Ms Catharina Sikow-Magny:

I am very pleased and honoured to be here with members at this hearing. I will provide some background to our proposal, on which the discussion will then be based. The Commission has been closely following, ever since 2021, the situation of prices in the energy market, the electricity market in particular, and we quickly saw that the situation was leading to difficulties for our households and companies. The Commission therefore took rapid action on many fronts, and I will briefly cover them all because all together they form a package within which each individual element then fits.

First of all, our main concern in making these many proposals was to ensure that we would not see different and unco-ordinated national measures that could negatively affect security of supply in neighbouring countries or undermine the good functioning of the Internal Market. Therefore, we started providing measures for member states to consider from autumn 2021. In October we proposed an energy prices toolbox, which provided guidance to member states as to how they could tackle the sharply increasing energy prices and protect their consumers and companies. Later, in May 2022, which was then already a few months after Russia had attacked Ukraine and cut off gas to many member states, we proposed the REPowerEU plan, which considered how we might phase out and then cope without Russian gas in our energy mix and in electricity production. In order to ensure co-ordinated action by member states, the Commission proposed a number of emergency measures on various aspects, which I will now go through briefly.

To alleviate energy prices last winter and to ensure energy supply without triggering increased use of gas, which we were lacking, especially in continental Europe, the revised gas storage regulation, together with the gas demand reduction regulation, was adopted in record time in July 2022. As a result, we reached our objective and successfully reduced gas consumption by 15% last winter. We are on track this spring for the gas storage filling obligations. These measures contributed also to the electricity price situation by ensuring less pressure there. In September of last year, however, the Commission proposed emergency measures to reduce electricity demand and to mitigate high electricity prices with a cap on market revenues from inframarginal technologies that were, including in the situation we had last winter, earning extraordinary revenues that had not been part of their business cases when deciding to invest in these inframarginal technologies. In addition, we included in that proposal or law a solidarity contribution on excess profits from the oil, gas, coal and refinery sectors, which had also benefited from the extraordinarily high prices in the fossil fuel sectors. The regulation requires the redistribution of the revenues of these two elements. The first one was to final consumers to make sure that those who pay the high prices get compensated for them, while the latter, in addition to providing support to consumers, especially vulnerable ones, could also be used on demand reduction measures or investments in phasing out fossil gas from Russia. This proposal was rapidly adopted so entered into force in October of last year. In addition, there was a requirement for member states to reduce electricity demand by 10% overall and by 5% for peak demand, this with the objective not only of reducing demand for and consumption of gas, which we were lacking, but also of cutting demand at peak times, which would also bring prices down considerably for electricity consumers.

In addition to these measures, we know that the permanent way of coping in the situation would be to have more renewables in the energy mix. Therefore, we have also proposed, as a crisis measure and later taken up in the renewables directive, measures to speed up permissions considerably in order that investors can have their investments rapidly implemented and, complementarily, measures to facilitate the state aid treatment through a temporary prices framework adopted in 2022 in order that member states can provide rapid relief to struggling companies and to help accelerate the roll-out of renewable energy. All these measures that have been taken in the course of the past 12 to 18 months have the same impact, the same objective, that is, to allow our member states to cope without Russian gas and to cope with the situation where gas prices are very high and then having an impact on electricity prices as well, in the crisis term, so temporarily, but also in a more structural way through more renewables in the mix.

The last point I will make, if the Cathaoirleach will allow me, is about the proposal we made in March to review or to revise the electricity market design, whereby we have brought some of the elements of the temporary crisis measures into a structural proposal, including, for instance, relying more on long-term prices through long-term contracts and better hedging tools for forward markets. That would reduce volatility in any future crisis, whereby we also then make it possible for member states to regulate retail prices in a well-defined crisis situation, therefore helping consumers, be they households or companies or SMEs, to cope with future price situations. Also in that proposal is what we learned from member states' practice in the crisis, a possibility for transmission system operators to, if desired, purchase demand response or consumption, lowering consumption, if the situation gets to very high prices, through a big saving tool.

These are the structural measures that are currently in negotiation between the European Parliament and the Council. We hope they will be rapidly adopted, ideally in order that we would have them implemented before next winter, in case they are needed.

I look forward to answering any questions members may have.