Social cohesion, but for social reasons? The puzzling pattern of price controls in the EU electricity market

Price controls in the EU are currently one of the most prominent and controversial instruments to address the problems of high price spikes in the household electricity market. However, national price controls have been a Highlights contested issue since the beginning of the liberalisation of the EU electricity market due to their potential regressive effects, and the potential undermining of the level playing field in the internal market. Price controls have been identified at EU level as the main barriers to the retail electricity market, which in itself is highly controversial in terms of its impact on energy poverty. In order to complete the single market and to decouple market intervention and instruments for social cohesion, the European Commission has twice tried and failed to achieve significant harmonization in terms of phasing out price controls or setting common standards. Despite this high-profile conflict, the persistence of price controls and the variation in their design at the national level is not really addressed in the political science literature, despite its explanatory value for understanding the low level of harmonization at the EU-level. Often cited arguments such as path-dependency or simply the prerogative of social concerns against liberalisation cannot explain why 8 of the original 19 states that had price regulation in 2008 still voluntarily abandoned it by 2017, and why 3 of them reintroduced it by 2020. Nor can such an explanation account for the variance in the design of price regulation and the different proportions of vulnerable consumers covered by such instruments and how they are complemented or replaced by other social measures. This paper argues that functional reasons, such as generally high prices or market failure due to high market concentration, are also not sufficient to explain the emergence of such an instrument. Rather, political reasons such as salience and national incumbency interests, as well as the public perception of public goods, are key to understanding the abandonment and renationalization of price controls. The influence of the Commission's monitoring regime on national policy is also discussed. The analysis uses a newly constructed dataset and event history models to explain the timing and persistence of electricity price controls across Member States between 2008 and 2020. Following this analysis, the rich monitoring data from the Commission, CEER, and ACER are used to qualitatively analyse particularly puzzling cases. This research will also help to understand the current diversity in the way electricity prices are tackled, and therefore the different impacts of such measures on the level of energy poverty. It will also contribute to the debate on further integration and renationalization attempts within the internal market in response to the energy crisis. Finally, the paper considers how promising the Commission's approach of prohibiting such market-distorting instruments in favor of ex-post market-correcting measures might be in the future, and why some pillars are more liberalized than others in the same policy area, by shedding light on national trajectories and decision-making.