The European Parliament on Thursday approved revisions to the laws governing electricity markets in the European Union, in particular establishing a right to fixed-term contracts as a safeguard against price fluctuations.

The new rules are a response to the price volatility seen in recent years. Energy prices in the EU rose sharply after the Russian invasion of EU ally Ukraine in February 2022, because Russia is a major exporter of natural gas and suspended deliveries to some countries.

Prices also rose during 2021 due to rising demand as COVID-19 restrictions were lifted.

The new legislation constitutes two separate bills amending different aspects of the EU’s regulatory regime for electricity markets.

Among other things, the changes will establish a new right to a fixed-term contract with fixed unit prices, so that a spike in wholesale prices won’t affect what the customer pays for the duration of the contract.

The existing legislation already established a right for energy consumers who have smart meters to request dynamic pricing, allowing them to save money by using appliances during off-peak hours.

The EU would also be given powers to declare an “electricity price crisis” when prices surge, which would allow member states to temporarily dictate prices for small-to-medium sized businesses (SMEs) and energy-intensive industries.

The version of the law approved by the parliament today is the product of intense negotiations between representatives of the parliament and the member states. An overwhelming majority of lawmakers voted in favour of both legal texts. However, the reforms still need final approval from EU member states before they can become law.