France wants EU cap on price of gas-fuelled power - document

BRUSSELS, Sept 27 (Reuters) - France has suggested the European Union caps the price of gas used to produce electricity to try to tame surging energy costs, as European countries step up efforts to tackle the crisis.

The EU put forward proposals last week to tackle the sky-high energy prices that are fuelling inflation and threatening recession.

Countries are set to approve those plans this week - but already, Brussels is already looking into extra measures, as some countries seek deeper EU interventions to curb the price of gas.

France has weighed into the debate with a paper shared among EU countries, calling for an EU cap on the price of gas used to produce power - a measure Spain and Portugal already implemented in June.

European electricity prices are set by the last power plant needed to meet demand - typically, a gas plant. Lowering the cost of gas-fuelled power could therefore bring down the overall power price - though governments would need to compensate gas plants for the gap between the capped price at which they sell power, and their actual running costs.

Spain and Portugal's scheme was expected to cost the countries 8.4 billion euros.

"A price cap mechanism for gas used to produce electricity is currently the most effective and the least expensive measure to reduce electricity prices in Europe," said the French paper, seen by Reuters, which asks the European Commission to propose the idea this week.

The Commission intends to present a document to EU countries on Wednesday, outlining further options the EU could use to tackle high gas prices - although this will not include legal proposals, EU officials told Reuters.

Brussels is expected to analyse in the document whether EU gas price caps could be imposed - an idea that has divided EU member states and faced scepticism from the Commission itself.

France said a gas price cap that would apply across European wholesale markets rather than just for gas-fuelled electricity could be considered, but was not the priority option.

Instead, France wants EU countries to cap Russian pipeline gas prices, and negotiate with gas suppliers Norway and Algeria to lower prices, it said.

Brussels proposed a first set of emergency measures to tackle high energy prices last week, including bloc-wide windfall profit levies on energy companies. EU energy ministers will meet on Friday to attempt to approve those measures, and debate the EU's next steps to tackle the energy crunch.

Reporting by Kate Abnett. Editing by Jane Merriman

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