The European Union will launch a “deep and comprehensive reform” of the electricity market, European Commission President Ursula von der Leyen said Wednesday.

In her annual State of the Union speech, delivered at the European Parliament building in the French city of Strasbourg, von der Leyen said the market was designed on the principle of merit order, and not fit for purpose.

“Consumers should reap the benefits of low-cost renewables,” she said, “So we have to decouple the dominance of the price of gas on the price of electricity.”

Von der Leyen also said there had been a shift from pipeline gas to increased use of liquefied natural gas, but the benchmark used in the gas market, TTF, had not adapted.

She said the commission would work on developing a more representative benchmark for trading that reflects this change, and also ease liquidity pressures on energy suppliers by amending rules on collaterals and taking measures to limit intraday price volatility.

An energy crisis of both supply and pricing in Europe came to a head earlier this month as Russia indefinitely halted gas flows to Europe through the key Nord Stream 1 pipeline. 

EU energy ministers met Friday to discuss a five-point plan which includes a price cap on Russian gas, a windfall tax on fossil fuel companies’ profits, a limit on revenues of renewable and nuclear companies, a mandatory target for reducing peak hour energy use by 5% and emergency credit lines for power companies. 

Russian President Vladimir Putin threatened to disregard existing contracts and shut off energy supplies to Europe completely after the plan was announced. 

Addressing the windfall tax and revenue cap plans, von der Leyen said that while profits were not necessarily a bad thing, “it is wrong to receive extraordinary record revenues and profits benefiting from war and on the back of our consumers.”

“In these times, profits must be shared and channeled to those who need it most.”

She said millions of households and businesses across the European Union were struggling with price rises and were fearful for the future.

Tax on fossil fuel profits would provide 140 billion euros ($139.8 billion) to be split between member states for energy bill support, she added.

Von der Leyen said a priority for the bloc must be on ending its dependency on Russian gas, with imports from the country already falling from 40% last year to 9% now.

“We have agreed to join storage, we are now at 84%, overshooting our targets,” she said.

But, she continued: “This will not be enough. We have to diversify away from Russia to reliable suppliers like the United States, Norway, Algeria and others,” as well as investing more heavily in renewables and LNG terminals.

‘Putin will fail’

Ukrainian first lady Olena Zelenska was in attendance in Strasbourg as a guest of honor, and was given a standing ovation by parliamentarians.

Zelenska tweeted that she wanted to “personally thank” von der Leyen for her contribution to Ukraine becoming a candidate for EU membership.

Von der Leyen, who delivered the speech wearing the Ukrainian flag colors of yellow and blue, made impassioned statements on the war, saying Ukraine had confronted the “face of evil” following the Russian invasion on Feb. 24.

“Much is at stake, not just for Ukraine but for all of Europe and the world at large,” she said, paying tribute to the victims of the war, which she said was also an attack on Europe’s economy, energy, values and future.

“It is about autocracy against democracy and I stand here with the conviction that with the necessary courage and solidarity Putin will fail and Ukraine and Europe will prevail.”

“Today courage has a name and that name is Ukraine. Courage has a face and that face is the face of Ukrainian men and women who are standing up to Russia aggression.”

Kyiv forces have reclaimed thousands of kilometers of Russian-occupied land in recent days, leading to fears over Moscow’s next move. Russia launched intense shelling on the Kharkiv region on Saturday.

Von der Leyen also said sanctions against Russia were “here to stay” and it was the “time for resolve and not appeasement.”

Three quarters of Russia’s banking sector had been cut off from international markets, nearly 1,000 international companies had left the country, its production of cars fell by 75% compared to last year and its “industry is in tatters,” with its military stripping household appliances for parts due to a semiconductor shortage, she noted.

She added that she wanted to extend “seamless access” to the EU single market to Ukraine and would travel to Kyiv Wednesday to discuss this with Ukrainian President Volodymyr Zelenskyy.