EU recommends relief funds for consumers hit by energy costs

The European Union on Wednesday urged member countries to provide relief funds to consumers and small businesses hit hardest by rising gas and electricity prices, as criticism mounts that the bloc's climate change fighting policies are fuelling the problem.

In recent days, France and Spain have led the charge for change to the rules governing EU energy markets as the price surge ramps up already-high utility bills and increases pressure on many people already hit hard by the coronavirus pandemic.

Energy prices in Spain have reached all-time highs since the summer. The cost of electricity is set to climb Thursday to 288 euros (USD 332) per megawatt hour (MWh), a 26 per cent rise over Wednesday's price.

EU Energy Commissioner Kadri Simson said that providing targeted support to consumers, direct payments to those most at risk of energy poverty, cutting energy taxes, shifting charges to general taxation, are all measures that can be taken very swiftly under EU rules.

The immediate priority should be to mitigate social impacts and protect vulnerable households, ensuring that energy poverty is not aggravated, Simson told EU lawmakers.

She said businesses can be given relief through state aid or by facilitating longer term power purchase agreements.

The 27-country EU imports about 90 per cent of its natural gas needs, compared to the US, which produces its own and where prices are lower.

Simson said the EU's executive branch, the European Commission, plants to present next week a toolbox of short- and medium-term measures that countries could adopt. Some countries are interested in setting up a strategic gas reserve for use in emergencies.

Italy is among them. At an EU summit in Slovenia on Wednesday, Italian Premier Mario Draghi said the idea of pooling resources in the way countries bought COVID-19 vaccines together is very positive, not to find ourselves completely unprepared for spikes in energy prices.

Hungarian Prime Minister Viktor Orban blamed higher energy prices on the EU Commission's Green Deal policies for fighting climate change, which aim to reduce greenhouse gas emissions 55 per cent by 2030 compared to 1990 levels and make the trading bloc carbon-neutral by 2050.

The reason why the prices are up is the fault of the commission. So, we have to change some regulations, otherwise everybody will suffer, Orban told reporters at the summit. He branded the Green Deal an indirect taxation on home and car owners.

But commission Executive Vice-President Frans Timmermans said that the EU climate law is our guiding principle, and we will not open that law again.

He said the quicker we increase our renewable energy sources, the quicker we can protect our citizens against price hikes in the traditional energy area.

Spanish Prime Minister Pedro Snchez urged the commission to be brave.

We are facing an unprecedented crisis that requires extraordinary, innovative and firm measures to be taken, Snchez told reporters. He said the EU must make a collective purchase of gas and revise the price-setting system for electricity, which he argued was undermining renewable energy use.

French President Emmanuel Macron agreed that EU countries have to build our capacity to be more independent, adding that clearly renewables and nuclear are the two key elements." Around two-thirds of France's electricity needs are met by nuclear power.

Asked whether Russia might be stoking the price surge by restricting supply, top EU officials replied cautiously.

The level of production of gas in Russia is probably one of those elements, along with increased demand in China and energy maintenance issues in Norway and Russia, EU Council President Charles Michel said.

European Commission President Ursula von der Leyen noted that Norway was ramping up its supplies and called the action a very good example others could follow.

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