As gas prices in Europe are heading toward unaffordability, the European Commission proposed that EU countries should reduce overall electricity use by at least 10% by the end of March 2023, as per the bloc's emergency measures published on Wednesday.

In a statement, the Commission said, “To target the most expensive hours of electricity consumption, when gas-fired power generation has a significant impact on the price, the Commission proposes an obligation to reduce electricity consumption by at least 5% during selected peak price hours. Member States will be required to identify the 10% of hours with the highest expected price and reduce demand during those peak hours. The Commission also proposes that the Member States aim to reduce overall electricity demand by at least 10% until 31 March 2023." 

"Reducing demand at peak times would lead to a reduction of gas consumption by 1.2bcm over the winter. Increasing energy efficiency is also a key part of meeting our climate commitments under the European Green Deal," it added.

The EU body also suggested that EU member states should collect excess profits from oil and gas companies, which surpassed a 20% increase in 2022 compared to the average profits of the previous three years.

"The Commission is also proposing a temporary solidarity contribution on excess profits generated from activities in the oil, gas, coal, and refinery sectors which are not covered by the inframarginal revenue cap. This time-limited contribution would maintain investment incentives for the green transition. It would be collected by the Member States on 2022 profits which are above a 20% increase on the average profits of the previous three years," it stressed.

According to European Commission estimates, additional income from "surplus" profits of energy companies may amount to around $24.99 billion in 2022, given the implementation of revenue caps as an emergency measure.

"The temporary solidarity contribution based on taxable surplus profits made in the fiscal year 2022 on energy undertakings in the oil, gas, coal, and refinery sectors in the Union could bring an estimate of around €25 billion of public revenues, to be redistributed by the Member States subject to compliance with Union law," the Commission said.

However, the European Commission made no mention of setting a price limit for Russian gas in its proposals.

It is worth noting that rising gas prices would almost surely plunge European economies into recession, cutting demand for other commodities, such as oil.

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