The price set is the marginal price for the last MW of capacity required (which is the most expensive one). No other way to do it I guess: if you give the cheaper producers less than the most expensive ones, they have the economic incentive not to supply until they get the higher price.
I highly doubt that would fly in the EU. Privatization always was 'at arms length', piss off enough bureaucrats and I'm pretty sure you'd find yourself nationalized pdq. Telcos have had the sharp end of the stick pointed at them a couple of times now and have each and every time folded rather than to see how sharp it really was, I don't think energy companies would fare any different, especially not because energy is more or less a first level need and telco services a second or even lower level one.
They figured out Enron too, after tens of billions worth of damage. Didn’t stop them.
I do agree that the EU isn’t likely to be hands off enough to ever let it get to that point though. It was a particularly dumb set of regulatory decisions that let/encouraged Enron to do what they did.
