Cost of living crisis: What energy prices does the EU want to cap? [Video]

The European Union is nearing a consensus about how to tackle the soaring electricity bills that are putting households and companies under unbearable strain.

The latest proposal from Brussels suggests the bloc could introduce a price cap on so-called inframarginal generators.

What does this mean?

The EU’s liberalised electricity market is based on the order of merit, also known as marginal pricing.

Under this system, all electricity producers – from wind and solar to fossil fuels – sell power according to their production costs and investment needs. The bidding starts from the cheapest sources – the renewables – and finishes with the most expensive ones – in this case, gas.

Since most EU countries still rely on gas to meet all their power demands, the final price of electricity is inevitably set by gas, even if green sources also contribute to the total mix.

With Russia’s invasion of Ukraine disrupting energy supplies and scorching summer temperatures increasing demand for …