Platts: EC to study how to cut EU gas, power price gap with US

The European Commission is planning an indepth study on EU gas and electricity price formation drivers by late spring next year as part of efforts to reduce the price gap with the US, EU energy commissioner Gunther Oettinger said Tuesday.

“The danger is that [EU] energy prices are too high overall,” Oettinger said as he presented EC guidance to national governments on intervening in electricity markets.

EU gas prices are about three times as high as those in the US, mainly because the US shale gas revolution has lowered US gas prices.

“We need to reduce the price discrepancy between the EU and US,” Oettinger said. “Our energy price analysis will show how savings can be made.” For gas, higher prices might result from oil-indexed supply contracts, monopolies, single suppliers and the lack of a fully integrated internal energy market, he said.

There are also costs involved in building new infrastructure, LNG terminals and adding reverse flows to gas pipelines, he said.

Oettinger added that the EU should not prevent shale gas exploration on the basis of ideology, but should test it out, ensuring that it complies with environmental standards.

Public taxes and levies also add to gas and electricity prices, he said.

“Subsidies, aid and support are all part of price formation and so can lead to higher prices. We want to know what the subsidies are for gas, renewables and nuclear power. We need a full evaluation of costs,” Oettinger said. “So in late spring we will have a complete overview of prices and subsidies.”

The EC’s study would show national parliaments where prices can be reduced and made more acceptable to industry, he said.

The EC also plans to produce a higher-level paper on gas and electricity prices in January, in response to a request from EU leaders in May.

This paper will look at the history of EU gas and electricity prices, where the EU is now, and EC forecasts for future prices, Oettinger said.

The EC will take the results of all this work on price formation into account in its future policy proposals, an EU source told Platts Tuesday.

EU leaders plan to include energy prices in their industrial competitiveness discussions planned for February.

SOURCE: Platts, 2013  …………READ MORE……………..

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