Ursula Van Der Leyen
Lapresse
Gas: EU proposes price cap at 275 euros but sets limits
The European Commission presented the market correction mechanism designed to activate a gas price cap in case of new peaks. The instrument adopted by the College of Commissioners consists of a maximum safety rate set a 275 euros per megawatt hour on the monthly titles of theTTF (Title Transfer Facility, the most used gas price benchmark in the EU based on the Amsterdam market).
The mechanism would activate automatically if, at the same time, the following two conditions: the monthly TTF price exceeds 275 euros per megawatt hour for two weeks; TTF prices are at least 58 euros higher than the reference price of liquefied natural gas for 10 consecutive trading days.
“When these conditions are met, the Agency for the Cooperation of Energy Regulators (Acer) will immediately publish a market correction notice in the Official Journal of the European Union and inform the Commission, the European Securities Authority and of the markets (ESMA) and the European Central Bank. The following day the price correction mechanism will enter into force and proposals for monthly TTF bonds exceeding the safety price ceiling will not be accepted”, reads the proposal of the Commission. The mechanism, if approved by the Council, can be activated from 1 January 2023. However, “to react to possible unintended negative consequences of the price limit, the proposal foresees that the mechanism can be suspended immediately at any time”, reads the text.
Gas: EU proposes price cap at 275 euros but sets limits
Suspension can take place “automatically, with a deactivation, when its operation is no longer justified by the situation on the natural gas market” or “by a suspension decision by the Commission when risks to the Union’s security of supply, demand reduction efforts, intra-EU gas flows or financial stability are identified”, yes law in the presentation of the EU provision.
“There is also the possibility for the Commission to prevent the activation of the mechanism in the event that the competent authorities, including the ECB, feel the materialization of such risks”, it is further specified. Furthermore, the proposal contains safeguards to avoid disruption of the energy and financial markets. “To avoid supply security issues, the price cap is limited to only one futures product (Products Monthly TTFs) so that market operators can still meet the demands of demand and procure gas on the spot and off-exchange market”, reads the presentation of the measure.
“To ensure that gas demand does not increase, the proposal requires Member States to notify within two weeks of the activation of the market correction mechanism what measures they have taken to reduce gas and electricity consumptionFinally, “there will be constant monitoring by the ESMA, the ECB, Acer, the Gas Coordination Group and the European Network of Gas Transmission System Operators (ENTSO-G)” to ensure the proper functioning of the mechanism.
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