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Nine EU member states reject need for energy market reform or climate rethink

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Nine EU member states have rejected suggestions from France and Spain that Europe's wholesale energy markets need reform in response to the current energy price crisis, they said in a joint letter ahead of an emergency meeting of EU energy ministers to be held Oct. 26.

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Both the Spanish and French finance ministers in early October called for long-term power contracts or regulated tariffs linked to generation costs as an alternative to wholesale pricing on the marginal unit cost.

But a joint statement from Austria, Germany, Denmark, Estonia, Finland, Ireland, Luxembourg, Latvia and the Netherlands published Oct. 25 said: "We cannot support any measures that conflicts with the internal gas and electricity market, for instance an ad hoc reform of the wholesale electricity market,".

On Sept. 30 the French government said it would freeze gas and electricity tariffs until the spring. Earlier in the month finance minister Bruno Le Maire said France got its power from nuclear and hydro plants, "so we have a carbon-free and very low cost energy, but with the European market there is an alignment of electricity prices with gas prices."

On Oct. 14, meanwhile, the Spanish parliament approved a "clawback" law on low-carbon generators (nuclear, hydro, subsidy-free renewables) benefiting from gas-supported power prices to help ease the burden on energy bills.

The first levies, which could be equivalent to around 90% of excess income per megawatt-hour, are expected to be payable from the fourth quarter. They are to end after the first quarter of 2022.

The joint statement from the nine member states said the EU "should be very careful" before interfering in the design of competitive internal energy markets.

"This will not be a remedy to mitigate the current rising energy prices linked to fossil fuels markets," they said.

Resilience to price shocks would be strengthened via better interconnection "with a view to the 15% electricity interconnection target by 2030," they said.

Cost-effective energy efficiency and accelerated deployment of renewables were other key medium-term solutions.

In the short term the member states said they supported the European Commission's recent "toolbox" of measures to ease the pain of rising bills for vulnerable consumers and hard-hit businesses. These include reducing or re-directing tax revenue and carbon auction earnings to cut bills.

"These measures should be easily adjustable in the spring, when the situation is expected to revert to average levels," they said.

Finally, the EU should "swiftly proceed" with the European Commission's "Fit for 55" package of climate measures, they said, as a well-managed energy transition was "not the cause, but part of the solution to keep prices affordable and predictable."

Ahead of the EU Council summit Oct. 21-22, Poland said the package should be revised or postponed in the light of rising energy costs.

Czech Prime Minister Andrej Babis also called for changes to financial regulation rules to outlaw speculation in the EU Emissions Trading System.