EU Regulators Oppose Energy Market Regulation

On April 29, the European Agency for the Cooperation of Energy Regulators (ACER) issued its much awaited report on whether or not the current pricing mechanism for energy should be redesigned. France, Italy, Spain, Portugal and Greece have rightly charged that mechanism with driving prices well over a real market price. The report, on the other hand, defends the mechanism of marginal prices across the board: “ACER finds that the current wholesale electricity market design ensures efficient and secure electricity supply under relatively ‘normal’ market conditions. As such, ACER’s assessment is that the current market design is worth keeping.” Although the current circumstances are far from normal, the “current electricity market design is not to blame for the current crisis.”

The system now in place sets electricity prices for the entire EU based on the highest price offered on the market, in order to subsidize renewable energies. At this point, soaring gas prices have made gas-produced electricity the most expensive, so this sets the price for electricity in all EU countries, independent from a country’s prevailing mode of energy production. Even a schoolboy understands that this is a distortion of prices. Not to mention the flagrant price manipulation by financial speculators on the futures market, including the CO2 emission certificates.

The latter’s lobby has also pushed a group of economists to publish a call against any regulation of the market in the Frankfurter Allgemeine Zeitung of April 21. The authors call for “reducing dependence on Russian gas now”, while asserting that high prices work as a behavioral corrective in the economy. Their arguments against government intervention in the energy market and in favor of subsidies for poorer households will ensure big profits for the speculators.

Not accidentally, the most well known of these economists, Martin Hellwig, had published a book in the aftermath of the 2008 financial crisis, the English version of which is titled The Bankers’ New Clothes, which was supposed to suggest remedies to the problem, but instead rejected effective financial reforms such as Glass-Steagall banking separation. It has been described by some as a “manual for the bank lobby”.

To our knowledge, very few voices from across the political spectrum have called for the obvious: suspend the ominous futures markets and CO2 certificate markets that are creating “energy poverty” in Europe. Among the few is the Greek Communist Party (KKE), which defends the “abolition of the energy exchange” and the “immediate and complete reopening of lignite plants, without any carbon certificates”. Moreover, they call for Greece to pull out of the EU sanctions on Russia, “which are eventually paid by the people, while the capitalists, such as the shipowners, make a fortune from the transfer of the very expensive American LNG”.

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