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The European Commission has presented this Tuesday a legal proposal to create an emergency cap on the price of gas in the TTF futures market that the Twenty-seven will debate this Thursday at an extraordinary Energy Council in Brussels, and that it would start working on January 1, 2023.
The cap is will activate if two conditions are met: that the price of gas futures in the one-month TTF exceeds 275 euros per megawatt/hour (MWh) for two weeks and that this increase shows a divergence of more than 58 euros with respect to the reference price of liquefied natural gas (LNG) for ten consecutive days.
“It is not an intervention for setting market prices at an artificially low price. It is a last resort mechanism to prevent excessive price levels that are not aligned with global prices,” European Energy Commissioner Kadri Simson told a press conference.
The top takes as reference the month of August, when the countries of the European Union (EU) rushed to buy gas to fill their tanks before winter and the TTF set a record of 349 euros/MWh. Now it has fallen to 116 euros/MWh, still far from the 15 euros of two years ago.
More than fifteen capitals, including Spain, France, Greece, Poland, Slovenia or Belgium, They have been demanding this line of action for months to mitigate pricesa path that Germany and the Netherlands reject, especially, and against which Brussels is also very reluctant.
In the absence of radical and effective measures to appease the energy price crisis by the Commissionseveral Member States had threatened to block the texts that are expected to be approved without major problems at the ministerial meeting on Thursday if Brussels did not first put a proposal for intervention on the table, European and diplomatic sources explain.
interventionist countries
The Commission has circulated various reflection papers, but has not a proposal with vocation of law arrived. And the “interventionist” countries were willing to paralyze the regulations on joint gas purchases, energy solidarity or acceleration of renewable energy permits so that Brussels would react.
Finally, last week the Community Executive shed light on the main lines of his idea, which has now been transformed into a legislative initiative with “a significant number of safeguards”.
The mechanism acts on futures one month from the TTF, reference for gas prices which is imported by pipeline in north-central Europe but which affects all purchases in the EU.
In addition to the aforementioned price and divergence conditions, to activate authorization from various institutions would be required.
Financial market stability
If the Agency for the Cooperation of Energy Regulators (ACER) sees that the conditions are met, it would inform the Commission, the European Central Bank (ECB) and the European Financial Markets Authority (ESMA), which would verify that there is no risk for the security of supply or for the stability of the financial market.
This requirement was not included in the informal document that the community authorities raised last week with the bases of the instrument and it is one more gesture for accept Berlin and The Hague.
Once in operation, the stop would be deactivated if the aforementioned conditions were no longer met and it also includes a “robust suspension clause”which allows the Commission to neutralize it “in minutes” if something goes wrong.
This is a mechanism designed so that it never has to be used and with sufficient safeguards for reluctant countries to access intervene in the market for fear that producers will stop selling gas to the EUadd the sources.
It would not even have been activated during the peak of last August, since it did not exceed that threshold of 275 euros for two consecutive weeks. Before the cap figure is known, diplomatic sources in favor of a cap on gas They pointed out that it would not make sense to set it above 200 euros.
In addition, the proposed system would not affect the unorganized markets (Over the counter or OTC, in English) as “so that you have a little flexibility” and there is always a possibility to buy a shipment of gas if the need is pressing.
