The main measures proposed by the European Commission include: Member States reduce electricity consumption by at least 5% during peak electricity consumption periods and reduce total electricity demand by at least 10% by March 31, 2023; Revenue caps for power generation companies are set at 180 euros per megawatt hour; a tax of at least 33% is imposed on excess profits generated by the oil, gas, coal and refining sectors. The latter two measures will help the EU raise about 140 billion euros, the European Commission said.

Timmermans, executive vice-president of the European Commission, told a news conference that these unprecedented measures were a necessary response to energy shortages and high energy prices affecting Europe. Reducing electricity demand is fundamental to the success of these measures. Putting a cap on huge revenue would prompt profitable energy companies to help struggling users. The era of cheap fossil fuels is over, and the EU needs to accelerate the transition to homegrown renewable energy.

Since the outbreak of the Ukraine crisis, due to the backlash effect of EU sanctions on Russia, European energy supply has been tight, and gas and electricity prices have soared. Combined with a drop in hydropower generation due to extreme weather this summer, and the repairs and closures of some older plants, EU power generation has been low over the past few months, further exacerbating tight energy supplies and high prices, which have caused consumers and industry to suffer. The huge burden has inhibited the European economic recovery.

Previously, the European Commission proposed to only set a ceiling on Russian gas prices, and EU member states were quite divided on this. Some member states worry that the measure will further affect Russia’s gas supplies to Europe, arguing that the move will not help calm rising gas prices. Also, proposals for a broader gas price cap have failed to gain broad support. Some member states believe that the move will lead to more natural gas being exported to other regions, which will worsen the energy woes in Europe and endanger the security of supply.

The European Commission’s proposal requires the support of a majority of EU member states to be approved. EU energy ministers plan to hold another special energy meeting on September 30.