EU to slash power bills by cutting taxes and grid costs

The European Commission is preparing a major overhaul of grid charges and electricity-related taxes to provide relief to households and citizens struggling with soaring energy prices, a document seen by Euronews reveals.

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The decision comes as power bills are rising due to the Iran war and the closure of the Strait of Hormuz, which has blocked the transit of roughly 20% of the world’s natural gas and oil supplies, unleashing a price shock across global energy markets.

Prior to the Middle East conflict, the European Union was already facing an energy crisis at home, with heavy industry players calling on “urgent and bold” action to rapidly slash electricity bills. The war launched by the United States and Israel against Iran has only exacerbated the problem.

In recent months, EU leaders have been discussing ways to cut energy bills, acknowledging that upgrading electricity transmission infrastructure is key— both because maintenance fees are borne by consumers and because an outdated infrastructure limits the full absorption of clean energy.

According to figures from the Commission draft document, the grid charges and taxes combined often outweigh the price of the electricity consumed. Network charges accounted for 27% of household electricity bills and 21% for businesses, while national taxes and levies added another 24% for households and 16% for firms.

However, the Commission’s focus on taxation is likely where the most politically sensitive changes will arise.

The EU executive is proposing to reverse the current pricing logic, ensuring that electricity — increasingly generated from renewable power — is taxed less than fossil fuels. For energy-intensive industries, EU countries would gain flexibility to reduce electricity taxes to zero, a move designed to keep European manufacturing competitive.

For households, the measures go further, according to the Commission document, with vulnerable consumers seeing electricity taxes eliminated entirely. The intention is to ensure that those least able to pay are shielded from structural costs embedded in the system.

Yet the path ahead is unlikely to be smooth as taxation remains a national prerogative, and any attempt to harmonise rules across EU countries is likely to meet resistance. EU governments will also have to weigh the loss of revenue against the benefits of lower energy costs.

Isabelle Brachet, senior fiscal and just transition policy coordinator at Climate Action Network Europe, said that emergency measures to protect consumers and industry from price shocks require fiscal space that many EU countries do not have.

“Massive fossil fuel profits should be taxed once and for all. Such a tax would encourage shifting investment away from fossil fuels, towards renewable energy and efficiency solutions,” Brachet said.

Electrifying the economy

The EU has relied for years on imported fossil fuels to power homes, transport, and industry, a model deemed too fragile as it leaves the bloc exposed to price shocks when global energy crises hit.

With the bloc’s intention to electrify its economy — replacing fossil fuels in homes, transport and industry — EU leaders are seeking ways to make electricity cleaner and more accessible.

“Since the beginning of the (Middle East) conflict, 44 days ago, our bill for fossil fuel imports has increased by over €22 billion, not a single molecule of energy in addition. And this shows the enormous impact this crisis has on our economy,” Commission President Ursula von der Leyen told reporters on 13 April.

Von der Leyen also urged the EU co-legislators, the European Parliament and the Council, to approve the Commission proposal to revamp the grid’s infrastructure by the summer, citing a “high sense of urgency”.

According to the Commission draft, which can still change, the EU calls for improved cross-border data sharing, allowing national systems to operate more like an integrated grid — a step seen as essential for managing growing volumes of renewable energy and ultimately boosting electrification.

Grid operators would face stronger incentives to cut costs, including through the adoption of smart technologies and more innovative infrastructure.

Consumers would be encouraged to adjust their electricity use to shift consumption away from peak hours. To make that possible, the Commission wants to accelerate the rollout of smart meters, giving users detailed, real-time data on their energy use.

It will also present an “electrification plan” this spring, introducing targets and addressing barriers in the industrial, transport and building sectors.

“We have the electricity that is produced in Europe from renewables and from nuclear. Our strategy to decarbonize has not only been confirmed in recent years, but it has grown in importance day by day. And our objective is very clear: We need to scale up the homegrown, affordable, reliable energy,” von der Leyen said.

The draft document is due to be presented on 22 April. Once the proposal is official, the Parliament and the Council can start negotiations.