European Union energy ministers on Monday agreed on a gas price cap, after weeks of talks on the emergency measure that has split opinion across the bloc as it seeks to tame the energy crisis.
The cap is the 27-country EU’s latest attempt to lower gas prices that have pushed citizens’ energy bills higher and driven record-high inflation this year after Russia cut off most of its gas deliveries to Europe.
Ministers agreed to trigger a cap if prices exceed 180 euros per megawatt hour for three days on the Dutch Title Transfer Facility (TTF) gas hub’s front-month contract, which serves as the European benchmark, EU officials and a document seen by Reuters showed.
The cap can be triggered starting from February 15, 2023, the document detailing the final deal showed. The deal will be formally approved by countries in writing, after which it can enter into force.
Once implemented, it would prevent any trades on the front-month to front-year TTF contracts at a price more than 35 euros/MWh above a reference level based on existing liquefied natural gas (LNG) price assessments, two EU officials told Reuters.
Germany voted to support the deal, despite having raised concerns about the policy’s impact on Europe’s ability to attract gas supplies in price-competitive global markets, three EU officials said.
“This is about our energy future. It’s about energy security. It’s about how we have affordable prices,” Belgian Energy Minister, Tinne Van der Straeten said on Monday.
Initially, the cap will not apply to private gas trades outside energy exchanges, although this may be reviewed once it is in force.
Three officials stated the Netherlands and Austria abstained. Both had resisted the cap during negotiations, fearing it could disrupt Europe’s energy markets and compromise Europe’s energy security.
Dutch energy minister Rob Jetten noted that “Despite progress in the last couple of weeks, the market correction mechanism remains potentially unsafe.”
“I remain worried about major disruptions on the European energy market, about the financial implications and, most of all, I am worried about European security of supply,” he added.
The EU proposal has also drawn opposition from some market participants, who have said it could cause financial instability.
Published in The Express Tribune, December 20th, 2022.
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