The EU is developing an emergency strategy to isolate power costs from increasing gas prices and longer-term measures to ensure electricity rates reflect cheaper renewable energy. EU energy ministers will meet on Friday to explore measures to reduce skyrocketing energy bills for companies and individuals.
Last year, European electricity bills soared due to record gas prices after Russia cut supply in retaliation for sanctions over the Ukraine conflict. European nations accuse Moscow of using energy as blackmail in revenge for Western backing for Ukraine during the February incursion.
Russian gas company Gazprom blames technical difficulties for flow disruptions. Changing the 27-country EU’s energy networks may be hard and time-consuming, since cross-border energy trade has taken two decades to develop.
Politicians are scrambling for a quick fix. Russia believes Western sanctions have created gas supply issues.
Several European power distributors have already failed, and several large producers might be in danger, struck by limitations that limit the price increases they can pass on to customers or caught out by hedging bets, with gas costs 400% higher than a year ago.
“This has had the ingredients for a kind of a Lehman Brothers of energy industry,” Finnish Economic Affairs Minister Mika Lintila remarked Sunday about the 2008 US bank meltdown.
Finland will guarantee its electricity firms €10 billion and Sweden 250 billion Swedish crowns. Germany, which relies heavily on Russian gas, has given Uniper a multibillion-euro bailout.
“The government’s programme is a last-resort financing option for companies that would otherwise be threatened with insolvency,” said Sanna Marin, Finland’s PM.
Utilities sell electricity in advance to guarantee a price but must retain a “minimum margin” deposit in case of default. Companies are having to obtain funds to pay margin deposits due to soaring electricity rates.
The benchmark gas price climbed as much as 35% on Monday and more than 400% for the year after Russia indicated Nord Stream 1 would remain closed beyond last week’s three-day maintenance pause.
The news shook European markets. European stocks fell as the euro hit a 20-year low. Before last week’s repair work, Nord Stream 1, which goes under the Baltic Sea to Germany, brought about a third of Russia’s gas to Europe.
“Problems with gas supply arose because of the sanctions imposed on our country by Western states, including Germany and Britain,” Kremlin spokesman Dmitry Peskov said on Monday.
“There are no other reasons that lead to problems with supplies.”
On Sunday German Chancellor Olaf said: “Putin’s Russia has breached the contract.” Russia’s electricity supply was no longer trustworthy. He continued to say Germany was ready for what’s to come: “We will get through this winter.”