EU energy plan to siphon off revenues triggers backlash from senior European Commission officials

There is strong dissent among senior European Commission officials to a plan unveiled by president Ursula von der Leyen to siphon off energy company revenues and redistribute them in response to high prices, The Irish Times can reveal.

A group within the commission have been urgently trying to persuade their colleagues to rethink the proposal before national energy ministers meet to consider it on Friday, according to internal communications seen by The Irish Times.

The dissenters view the plan as overly-influenced by the circumstances of Germany and an ill fit for other member states, and describe it as a patch-up that preserves an electricity market that is fundamentally flawed in its design and should be intrinsically reformed instead.

They say the plan would be costly, slow and difficult for many member states to implement, with a high risk that struggling citizens will not receive timely help. Changing the market itself so that gas no longer sets the price for electricity from all sources would be a neater solution by lowering prices from the outset, without the need for a complex system of collection and redistribution of revenues, they insist.

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“Germany has the deep pockets and they can fund whatever nonsense they want – other member states cannot,” one senior commission official wrote in a critique of the plan that has been circulated among staff.

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The official described the plan as a “very haphazard Robin Hood” idea. “It sounds good at first. It gives you one day of good headlines, and then it hits you in the face that it doesn’t work,” the official said.

A second official told The Irish Times they would be “fired in the morning” if it was discovered they were speaking out, but felt they had to out of a sense of public duty.

“I mean, how long is this going to take?” the second official asked of the plan. “Will it actually be honestly doled out? I don’t believe any of this nonsense. We can simply reform the market so that the market price reflects the 90 per cent of electricity that’s produced not using gas.”

The group accuses the commission of having unfairly dismissed a proposal brought forward by the Greek government, which they support.

The Greek proposal, which was put forward when EU leaders met in July, argued that the “dramatic increase in electricity prices has proved the inadequacy of the current market design of the electricity market”.

Under the current system of marginal pricing, the most expensive energy source in any given hour sets the price for all electricity sold in the market, meaning that astronomical gas prices are setting the price of power from sources that cost almost nothing to produce after an initial installation cost, like wind and solar energy.

The Greek plan argued that the market for electricity should be split into two, separating fossil fuels from energy sources like nuclear and renewables, so that consumers can benefit from the latter’s low production costs.

[ Naomi O'Leary's Europe Letter: Rebel EU officials speak out against energy plan ]

The Athens government calculated that this would bring the wholesale price of electricity down to €137 per megawatt hour, which is a small fraction of current market rates, and also well below the level of €200 that the commission is reportedly considering setting as a maximum price under its plan.

The Greek plan was dismissed as unworkable by the commission’s directorate general for energy, in an analysis that was distributed to member state governments.

But the group of dissenting commission officials have circulated a document that unpicks this analysis in vehement terms, describing it as full of “unsupported assertions”. It describes a claim that the Greek plan is “likely to significantly impact investor certainty” as “a straightforward lie”.

The second official insisted that top figures within the commission understood that the electricity market was dysfunctional, but said there was a missing sense of urgency to act.

“I feel that we could be moving towards mass social unrest across the union. People cannot pay an order of magnitude more for energy bills,” the second official said. “Somebody hasn’t quite understood what it means to poor families not to have enough in their pockets to feed their children or keep warm, which is where we’re headed – fast.”

When the criticisms of the plan were put to the commission by The Irish Times, a senior commission source insisted that it had not ruled out a reform of the electricity market, but that this needed to be carefully considered, and that the plan to redistribute revenues was needed as a short-term fix.

“We are looking at the functioning of electricity markets more generally,” the senior commission source said.

“Market functioning in electricity is very closely linked to the security of supply of EU member states. So it is an area where any type of change needs to be studied very carefully in terms of its implication,” he continued.

In the meantime, the commission was proposing revenue redirection as a “quicker and more urgent intervention”, he said.

Another commission source denied that the proposal was overly influenced by Germany, saying it was the idea that had widest support among member states, and that several had already announced similar national plans.