Price interventions: Eurelectric vision

Retail price interventions have increased across the EU, particularly in response to the 2022 energy crisis, despite the clear objective of Article 5 of Directive (EU) 2019/944 to promote freely determined pricing and effective competition among electricity suppliers.

Such interventions tend to distort retail price signals by weakening the link between consumer behaviour and real-time system needs and reducing demand-side responsiveness at times of stress. These should therefore be reserved only for protected customers, combined with energy vouchers or direct bill discounts for vulnerable households, to ensure targeted support from the Member States’ social policy without broad market distortion.

Price interventions tend also to flatten price signals and remove incentives for consumers to adopt smart appliances or participate in flexibility schemes, delaying the shift toward a more digitalised and responsive electricity system.

Market competition is limited when regulated prices set the upper limit or when regulated prices are set below cost. The use of regulated prices based on specific production plants and/or subsidies is not compatible with the entry and development of new players, which are often pushed out, resulting in limiting consumer choice, reducing incentives for innovation and customer switching.

The costs of retail interventions are often socialised, either through public budgets or cross-subsidies from other consumers which can lead to distortions.

National measures can also have unintended detrimental cross-border effects. Artificially low retail prices, when coupled with rising imports, increase pressure on neighbouring systems and risk undermining regional cooperation and the integrity of the internal energy market.

While emergency interventions may offer short-term protection, their long-term impact risks slowing down the energy transition, weakening competition, and distorting the principles of the internal electricity market. Therefore, the Commission should thoroughly assess the situation in each Member State with a view to phasing out unnecessary price interventions, as foreseen under Article 5 of Directive 2019/944, and instead tackle well targeted support to those in need though social policy and/or industrial policy means.

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