
• Higher consumption in Italy (just like in the EU and elsewhere in the world) driven by economic recovery.
• Increase in the CO2 price.
• Gas price increase is also due to reduced LNG and piped gas supply.
• Limited additions of upstream/liquefaction gas capacity and increased absorption by international (namely Asian) buyers played a role in restricting gas supply. This should ease in the next months.
• Impact on the commodity market of Ukraine crisis

Most impacted customers?

• The most impacted are regulated customers, households, and SMEs, because these are supplied through a single buyer (public owned) who buys only on spot basis. Also, customers who choose a free market offer which does not include a fixed price for commodity had a similar impact. These impacts would have been higher without adoption of the mitigation measures (see the next point).

Mitigation measures?

The Italian government initially intervened with three main measures applying on Q4/2021

• Reduction of VAT for gas customers to 5%.
• Reduction of levies (renewables incentives and other system costs) for electricity and gas customers (both households and non-households). In depth, only for households and SMEs (<16,5kW) of the power sector the levies have been set to zero.
• For more than 3 million nuclear families who have the right to discount bonuses for electricity and 2.5 million who take advantage of the income-based gas bonus the price increase has been offset.

The above listed measures were confirmed also for Q1/2022 and Q2/2022, but the government intervened with further decisions to support final customers in these two quarters:

• Increase of electricity and gas bonuses,
• Obligation for energy suppliers to offer household customers who cannot pay their energy invoices to pay in installments with no interest rate the bills issued from January to April 2022. A measure that has been extended also to non-household for energy consumed in May and June 2022
• Levies set to zero also for large electricity consumers (non-household > 16,5 kW)
• Tax credit for energy-intensive customers, equal to 20% of the cost of energy consumed in Q1/2022 and 25% in Q2/2022
• Tax credit for NON energy-intensive customers (> 16,5 kW), equal to 12,5% of energy consumed in Q2/2022

In addition, in January 2022 the Government introduced a compensation mechanism, according to which power producers from mostly non-incentivized RES power plants are required to pay-back to the system the “extra-revenues” obtained in the market during the period February-December 2022 (claw back). The expected revenue of the measure is 1,5 billion €. The main features of the new mechanism are the following:

•  The measure applies to the following power plant categories:

• PV plants with a capacity above 20kW benefitting from Conto Energia, a fixed feed-in premium independent from the electricity market prices
• All non-incentivised RES plants (Hydroelectric, geothermal, wind and solar) with a capacity above 20 kW entered into operation before January 1st 2010

• The Decree establishes a cap on the remuneration on the electricity market, equal to a reference price identified in the Decree (ranging from 57 €/MWh to 75 €/MWh according to the bidding zone)
• Producers will have to return the difference between the zonal hourly prices (or the monthly average of zonal hourly prices for programmable units) and the cap mentioned above. If prices fall below this level, then GSE will return the difference to producers. This obligation will be applied between 1st February 2022 until 31st December 2022
• The measure does not apply to energy sold through supply contracts concluded before January 27th 2022, provided that they are not linked to spot market prices and that they are not stipulated at an average price >10% than the cap (in those two cases the price of the contract becomes the reference price for the application of the claw back obligation)

The Law Decree (Decreto Legge) introducing the new measures for 2022 has been published on the Official Journal on January 27th, 2021 and has been converted into law on March 28th . The Italian regulator (ARERA) launched a public consultation on its (binding) guidelines for the implementation of this measure whose deadline is set on April 22nd

The Italian Government, with the article 37 of the Law Decree March 21^st , 2022, N. 21, also introduced an extraordinary contribution by way of a levy applied for 2022 on companies active in the energy sector which will be used to limit the increase of energy prices for final customers (expected revenue of 4,4 billion €):

• This measure applies to the subjects who carry out in the territory of the State, for the subsequent sale of the goods, the activity of electricity production, the activity of production of methane gas or extraction of natural gas, to retailers of electricity, of methane gas and natural gas and to the subjects that carry out the production, distribution and trade of oil products. The contribution is also payable by subjects who, for subsequent resale, permanently import electricity, natural gas or methane gas, petroleum products or who introduce such goods from other states of the European Union into the territory of the State.
• The tax base of the extraordinary contribution consists of the increase in the balance between active and passive operations, referring to the period from 1st October 2021 to 31st March 2022, compared to the balance of the period from 1st October 2020 to 31st March 2021. The contribution is applied to the extent of 10% in cases where the aforementioned increase is greater than 5,000,000 €. The contribution is not due if the increase is less than 10 percent.
• The contribution should be paid by June 30^th, 2022 and it is additional to the claw back on extra revenues of RES producers on electricity markets.
• The involved companies cannot transfer this extra-cost on final customers.

The Law Decree will be converted into law within 60 days from its publication. During this process some amendments are still possible.

Impact on power sector (producers, suppliers)

• Initially, suppliers were not heavily impacted as part of the mitigation measures (temporary reduction of levies) had already been adopted to relief customers at the beginning of the COVID-19 emergency, thus most of the operational and IT activities to implement them had already been developed. Furthermore, government measures only intervened on taxes/levies and not on the commodity, thus avoiding any distortion of price signals.
• However, with the adoption of additional measure in Q1/2022 energy companies were much more heavily hit due to the introduction of the compensation mechanism described above which, according to some preliminary estimations of the Italian government, should be worth at least 1,5 bn € paid by RES producers.
• In a country like Italy, where a large share of electricity is produced by natural gas (around 45%), gas prices together with high C02 prices, influence electricity prices in the spot market in the hours when CCGTs fix the prices. Most part of the energy supplied in 2021 has been traded in the previous years at lower prices than the current ones. Moreover, renewable power plants under incentive schemes (i.e., CfDs) did not incur any impact from this situation. 

Industry reaction

• Industry, which consumes large volumes of electricity and/or gas, has strong concerns. Reflections in support of the role of long-term gas contracts have begun, highlighting their potential contribution to supply security and affordability (competitive procurement). Finally, this situation of increased prices could impact the discussion on EU reforms of the ETS.

Any other relevant info / data

• In Italy, the development of a "Single Buyers Platform" is under consideration, but the precise goal and operating modes are not yet clear.
• Electricity bills have risen by20% in the last quarter and are expected to rise by 40% from October.  
• Italian day-ahead power averaged Eur112.40/ MWh in August, up nearly200% on year and a record for August. 
• in November the Day-ahead average price has been 226 € / MWh (with hourly peaks reaching 400 € / MWh). In March 2022, the day-ahead average price has been 308 €/MWh with peaks reaching almost 700 €/MWh.

Latvia

Key drivers of price increase:

• Increase in Nordpool day-ahead prices, driven by reduced production volumes from RES (low levels of Scandinavian hydro, lower wind output)
• Increase of natural gas price
• Increase of CO2 price
• curtailment of available transmission capacity with third countries imposed by Lithuania TSO, reducing available capacity for Baltic imports

Most impacted customers?

• The first to be impacted - clients with dynamic pricing (indexed to day ahead hourly pricing), approx. 10-20% of consumption
• Due to low hedging opportunities in region, the wholesale price increase is gradually increased in customers' contracts. Most customers have already experienced a price increase

Mitigation measures?

• Reduction of renewable energy support fee collected from electricity end-users by 65%. Temporary abolishment of end-user payments from January to April, payments compensated by state budged
• Doubled to tripled support to vulnerable customers depending on income status
• the annual inflation increase of the system service tariff has been postponed
• Compensation of system service tariffs to all end-users (50% for December, 100% from January to April). Payments compensated by state budged.
• Increased monthly payments under existing social programs for a period of high energy prices

Impact on power sector (producers, suppliers)

• Smaller retailers face liquidity problems
• one retailer, mostly with municipal supply contracts (fixed price contracts), has ceased operations
• Basically all traders are executing the contractual option to renegotiate the contracts

Industry reaction

• industry calls for the possibility, if not improved, of at least not worsening the situation with imports from third countries
• industry calls for the urgent introduction of liquid hedging instruments, such as FTR on the most congested price zones
• industry welcomes the measures to lower environmental taxes and increase of support to vulnerable customers

Any other relevant info / data

• Market expect quite high-priced winter and a bit lower, but still high 2022.
• The political agenda includes a return to regulated prices and the day-ahead market limitation. However, the current arrangement is to avoid market intervention, finding compensatory mechanisms through social support systemes, environmental taxes and system service tariffs.

Luxembourg

Key drivers of price increase:

Luxembourg imports most of its electricity from Germany. Therefore, the factors and elements impacting the market prices (commodity price) are similar to those of the German market (see remarks made for Germany).

For information, the elements mentioned for electricity prices in Luxembourg are not applicable to the natural gas market. Indeed, the Belgian and Luxembourg gas markets were integrated on 1  October 2015 in one market zone, the integrated market area BeLux. Therefore, for natural gas in Luxembourg, the remarks mentioned for Belgium have to be considered.

Most impacted customers?

Most impacted customers are industrial customers (with dynamic, spot based pricing) as well as part of professional customers where supply contracts came to an end in 2021, and who had failed to renew their contracts before summer.

Mitigation measures?

Energy premium for low-income households

Government has decided to introduce an energy premium for low-income : households receiving the cost-of-living allowance (AVC, “Allocation de vie chère”) will receive a one-off premium of at least € 200 and up to €400 depending on the composition of the household.

GAS - Subsidy of network costs

The price of natural gas should be reduced by the temporary (as of 1st May 2022 till 31 December 2022) take-over by the State of the network costs, DSOs grid fees only for residential + professionals + small B2B customers.

ELECTRICITY – Fonds de compensation

The contribution to the compensation fund (support for RE power) has decreased as of 1^st Jan. 2022 vs. 2021. An additional decrease could be implemented.

EU Commission 23 march Communication on « Temporary Crisis for State Aid measures” (C (2022) 1890)

Ministry of Economy is preparing a legislative act in order to apply in Luxembourg the measures provided for in Article 2.4. of the above-mentioned EU Commission communication, especially for energy-intensive businesses. It is also important to see how Luxembourg will transpose the series of other schemes, loans and subsidies to businesses, which can be used by European States in this period of crisis.

CITY of LUXEMBOURG  Announcement

Solidarity allowance increase + introduction of an energy premium for about 6,000 eligible households living in the City in Luxembourg, only on its territory.

Impact on power sector (producers, suppliers)

No “official” bankruptcy in the energy sector at this stage.

However on 13 December 2021, one Luxembourg energy supplier (EIDA S.A.) had to declare incapacity to continue delivering its power customers.

EIDA has been founded and active on the market since 2006.

EIDA supplied about 3.000 delivery points in Luxembourg with power (about 100 GWh of residential and professional customers).

The reason for the incapacity to delivery was the bankruptcy of their power supply counterpart Anode Netherlands.

As a result of these difficulties in the electricity market and the impact on the company's activities, EIDA also had to stop its natural gas supply activities (500 delivery points) on 15^th January 2022.

No bankruptcy has been declared yet, although one of their main shareholders, Pluspool (Netherlands), has been declared bankrupt.

Industry reaction

Industry has strong concerns, lobbying associations (FEDIL) started intervening with the government asking for supporting industrial customers. See also the comments mentioned on “mitigation measures” and the potential Ministry of Economy proposal to apply EU Commission 23 march Communication on « Temporary Crisis for State Aid measures”, especially for energy-intensive businesses.

The Netherlands

Key drivers of price increase:

• High wholesale market gas prices combined with more gas fired production of electricity

Most impacted customers?

• Household and SME customers with variable price contracts and those who now start a new contract with fixed price and fixed period
• Industry customers whose prices are linked to the wholesale market

Mitigation measures?

• Temporary energy tax reduction of 3.2 billion in 2022.
• Extra 150 million insulation subsidy on top of existing scheme.
• Temporary VAT reduction (21% to 9%) in the second half year of 2022.
• Direct payment of 800 euro to lowest income group (800,000)

Impact on power sector (producers, suppliers)

• Household and SME customers with variable price contracts and those who now start a new contract with fixed price and fixed period.
• Industry customers whose prices are linked to the wholesale market.
• Suppliers with high dependency on short term markets are at risk.

Industry reaction

• No market intervention – this is how a market works – low prices and high prices the same

Any other relevant info / data

• For large suppliers are supporting a program to fight energy poverty with 1 million euro, linked to a ngo helping people with debts.

Poland

Key drivers of price increase:

• Sharp price increase of CO2 allowances
• Increase in wholesale natural gas price

Most impacted customers?

• Leading power companies has officially demanded significantly higher tariffs to cover their expenses caused by higher carbon prices, therefore also a vulnerable customers will be impacted by the current energy crisis.
• Industrial and business customers, whom will be forced to increase their product prices or to reduce production capacities.
• Specific impact for the largest buyers who buy directly from the power exchange, unless they benefited from long-term instruments.
• Consumers in smaller companies were less affected if they had long-term contracts with a fixed energy price. However, the effect is postponed by one or two years.

Mitigation measures?

• A new law protecting low-income customers that are energy vulnerable is being prepared and on the EU level there is proposed by Poland financing by EU funds in this area and for the flexibility to introduce quick, temporary measures to protect consumers and ensure fair treatment of businesses.
• The VAT rate for gas was reduced from 23% to 8% on  January 1 2022, and then from 8% to 0% on February 1 in order to reduce gas costs for consumers.
• The reduced VAT rate of 5% on electricity was introduced until  July  31, 2022.
• VAT charged on heat was cut from 23% to 8% starting January 1, 2022. On February 1, 2022, the VAT was further reduced from 8% to 5%. This applies to apartment buildings in housing cooperatives, communities, as well as single-family residences that are connected to the district heating network.
• Polish government proposed to reform EU ETS rules (due to alleged market speculations).
• Due to socio-economic cost for the most vulnerable households especially social aspect needs to be carefully considered.

Impact on power sector (producers, suppliers)

• Gas is not a substantial part of the power mix in Poland, but has quite huge part in the energy mix (for industrial use and heating purposes).  

Any other relevant info / data

• Poland has filled its gas storage facilities. 
• Poland is caring on investments which will result in not being dependent on Russian gas as soon as possible.
• Polish government considers banning coal import from Russia.
• The December excise duty cut slowed the worrying increase in gasoline costs. In February, VAT will be reduced from 23% to 8%.

Portugal

Key drivers of price increase:

The main driver is the gas price evolution with strong increase in European indexes due to a combination of factors:

• Storage reservoirs in minimum historical values.
• Exports restrictions from Russia, Norway and USA.
• Strong LNG competition with Asia.
• Uncertainties on Nordstream2 pipeline COD.
• More recently, the extraordinary context resulting from the Russian military aggression against Ukraine with the risk of supply disruption from Russia (and the growing pressure for Europe to rapidly cut its dependency, namely concerning natural gas).

A second factor is the price of CO₂ licenses:

• Steady increase in the past years as a result of regulatory policies aiming at the reduction of supply to foster decarbonisation.  
• To a lower extent, since August 2021, some speculative positions from investment funds, may have some impact in prices in a context of less liquidity.
• More recently (and also related with gas prices), the inversion in the technological merit order on behalf of more efficient coal also led to an increase in demand for licenses pushing also for higher prices.

On a much lower extent some factors regarding generation and interconnectors:

• Restrictions and unavailability in the interconnections and nuclear power plants

In the Iberian Peninsula in particular, there were also low levels of wind and hydro generation (namely due to a prolonged drought period), with the hydro storage levels in Portugal and Spain way below the average of the past two decades.

Most impacted customers?

In Portugal, at the moment, this was more directly felt by industrial customers with contracts indexed to the wholesale market, as they are exposed to the spot market volatility. But overall:

1. For households the average increase of the regulated tariff was only 1,6% in 2021, and according with the NRA tariffs’ approval for 2022 is foreseen   some containment of the tariff evolution (0,2% increase); for the household in the liberalised market, at least in what concerns the most representative suppliers, most of the energy for 2021 was pre-purchased at a lower price so contracts and prices are stable. Nevertheless, in light of the recent increase of the wholesale prices, with effect from April 1^st, onwards, NRA increase the electricity regulated tariff (+3%; +5€ /MWh) and the natural gas regulated tariff (+3%; +2€ /MWh).
2. For industrials the same happens for 2021 (with energy hedged in advance), except for those customers with prices indexed to the pool. Some customers are looking for longer maturity contracts that also help stabilise their prices which will be complemented by the measures announced by the Ministry for Environment and Climate Action to mitigate increases in costs of electricity (eg. reduction in the network tariffs and some additional measures for the energy intensive)

Mitigation measures?

A. The NRA tariffs for 2022 remain reasonably stable

In the tariffs approved on December 15^th, 2021:

1. The regulated tariff for household consumers decreased in 3,4% from December to January (which represent about 0,2% increase compared with 2021 average tariff, which is in line with the Government announcement that the regulated tariffs would not increase in 2022).
2. Network tariffs decreased more than 50% for households and even more for industrials, with an average reduction of 94% for higher voltage levels (previous Government announcement was a reduction of at least 30%).

Meanwhile, the NRA increased the regulated tariffs in the energy component, with effects from April 1^st onwards: the electricity regulated tariff (+3%; +5€ /MWh) and the natural gas regulated tariff (+3%; +2€ /MWh).

B. On January 14^th 2022, the Government published the Decree-Law on the revised legal framework for the electricity sector, which sets the rules regarding the Energy Intensive Statute considering several support measures such as:

1. Exemption at least for 75% of the CIEG component of the network tariffs (related with policy costs, not with network costs per se);
2. Exemption of proximity criteria established for self-consumption and full exemption of the CIEG component applied to the self-consumed energy.
3. Compensation, where applicable of the CO2 indirect costs for companies under the ETS and subject to a high risk of carbon leakage.
4. Access to a hedging mechanism, supported by the State, in the procurement of RES electricity under long-term contracts, namely with the full exemption of the CIEG component.

C. The NRA approved the Directive 16/2021, from November 18^th, that sets the rules for the new capacity balancing product that intends to replace the current interruptibility scheme. The interruptibility scheme was meanwhile revoked but will remain into force at least by the end of the year (as the new service is dependent on the EC evaluation for compliance with the State Aid Guidelines). The new capacity product:

1. Is only applicable for large industrials (no other consumers or technologies are able to participate);
2. Consists of a yearly auction conducted by the NRA;
3. Consumers under the capacity mechanism are obliged to bid for the energy product as well, with a price cap.

The call for the 1^st auction took place on December 14^th 2021:

1. Applicable for the year of 2022
2. Reserve price of 20€/MW/h
3. Max 47MW/h per physical unit
4. Capacity awarded: 304,4 MW (corresponding to 71,62% of the auction total capacity of 425MW/h

This represents up to 53M€ (against maximum value of 74,5 M€.)

D. The NRA also published the Regulation 951/2021, November 2^nd, with other extraordinary measures, for the electricity sector, to mitigate the impact of the wholesale prices (recently extended for more 3 months, with effect from April 1^st) , in particular for some suppliers that face bankruptcy risks:

1. Exit mechanisms for suppliers with default probability before that occurs. Suppliers may require a massive switching of their customer’s portfolio to the Last Resort Supplier, under the best available option in regulated tariffs, for a maximum period of 2 months. Some suppliers already requested the application of this mechanism, and several others are expected to follow.
2. Access to hedging mechanisms from smaller suppliers considered more exposed to market fluctuations. Suppliers with a market share below 5% are now granted access to extraordinary RES auctions, regarding a part of energy from a mechanism initially designed for the Last Resort Supplier.
3. Fast track adaptation on collaterals required, for suppliers with relevant changes in their consumers portfolio.

E. There is currently a public consultation from the NRA (until 8^th April) with extraordinary measures, on the gas sector as well, to mitigate price volatility

This consultation focuses on a set of possible options regarding gas procurement mechanisms – including a regulated mechanism to sell gas and a demand “stabilizer” mechanism – and market design changes – namely with the role and responsibilities for “dominant operator” and market makers (mandatory for the so-called dominant operators), and some suggestions of adjustments regarding market operation and imbalances management, and also on spot market rules and interconnection capacity allocation.

F. Under the special conditions agreed in the European Council meeting, for Iberia, the two governments (Spain and Portugal) sent a joint proposal to the Commission: 

• A two-phase price mechanism in the day-ahead market:

• Phase 1: regular auction at European single day-ahead coupling to set clearing prices, the matched volumes, and net interconnection flow.
• Phase 2: second auction, exclusive for the “internal” MIBEL region, keeping the net interconnection flow and prices unchanged.

New bids only for thermal power plants, considering the internalization of the compensation mechanism, to reach a new adjusted price for “internal” market.

• A compensation mechanism, for thermal powerplants (CCGT, coal plants and CHPs) to cover the difference between the real gas price and a reference price of 30€/MWht.
• Compensation (€/MWh) = (P_GN-30)/0,55
• “P_GN” – Daily Reference Price at the virtual balance point (PVB), MIBGAS.
• The compensation also applies for declared physical bilateral agreements, intraday market and ancillary services.

• The cost of this compensation mechanism is assumed by demand.
• The measure is proposed to be in force until 31^st December 2022. 

In the latest statements, the Portuguese Government announced additional measures for price mitigation:

• Introduction of the mechanism resulting from the joint Iberian proposal to limit the impacts of gas prices on the cost of electricity (estimated monthly savings of 690 M€ in energy costs in Portugal), as above mentioned.
• Allocation of 150 M€ of additional revenues from the Environmental Fund (via EU ETS auctions) to reinforce the reduction of the network access tariffs for industrial consumers.
• Adoption of a State Aid framework to support the increased natural gas costs of energy intensive companies and support measures in the form of loan guarantees / subsidised loans.

Impact on power sector (producers, suppliers)

Even with natural hedging from vertical integration, sales overcome the covered electricity generation, which means companies must buy the difference at the market. So this will have a negative impact on the results.

The new balancing product will impact suppliers negatively as this now adds to the sourcing costs of energy that was already covered (and contracted with consumers) before by suppliers, not considering that additional cost that will be allocated to consumption through suppliers. This represents up to 53,3M€ for 2022.

Industry reaction

Several reactions from the industry, namely after the recent developments of the Russia-Ukraine conflict. Just some initiatives to create awareness that:

• Strong market fluctuations call for long-term solutions, not hasty short-term interventions which will only worsen things and shake confidence of investors.
• Disproportionate interventions that create additional distortions must be avoided. This is the case with some of the measures in Spain.
• Regardless short-term solutions, it is crucial to keep on the path of renewables and electrification as key factors towards decarbonisation and to reduce exposure to oscillating gas prices.

There is a strong concern regarding the market  intervention proposed under the Iberian joint proposal.

Any other relevant info / data

With the Government election on January 30^th 2022 (same government is maintained but with an absolute majority), is expected the State Budget Law Proposal for 2022 in mid of April, adapted in view of Russia-Ukraine conflict, but not anticipated major changes on additional rising power prices mitigation measures that the ones already announced by the Government.

Slovak Republic

Key drivers of price increase:

​High prices on the spot market.

Most impacted customers?

Households and industry

Mitigation measures?

• Government does not plan any short-term or long-term interventions in the price formation.
• Recently, the reform of regulated tariffs (i.e. “tariff for system operation”) took place through the prolongation of RES support. Tariff for system operation consists of several components, including the RES support. This prolongation means that the RES support will be distributed over several additional years (i.e. annual reduction of the tariff for system operation). The main objective of this measure is to reduce final prices for all consumers.
• Politicians are considering the reductions in VAT rates for electricity and gas, the temporary suspension of payments to the National Nuclear Fund, or the use of financial resources from the national Environmental Fund for compensating high energy prices for industry.

Impact on power sector (producers, suppliers)

One of the main suppliers stopped its activity.

Slovenia

Key drivers of price increase:​

• General inflation - In 2021, consumer prices went up by 4.9%. Average annual inflation was 1.9%. In one year, goods prices increased by 6.7% and service prices by 1.5%. At the monthly level prices on average remained the same. The largest upward impact (1.3 percentage points; p.p.) on the annual inflation in 2021 was made by higher prices of petroleum products (diesel prices increased by 34.5%, petrol prices by 31.8% and liquid fuels prices by 13.7%). Prices of food went up by 4.0% and had an impact of 0.6 p.p. on annual inflation, while 0.5 p.p. was added by higher prices of heat energy (by 70.9%).
• Measured with the harmonised index of consumer prices, in December 2021 the annual growth of consumer prices was 5.1% (in December 2020: −1.2%). The 12-month average price growth was 2.0% (in the same period last year: –0.3%). The monthly price growth was 0.1%.
• Energy prices - Price increase of CO2 allowances.

Most impacted customers?

• Industrial electricity consumption is lagging behind 2019 levels due to problems with the supply of materials and the slowdown in production growth. A huge majority of the industrial companies has delayed orders and did not enter into electricity and gas contracts for 2022.
• Household customers have usually contracts with price guarantees but only for a limited period of time; for the most part price adjustments have occured either towards the end of 2021 (December bills) or in the beginning of 2022. The most impacted households were the ones which are using heat from the district heating systems that run on gas (some major towns in Slovenia).
• Most impacted customers – in both, industrial and households sector – were also the ones who got their contracts cancelled by a limited number of suppliers.

Mitigation measures?

• The Government adopted measures to ease the situation, for example, it reintroduced administered pricing of heating oil by issuing a regulation on the pricing of petroleum products. The Government prolonged the measure in January 2022 for another three months. The distributors' margin has been limited to a maximum of six cents per litre of heating oil.
• In order to tackle the rising prices of petroleum products, the Government set the maximum retail prices for fuels at service stations. From 15 March 2022, regular petrol costs EUR 1.503 per litre, and diesel costs EUR 1.541. The prices of the two best-selling petrols, regular and diesel, will be capped for a month (30 days).
• As part of intervention measures to address higher energy prices, the Government reduced the amount of excise duty on electricity and excise duty on energy products for heating (heating oil and natural gas) by half (valid from 1 February 2022 for the period of three months). Excise duties on motor fuels are now lower: by 5% for petrol and by 15% for diesel.

The Government proposed and the National Assembly adopted on 22 February 2022 the package to mitigate the impact of high energy prices. The Emergency Measures Act to mitigate the consequences of the impact of high energy prices envisages the following:

• Vulnerable customers will receive, by 15 April 2022, heating allowances (energy vouchers). An estimated 710,000 beneficiaries will receive a solidarity allowance in the amount of EUR 150. Beneficiaries are pensioners whose income in December 2021 amounted to max EUR 1000; beneficiaries of disability benefits under the law governing the social inclusion of the disabled; recipients of financial social assistance or childcare allowance; large families (additional 50 EUR on top of 150 EUR) and foster parents. The Government will spend EUR 106.5 million on this measure.
• Temporary exemption from the contribution for the support of the production of electricity in high-efficiency cogeneration and from renewable energy sources (RES + CHP contribution) for household customers and for low-voltage end customers without power metering. The measure is valid for the period of three months (from 1 February to 30 April 2022).
• Reduced network tariff for the distribution system operator, SODO, which is also in force from 1 February to 30 April 2022. The operator will receive approximately EUR 65 million less inflows for the distribution network, representing 25 % of the annual turnover of the five electricity distribution companies.
• A new rule, equalizing of the rights of all household consumers of natural gas with the owners of individual flats in multi-apartment buildings, which heat their flats from common natural gas boilers. The Governmental intervention law provides for a period of validity from 1 February to 30 April 2023, so that the next heating season is also covered. However, this area will be systematically regulated in the new, amended law.

The Emergency Act to mitigate the consequences of rising energy prices in the economy and agriculture envisages the following:

• State aid for energy-intensive companies that have suffered the most damage due to rising energy prices. A total of EUR 70 million is provided for this purpose. Beneficiaries are the companies whose energy costs will increase by more than 40% in the financial year 2022 compared to 2021. The aid will be paid in a lump sum by 5 May 2022. The aid is expected to be distributed to around 14,500 companies.
• Aid for the farmers, worth EUR 32 million: the financial compensation is granted in the form of a flat rate per hectare of land according to the type of actual use; the maximum total eligible area for financial compensation is 100 hectares of utilized agricultural area. Approximately 56,000 agricultural holdings are eligible for funding. In addition, about 11,000 beekeepers will receive aid, namely EUR 5 for each bee family.

It is worth adding that Slovenia still did not adopt the regulation in relation to indirect emission costs. ETS Guidelines aim at reducing the risk of “carbon leakage”, and in particular, they enable Member States to compensate companies in at-risk sectors for part of the higher electricity prices resulting from the carbon price signals created by the EU ETS (so-called “indirect emission costs”). Slovenia has not yet transposed the EU rules – the regulation was planned to be adopted first by the end of 2021, then by the end of February 2022.

Impact on power sector (producers, suppliers)

• Some retailers are keeping the prices unchanged for the time being. Some already announced price increases; one retailer defaulted.

Industry reaction

• Industry and power industry called for improved framework conditions for the deployment of renewables, in particular to accelerate permitting processes.
• Industry, in particular the energy intensive sector, called for urgent short-term measures (reduced tax rates, lower fees, price cap).

Any other relevant info / data

• Stable gas and electricity prices in the last years.
• The average natural gas price for household consumers in Slovenia 2021 amounted to 56 EUR/MWh; it decreased by 2% in one year. The average natural gas price for non-household consumers in Slovenia 2021 amounted to 44 EUR/MWh, up 31% in comparison to 2020.
• In the second half of 2020, natural gas prices for non-household consumers 13% higher than the EU average.
• The average electricity price for household consumers in Slovenia in 2021 was 161 EUR/MWh, which is a 6% increase over one year. The average electricity price for non-household consumers in Slovenia in 2021 was 116 EUR/MWh, an 8% increase over one year.
• The international comparison of natural gas prices for the second half of 2020 shows that in Slovenia the price with all taxes for household consumers represented 79% of the EU-27 average and for non-household consumers without VAT 113% of the EU-27 average. In the same period the electricity price with all taxes for household consumers represented 79% of the EU-27 average and for non-household consumers without VAT 78% of the EU-27 average.

Spain

Key drivers of price increase:​

• Record-high gas prices
• Economic activity below pre-pandemic levels.
• Impact of Russia’s invasion of Ukraine on the behavior of energy markets.
• Not enough renewable generation to make up the gap
• Higher carbon prices

Most impacted customers?

• Consumers signed up to the Voluntary Price for the Small Consumer (PVPC) scheme, i.e., subscribed to the regulated tariff, since in this tariff electricity prices are linked to the result of the day-ahead energy market.
• At present, there are around 26 million customers in Spain (with less than 10 kW of contracted power), of which around 10 million are subscribed to the PVPC scheme. All vulnerable consumers are required to be under this PVPC scheme.
• Industrial customers who increase their energy bill costs and affect their profitability, even having to interrupt their production processes

Mitigation measures?

Market intervention measures: 

Temporary deduction (until 30 June 2022) of market revenues in a proportion of natural gas prices for non-CO2 emitting power plants (hydro and nuclear, and wind and photovoltaic without subsidies): when the gas price is above 20 €/MWh, these generators must pay an amount per MWh produced that is equivalent to the alleged gas price increase in the electricity market . There is an exemption for the energy already subject to a long term fixed-price contract, with physical delivery or financial clearance, and for those intragroup new o renew contracts, if the contract price agreed is fixed and does not exceed 67€/MWh. If the agreed price is higher, the deduction will apply to any electricity sold in excess of EUR 67 per MWh. In case of intra-group contracts between generator and retailer, the price to be analysed will be the price to the end customer and, if applicable, the reduction will be made on the retailer.

• Proposal of a deduction of market revenues in a proportion of CO2 prices for non-CO2 emitting capacity installed before 2003 (hydro and nuclear, and renewables without any regulated scheme): when the CO2 price is above 21 €/tCO2, these generators must pay an amount per MWh produced that is equivalent to the CO2 price increase in the electricity market. Still under debate in the Parliament.
• Compulsory participation in the auctions of baseload energy (from 2022 onwards) for 4 companies that must offer a 25% of their nuclear and hydro production to retailers and large industrial consumers. Still pending for setting the regulatory scheme.
• Proposal for a compensation to gas-fired combined cycle power stations, coal-fired power stations, and cogeneration plants calculated through the difference between the gas price in the Iberian gas market and a reference price (€ 30/MWht), thus lowering bid prices of these technologies. The compensation funding will be shared by all the acquisition units in the wholesale power market. (Still under scrutiny of the European Commission)
• Revenue updating of RES with premia schemes to be aligned with long run 7.4% rate of return.

Fiscal measures: 

• Reduction of taxes and levies 
• Temporary suspension of the Tax on electricity generation (7%) (until the 30 June 2022) 
• Temporary reduction of the excise duty rate on electricity (from 5.11% to 0.5%) (until 30 June 2022) 
• Temporary reduction (until 30 June 2022) of the Value Added Tax (VAT) rate from 21% to 10% for customers with less than 10 kW of contracted power.
• Reduction of charges for customers by 36%.
• Increase of the amount of revenues from CO2 emission allowance auctions used to finance levies in the electricity bill in 2021: from €1,100M to €2,000M.  But these revenues have been decreased to € 1,100 M in 2022.
• Cap on gas price reviews for the regulated tariff of natural gas, known as the “last resort tariff” (TUR) for customers that have annual consumption of less than 50 MWh and are not in the liberalised market, until August 2022.

Measures to protect the most vulnerable households: 

• Four-month extension of bans on electricity shutoffs for vulnerable consumers
• Broader “vulnerable” consumer category
• Vulnerable customers will have access to a discount of 60% on their electricity bill (instead of the usual 25%) until 30 June 2022
• Severe vulnerable customers will have access to a discount of 70% on their electricity bill (instead of the usual 40%) until 30 June 2022

Measures to protect electro-intensive customers:

• 80% reduction in grid access tolls (capacity related tolls and energy-related tolls) (until the 31 December 2022)

Support schemes to industries:

• Direct aids to gas-intensive industries: 188 M€ will be targeted to support those industries which have developed its activities in, at least, one of the sectors identified by the administration (CNAE) during 2021 and onwards

Permitting:

• RES projects are classified as “urgent” for reasons of public interest resulting in the applicable legal deadlines being shortened to half
• Environmental permitting process for RES projects located in low and moderate environmental sensitivity areas will be prioritized.
• 10% of the capacity committed in transmission grid contests is freed up for self-consumption but it should include other renewable technologies and storage.
• Storage installations are considered as regular generation plants however this technology is not being fostered.

Impact on power sector (producers, suppliers)

• Carbon-free generation that are not backed with long-term contracts may have to supply electricity at loss.
• Major distortion in case of splitting the Iberian market from the EU markets in terms of interconnection flows, with additional costs for suppliers to compensate the difference between the gas market price and the gas price cap. Thus, those customers with fixed contracts are to expose to higher prices and it would give rise to conflicts in hedging or pool referenced contracts.
• Undermine investor confidence by introducing regulatory uncertainty, especially hinder the investment inflow for climate target (e.g., investment companies will be less willing to invest in green energy). As a result, the Spanish energy transition is put at risk: it will be more expensive and slower. 
• Proper market functioning at risk:

• Non-emitting generators will be required to bid-in at prices unrelated to costs, then distorting behaviour
• Against the “polluters pay principle”, it incentivises fossil fuel generation

Industry reaction

Industry reaction on the Market intervention measures:

• Spain’s industries are requesting the government to put a halt on the charges to non-emitting electricity generation, as their electricity supply contracts are put at risk (upwards adjustments) (See first market intervention measure)
• Request not to intervene the market out of the rest of the European markets.

Sweden

Key drivers of price increase:​

• Market coupling with central European market and particularly with German market.
• Initially low levels in Scandic reservoirs at the end of the summer and low wind power production.
• Large deficit in the power balance in the south of Sweden, underscored by the closing of nuclear reactors and increased taxes/duties on refuse-based CHP.
• Transmission capacity curtailment between Swedish BZs, internal bottlenecks in SE3 (Stockholm/Gothenburg)

Most impacted customers?

• Customers in Southern Sweden where prices have been more than twice as high than in Northern Sweden.
• In general, few industrial customers publicly reveal reductions in production, however, some industries have announced cutbacks and there is one example of permanently closing a facility.
• According to latest statistics, the share of dynamic contracts in Sweden as a whole is 54,3%.
• Price comparison websites have announced a steep increase in demand for contracts with fixed price, however, several retailers have stopped offering such contracts

Mitigation measures?

• The Swedish TSO did for a short period contract capacity from a CHP plant for operational security reasons.
•  The Swedish government have introduced a model for electricity price compensation for households based on their monthly consumption during December-March.

Impact on power sector (producers, suppliers)

• Prices have been more than twice as high in southern Sweden (SE4) than in northern Sweden.
• Risk for bankruptcy – electricity retailers who offer fixed price contracts are exposed to high volume and profile risks, especially with high prices. Further, there is a risk that some actors will not manage the higher margin calls.
• Insufficient hedging opportunities has led to retailers not offering fixed price contracts.
• Loss of market makers for area price hedging at Nasdaq. Due to transmission curtailments, price area differentials can sometimes comprise 50% of the DA-price.
• Increased costs for customers, extreme volatility, increased risks (profile, volatility, credits…), both for customers and retailers, increase the risk for customers failing to pay.
• Fear of loss of trust for the market, it’s participants and maybe politicians
• Asymmetries between natural sellers and buyers of hedging products implies low liquidity. Market participants requests the TSO to fulfil the requirement according to article 30 of the FCA-code.

Any other relevant info / data

Parliament election in September 2022

During the period Jan 2021 – Mar 2022, the total congestion income to the Swedish TSO adds up to more than M€ 3500

Daily average price development in Swedish price areas SE1, SE2, SE3 and SE4.

Switzerland

Key drivers of price increase:

• High electricity prices in neighboring countries due to very high gas, coal and CO2 prices as well as low availability of thermal power plants. Gas deposits in neighboring countries are low and the war in Ukraine are keeping gas prices high.

Most impacted customers?

• Switzerland has a partial liberalization. Therefore, in Switzerland, only customers with a demand > 100 MWh / a are exposed to the market. As such, industries and energy-intensive customers are particularly affected.
• Households and small businesses with a requirement <100 MWh / a are not yet affected due to prices under scrutiny. However, these customers will see rising prices in the next few years (more or less strongly depending on the supplier's procurement strategy). Nevertheless, electricity retail prices in Switzerland are relatively low.
• However, gas customers are already affected by the high gas prices.

Mitigation measures?

• No mitigation measures planned so far by the government.  

Impact on power sector (producers, suppliers)

• So far, only customers with a demand > 100 MWh are exposed to increased energy prices.
• Producers are positively affected as prices are now above long-term marginal costsafter prices have been below long-term marginal costs for a very long period (12 years).  
• Suppliers are affected differently depending on the proportion of in-house production, their purchasing strategies and risk exposure
• Still the companies are facing temporary liquidity risks due to high price levels and volatilities. Therefore, their possibilities for hedging (deposit of margins) are limited.

Industry reaction

• Some industrial customers have delayed the signing of the supply contract and have therefore not concluded it. They are now temporarily entitled to a backup power supply.

Any other relevant info / data

• The strong electricity and gas prices and security of supply are topics in the media.

Türkiye

Key drivers of price increase:

• Rising fuel cost of NG and imported coal using power plants
• Low-level of generation from hydropower due to the heavy drought in 2021.
• Strong increase in electricity demand​

Most impacted customers?

• Some of the rise in natural gas prices are reflected to industrial consumers and electricity producers using NG.
• Some part of the rise of electricity prices are reflected to electricity consumers, mostly to industrial and commercial consumers.

Mitigation measures?

• Ministry of Energy and Natural Resources declared that a new agreement was signed with Azerbaijan and Russia for natural gas supply.
• Graded tariff mechanism for residential electricity consumers introduced to protect vulnerable consumers from high electricity price increases.
• Some taxes (corresponding to 1,6% of end user price) related to electricity prices were abolished

Impact on power sector (producers, suppliers)

• The renewable energy producers are not affected they have fixed tariffs. Those who are using imported coal for energy production are affected negatively.
• Suppliers may be at risk of collecting revenue from consumers due to high prices.

Industry reaction

• Industry is asking for state support in terms of tax reductions, special electricity tariffs etc.

Any other relevant info / data

• Existing long term natural gas supply agreements is an advantage for Turkey.

United Kingdom

Key drivers of price increase:​

• The global upward pressure on natural gas prices is feeding into the UK electricity prices given that 1) the UK imports a significant share of its natural gas and therefore is not protected from these price increases, 2) Over 35% of the UK’s electricity supplied is typically generated from natural gas and 3) Gas power plants are often the price setting plants in the merit order.
• A bounce back in energy demand after coronavirus lockdown restrictions
• Some of the poorest conditions for wind generation in the North Sea for more than two decades
• Low gas stocks in Europe after the prolonged cold weather last winter
• UK’s lower gas production(28%) due to maintenance
• High prices for electricity on subsea cables, through which Britain trades power with continental Europe
• Rising UK ETS has also supported the power prices.  

Most impacted customers?

• Households on default tariffs are to an extent protected from these price increases for the time being as the cap will not change again before April 2022. The price cap is set to increase by 54%. For customers (based of average household consumption) paying via direct debit on default tariffs the increase will be £693, and pre-payment meter customers will see an increase of £708.
• Other households shopping around have already witnessed significant increases in the fixed tariffs offered currently in the market, many tariffs being hundreds of £s above the October 2021 price cap level of £1,277 for a typical consumer.
• Non-domestic users are often under more cost reflective contracts and many will face rising costs already this winter.

Mitigation measures?

• Said 22nd: The UK government has offered GBP220 million ($300 million) to help the country’s largest carbon emitters to cut their emissions and reduce energy bills. 
• Kwarteng said price increases would not be passed down to consumers and that the government was ready to guarantee that “the energy price cap, which saves 15 million households up to £100 a year, is staying.”
• On 30thSeptember, the British government announced the creation of a GBP500 million fund, distributed by local Councils, to help vulnerable customers.  
• Recently announced mitigation measures include:

• In April, people in council tax bands A to D in England will receive a one-off £150 discount.
• In October, customers in England, Scotland and Wales will receive a £200 rebate on their energy bills. They will have to repay this at £40 a year for five years, starting in April 2023
• The warm house discount scheme will be expanded, to cover three million households. It offers low-income households a one-off annual discount on their electricity bill, and was worth £140 in 2021/22.

Impact on power sector (producers, suppliers)

• Large industrial users will experience higher energy costs quickly, although many will have hedged their expected consumption in advance to lock in prices.
• Many households will be shielded initially, as many are on fixed tariffs — particularly in the UK. But regulator Ofgem has already raised the price cap in August by more than 12% to account for the strength in wholesale prices. That is despite wholesale costs only making up about 40% of an average utility bill.Households on default tariffs are, to an extended, protected from these price increases for the time being as the cap will not change before April 2022. 
• Supplier side: The volatile wholesale market is adding onto already challenging market conditions and has led to almost 27 supplier exits from the domestic retail market since August, as demand shaping costs have increased and some suppliers haven’t necessarily hedged themselves properly against the price increases.
• Producer side: Tight margins and high gas prices have resulted in coal plants running through extended periods as well, although the UK’s coal fleet is limited nowadays. 

Industry reaction

• Industry is working with Government and the regulator, Ofgem, to facilitate a mechanism for recovery, and is working to develop measures for short-term interventions that can be put in place to further stabilise the retail market and protect GB consumers.

Any other relevant info / data

• Power prices in the £100-200/MWh region throughout most days with peak periods reaching above £200/MWh.
• electricity system margins were tight at times which resulted in some very high price periods during peak hours in September (above £4,000/MWh in one period).
• Day-ahead power prices hit£540 per megawatt hour on 13th Sept (Highest since 2008) 
• Day-ahead prices jumped 7 per cent on14th Sept to more than £65 per therm, almost treble their level the start of the year and an increase of 70% since early August alone. 
• Gas hits record high:reaching £31 per therm, more than 4 times higher than this time last year. 
• Wind was only providing9% of electricity generation on Monday afternoon, compared with an average of 18 per cent over the past year, according to data from National Grid 
• Coal-fired plants were producing a similar amount — more than double the norm over the past 12 months
• Up to date spot electricity data:Drax Electric Insights, Nordpool 
• Up to date spot gas price data: National Grid