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EU Parliament adopts reform of the electricity market

Members of the European Parliament adopted a reform that will make the EU electricity market more stable, affordable and sustainable.

The measures, composed of a regulation and a directive already agreed upon with the Council, were adopted with 433 in favour, 140 against and 15 abstentions and 473 votes to 80, with 27 abstentions, respectively.

“This reform puts citizens at the forefront of electricity market design,” said lead MEP Nicolás González Casares. “The text includes measures to protect citizens, especially the most vulnerable and to accelerate the deployment of renewable energy sources. The Parliament has taken a step forward in democratising energy, creating a market design that responds to the failures exposed by the energy crisis. All consumers, including micro, small and medium-sized enterprises will have access to long-term, affordable and stable prices.”

The law will protect consumers against volatile prices. MEPs ensured that they will have the right to access fixed-price contracts or dynamic-price contracts and receive important information on the options they signed up to. Suppliers will not be allowed to unilaterally change the terms of a contract.

MEPs also ensured that EU countries can prohibit suppliers from cutting the electricity supply of vulnerable customers, including during disputes between suppliers and customers.

The legislation provides for so-called “Contracts for Difference” (CfDs), or equivalent schemes with the same effects, to encourage energy investment. In a CfD, a public authority compensates the energy producer if market prices fall too steeply, but it collects payments from them if prices are too high. The use of CfDs will be allowed in all investments in new electricity production, whether from renewable or nuclear energy.

The text sets out also a mechanism to declare an electricity price crisis. In a situation of very high prices and under certain conditions, the EU may declare a regional or EU-wide electricity price crisis, allowing member states to take temporary measures to set electricity prices for SMEs and energy-intensive industrial consumers.

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