European Commission: «Report card» on gas even if a country does not have a supply problem

Proposal for the Commission to assume responsibility on the urgent activation of mandatory gas consumption reduction rates from all European countries, the Commission is expected to announce on Wednesday, along with the new preparedness plan for the «Old Continent» that will reduce fuel demand by 60 billion cubic meters in view of the coming winter. The European Commission is expected to announce on Wednesday, along with the new preparedness plan for the "Old Continent," which will reduce fuel demand by 60 billion cubic meters in anticipation of the coming winter.

According to reports, the proposal will be made with the introduction of a new European Council Regulation to create the institutional framework that will allow centralised (i.e. from Brussels) fuel consumption cuts to be implemented in all Member States, which until now have been the responsibility of national authorities.

Activation will take place in the event that the Commission declares a State of Alert (Alert Level 2), in the event that considers that the disruption of gas imports has led to a significant deterioration in Europe's supply situation.

A state of alert may also be declared at the request of at least two Member States. Once the reduction targets are activated, mandatory consumption restrictions will be imposed on a pan-European scale, meaning that even countries that are not facing fuel supply cuts will be required to comply.

In the draft of the Regulation proposal that was leaked, the percentage reduction in demand to be achieved overall had not been «locked in.» E.U. in such a case, nor the share that each Member State should assume in order to limit demand. SHowever, the relevant reference in Europe's preparation plan for the coming winter points out that such a coordinated pan-European response would limit the impact of limited fuel supply on prices.

At the same time, it is envisaged that, from the date of entry into force of the Regulation, voluntary (non-binding) gas consumption reduction targets for member states, for the period from August to March 2023. The aim is to save gas and fill the storage facilities before a state of emergency is declared.

Measures to reduce consumption are expected to be selected by the authorities of each Member State. To finalize them, countries will need to update their National Emergency Plans.

The choice of a Council Regulation for this new institutional framework allows the European Parliament to be bypassed, while its approval will be by enhanced majority – thus avoiding the obstacle of a possible veto by any country. The aim is for the proposal to be discussed at the Extraordinary Meeting of Energy Ministers on July 26, so that if there is broad agreement, it can be put to the vote immediately.

However, analysts estimate that southern European countries will react strongly to such a prospect, as the most immediate threat to gas supply disruption concerns northern countries in particular. Thus, countries such as Spain (which is supplied exclusively with LNG) or all countries that receive Russian gas via Turk Stream (which is in continuous operation) are considered unlikely to accept the impact of cuts when they are not facing a gas supply problem.

In fact, it is estimated that the imposition of a universal «ticket» on gas, if there is no interruption of Russian exports to the entire «Old Continent,» could not contribute significantly to balancing the European system. On the contrary, it seems to be aimed more at «transferring» to southern Europe the competitiveness deficit that industrial production in northern countries will inevitably acquire.

At the same time, the same analysts point out that since the beginning of the crisis, northern countries have taken a categorically negative stance on the possibility of intervention in the wholesale electricity market, which was requested by Mediterranean countries which were most affected by high prices. Therefore, they estimate that at the Extraordinary Summit on July 26, there will be yet another episode in the North-South divide—this time with the roles reversed.