EU's top executive backs price cap on Russian pipeline gas

The European Union's top executive said Friday that the bloc's electricity market “is no longer operating” amid the Ukraine war, and proposed a price cap on Russian pipeline gas.

European Commission President Ursula von der Leyen blamed Russian President Vladimir Putin's war against Ukraine for the energy crisis and the dramatic rise in gas and electricity prices.

She said Europe's priority is to save energy because reserves are scarce, although the 27-nation bloc has already reached its goal of filling gas storage to 80% of capacity ahead of the winter months. The target date was Nov. 1.

“We had imagined this would take two more months," she said in a speech in the German town of Murnau. “We have worked hard to end our dependency on Russian gas, turning instead to other suppliers. As a result, Norway now delivers more gas to Europe than Russia. Furthermore, the U.S. is supplying Europe with considerable volumes of liquid gas.” Natural gas is used to power industry, heat homes and offices, and generate electricity.

Russian energy giant Gazprom said Friday that it can't resume natural gas supplies through a major pipeline to Germany for now because of what it said was a need for urgent maintenance work. The announcement came just hours before Gazprom was due to recommence deliveries after a three-day stoppage.

Gazprom started cutting supplies through the Nord Stream 1 pipeline in mid-June and Russia has reduced gas deliveries to several European countries which have sided with Ukraine in the war.

“We see that the electricity market is no longer operating because it is being severely disrupted by Putin's manipulation," von der Leyen said ahead of a meeting next week in Brussels of EU energy ministers. The European Commission is also set to present a package of detailed measures later this month.

To tackle the price crisis, von der Leyen said she firmly believes that “it is now time for a price cap on Russian pipeline gas exported to Europe," and proposed to decouple electricity from gas prices.

Even before Russia started its war against Ukraine, many EU member states had been calling for a thorough and structural reform of the bloc's energy market because they believe that the influence of gas in setting wholesale electricity prices is disproportionate.

“Of course, we will also talk about the need to look at electricity market design in the medium term, i.e. decoupling, for example, the price of gas from general electricity pricing and — the most important issue today, tomorrow and beyond — massive investments in renewable energies," von der Leyen said.

With energy bills skyrocketing, the head of the EU's executive branch also proposed that some of the windfall profits made by electricity producers should be used to support “low-income earners and vulnerable businesses in these times of expensive electricity."