Ms Catharina Sikow-Magny:

The situation with the gas market is much better than it was last winter and prices are returning to normal. Obviously that should be reflected in the electricity market whereby electricity is produced by gas. In order to judge the price of electricity and what is happening there, one would need to know whether there are scarcities in the electricity market. For example, as I referred to in my earlier reply, half of French nuclear reactors are an important scarcity element that, independently of the gas price, would have considerably increased electricity prices. Scarcity is something one would need to consider.

On the question of hedging, we have addressed the matter in the proposed design of the electricity market. Today, depending on the market, hedging may be possible for one year but very often there is not enough liquidity so, in practice, it will not be possible to have hedging for two years, three years or longer. This is what our new proposal addresses. We are making sure one can hedge up to three years at least. The demand seems to be up to three years, so we are looking into that.

As the Senator mentioned, one would need to look at the situation in Ireland. Was gas purchased before the market price reduced? What are the liabilities for those who bought it and use it for electricity? Are there inherent electricity scarcity issues that could lead to higher prices in electricity? How does the hedging market works and is short term and not long term enough for the demand?

On the revenue cap for the technologies, our initial proposal had only the one number of €180 per MWh for all the inframarginal technologies. In the discussions with member states and the Council, the decision then was to allow member states, according to their assessment of need, to have a technology-specific approach and thus a lower cap than €180 per MWh. Therefore, we believe member states are best placed to assess what is best for their production mix and future investments. It is then about how to incentivise them and what works best in the context of the markets of the member states.

Our proposal focuses on the inframarginal technologies. For instance with for hydro, it concerns free flowing rivers. If hydro power can involve the pumping of water so that it can be used whenever one decides to use it, then that production is not inframarginal but becomes marginal. The same can possibly apply to certain storages. One would need to be very careful with the incentives for getting marginal technologies to the market. One would not want these not to produce when prices are very high but would want them to produce when prices are high in order to reduce prices.