BRUSSELS (Realist English). The political struggle between EU member states and the European Commission over the distribution of electricity grid costs and tariff-setting rules is intensifying.
According to Council documents obtained by Euronews, governments lean toward retaining control over how grid costs are paid for and managed, instead of transferring these powers to Brussels.
The backdrop to this dispute is the enormous pressure associated with financing the modernization of EU electricity grids. According to estimates, by 2050 the cost of connecting all European citizens to electricity grids will reach 1.2 trillion euros. Some analytical centers promise that a single “North Star” electricity grid, planned and controlled from Brussels, will save 560 billion euros, and Energy Commissioner Dan Jørgensen has acknowledged this figure.
Key Battleground: Can the Commission Set a “Reference Tariff Methodology”
At the center of the dispute is a provision that would give the European Commission the power to establish a common structure and reference methodology for electricity tariffs. The Irish presidency emphasizes that the goal is “harmonization of methodology,” not actual tariffs, and that national regulators may deviate from the reference method if justified.
However, a number of major member states remain dissatisfied. France, Germany, Italy, Poland, Finland, Spain, and the Netherlands want the Commission’s powers to be substantially reduced or abolished, insisting on guidelines rather than a mandatory approach.
The Council of European Energy Regulators (CEER) has also clearly stated its position, emphasizing that the key competence and independence of national regulators in developing or approving electricity grid tariffs and their methodologies “is crucial.” CEER notes that differences in tariff design between countries can be reasonably explained by factors such as network topology, system needs, and the number of operators, and a single reference method could undermine regulatory independence.
The Battle for Tax Sovereignty: Germany Warns of an “Unacceptable Precedent”
Another front is the taxation of energy carriers. The European Commission is trying to introduce a provision through electricity market legislation guaranteeing that electricity is not taxed higher than gas, in order to promote electrification (the EU has set a goal of achieving 46% electrification by 2040).
Germany is strongly opposed. Director-General of the German Ministry of Finance Bastian Flege stated in a letter to the EU that he “seriously doubts that (the proposal) can obtain an effective majority,” and pointed out that it “violates the unanimity requirement in tax legislation… directly interferes with the tax and budgetary sovereignty of states.” Germany believes the Commission is trying to circumvent the “unanimity” principle required for tax measures through electricity market legislation, which requires only a “qualified majority.”
Italy, Austria, Sweden, Finland, Estonia, Lithuania, Slovakia, and the Czech Republic have also joined the opposition. The Czech Republic considers Brussels’ move an “unacceptable precedent for the future,” since it could deprive member states of their veto right. Finland particularly notes that comparing gas and electricity is incorrect, since the former is an energy source and the latter is an energy carrier.
Subsidy Race: Member States Use “Band-Aids” Instead of Reforms
Faced with rising grid costs, member states prefer subsidies to structural reforms. According to Euractiv, Germany is injecting more than 30 billion euros in subsidies into the electricity system to lower prices, including 6.5 billion euros for subsidizing grid fees, about 15 billion euros for renewable energy subsidies, and 1.5 billion euros for a special program for industrial tariffs.
France is investing nearly 11 billion euros in capacity market, industrial, and renewable subsidies. Poland will spend 3 billion euros on a state market mechanism and CO2 cost refunds for heavy industry.
Portuguese Energy Minister Maria da Graça Carvalho was the first to express dissatisfaction: “Those countries that can invest more… through injecting public finances into the electricity system… artificially lower electricity prices.”
In less than 12 months of the CISAF framework, Brussels has already approved 18.4 billion euros in subsidies under the new rules.
Disagreements Over Transmission Revenue and Cross-Border Financing
France and Sweden previously blocked a proposal that would oblige countries to pool revenue from domestic electricity grids into a pan-European fund. France and Sweden, as the largest electricity exporters, do not want to give up revenue critical to their grids.
Sweden is the largest electricity exporter in the EU, and its grid operator uses “congestion revenue” to balance supply and demand across the country. France is dissatisfied with a provision allowing the European Commission to unilaterally decide when and how to use these funds.
At the broader financial level, countries diverge along three dimensions: the scale of CEF-E financing, the right of domestic grid reinforcements to receive CEF-E financing, and the broader financial portfolio. France is particularly concerned that domestic grid reinforcements caused by transit needs create real costs but cannot receive EU support because they do not fall under the cross-border cost allocation agreement (CBCA). A European Parliament analysis recommends extending CEF-E eligibility criteria to such investments, provided their causal link to cross-border capacity is established through a structured assessment.
Outlook
The essence of this game goes far beyond technical discussions about electricity tariffs. As Francesco Sassi, an assistant professor at the University of Oslo, told the European news channel: “The elephant in the room that no one wants to discuss directly — preferring to debate the technical economics of grid systems, grid control, interconnection, and electricity tariffs — is that these issues are inherently political and geopolitical.”
The European Central Bank, in a May report, rarely intervened in this sensitive area, supporting coordination of energy taxes and grid fees, stating that huge differences between countries in taxes, grid fees, and regulatory charges are splitting the European energy market and undermining the competitiveness of EU industry compared to the US and China.
However, as Euractiv summarizes, as long as member states continue to “circumvent economic laws” with subsidies, the opportunity to genuinely improve the system will be missed. Andreas Fischer, a senior economist at the Cologne Institute for Economic Research, notes that only through possibly painful reforms can politicians “lower electricity prices in the long term.”
