The European Commission will propose a price cap on Russian gas, alongside measures including a mandatory EU cut in electricity use and a ceiling on the revenue of non-gas power generators, the bloc's chief said on Wednesday.
Power and fuel prices have soared as Russia has cut the amount of gas it sends to Europe, with European leaders accusing Moscow of weaponising its energy supplies. Russia has blamed the supply cuts on technical issues and Western sanctions imposed over its invasion of Ukraine.
"We will propose a price cap on Russian gas ... We must cut Russia's revenues which Putin uses to finance this atrocious war in Ukraine," European Commission President Ursula von der Leyen told reporters.
President Vladimir Putin said on Wednesday that Russia will stop supplying gas and oil if price caps are imposed.
Some EU countries - which would need to approve the EU proposals - are wary of a cap on Russian gas prices if it puts at risk the dwindling supply they still receive from Moscow.
The Commission said the price cap would mean countries could keep buying Russian pipeline gas - which it said cannot be easily diverted to other markets - so long as the price did not exceed an agreed threshold.
"Significant disruptions are already taking place without a price cap," the Commission said in a note explaining von der Leyen's plans, while acknowledging that Russia could retaliate against the measure by cutting supplies further.
The Commission's note suggested setting the price ceiling above production costs, though below current market prices, to encourage Russia to keep on selling to Europe.
Separately, the Commission said the EU would explore the creation of an EU-based pricing benchmark for liquefied natural gas (LNG). Currently there is no benchmark for LNG trade in Europe, whereas in Asia the Japan Korea Marker is widely used.
LNG in Europe was typically valued against the gas price at the Dutch TTF gas hub, but recently pricing agencies have started to turn to alternative benchmarks since volatile TTF prices do not reflect LNG market developments.
Prices of LNG at different gas hubs, from the UK to Spain, have varied widely due to capacity constraints at some terminals.
Von der Leyen outlined the EU's emergency plans to lower soaring gas and power prices, which have increased bills for households and hammered Europe's energy-intensive industries.
The EU wants to cap the revenue of non-gas fuelled generators and channel their "unexpected profits" into measures that support households and companies, von der Leyen said.
European power prices are typically set by gas plants, and this revenue cap would aim to reduce the cost of electricity generated by wind farms, nuclear plants and coal generators that have lower running costs as they are not exposed to surging gas prices.
Oil and gas companies that have reported big profit increases would also be required to make a "solidarity contribution", von der Leyen said, without giving further details.
Other measures Brussels will put forward include a requirement for countries to cut electricity use during peak hours, and liquidity help for firms facing major collateral requirements.
EU countries' energy ministers will discuss the proposals at an emergency meeting on Friday.
(Reporting by Kate Abnett, Marwa Rashad, Marine Strauss, Gabriela Baczynska; editing by Jason Neely and Jane Merriman)
