Its aim is to put in place, as of January 1, 2023, an emergency mechanism which would automatically come into action if wholesale gas prices shoot up, with the aim of avoiding excessive volatility and excessive peaks in prices, as the market experienced them this summer.
Member states – Belgium in particular, which has been advocating for a cap for months – have been eagerly awaiting this proposal, ahead of a meeting of energy ministers on Thursday.
The Commission is now putting forward figures: the mechanism will be activated as soon as the price of the TTF contract (named after the main European gas exchange) for one month exceeds 275 euros per megawatt hour for two weeks, and that TTF prices exceed of 58 euros the reference prices of liquefied natural gas (LNG) for ten consecutive days within these two weeks. Therefore, orders exceeding this limit will not be accepted. Other transactions, such as daily or shorter-term transactions, remain authorized.
The proposed ceiling appears at first glance to be very high. Energy Commissioner Kadri Simson could not answer the question of whether the mechanism would have been activated if it had already existed this summer.
Countries such as Germany, the Netherlands and Denmark have long held back the idea of a cap, for fear that gas suppliers will turn away from Europe. The Commission itself had been reluctant in recent months.
It is for this reason that the European executive has provided for suspension clauses, which can be activated, for example, if it appears that too many gas suppliers are looking for outlets outside Europe once the mechanism has been activated. “By working with a dynamic ceiling (which fluctuates according to world markets, editor’s note), we avoid this problem”, according to a representative of the Commission.
The framework of the mechanism should be established on January 1 for a period of one year, if the Member States manage to agree.
The Commission hopes that it will have a sufficient deterrent effect not to be activated. The idea, it is said, is to get through the winter and especially the period, from next April, when the requests to refill the gas reserves emptied during the winter will not fail to put the market back under pressure.