THEUe is working on a new plan to contain the energy crisis. The executive arm of the European Union intends to propose a mechanism to curb price volatility, i.e. a dynamic roof, on the main European stock exchange, the ttf of Amsterdam. But only in case of urgent need and for a period not exceeding 3 months. In the EU plans there would also be the elaboration of a specific reference parameter for the price of liquefied natural gas (LNG) - alternative to the TTF - by the end of 2022 and a new temporary mechanism for managing intraday volatility. Then mandatory joint purchases for at least 15% of storage needs and a solidarity mechanism between Member States in the event of an emergency. Barring surprises, these are some of the points contained in the draft of the legislative proposal that the president of the EU Commission, Ursula von der Leyen, will officially present Tuesday 18 October together with a communication on the energy emergency. The package will then be discussed by EU leaders at the October 20-21 summit in Brussels, but a decision will most likely have to wait until November: the Czech presidency has already announced that it will convene an extraordinary energy council in November.
However, concerns ahead of the winter remain high also due to the continual winds threats from Putin and Gazprom: "Stop flows to countries that limit prices". But also the latest proposal to cut off Germany and Europe: a “Energy hub in Türkiye to regulate prices and supply gas to third countries".
What is the gas price today?
The rumors about the EU draft have led to further declines the price of gas. The value of the November future at the Amsterdam TTF is down, at 141 euros per megawatt hour, -7,68%. At least in the last four months. But let's see what Europe could do to deal with high energy prices.
EU plan on the energy crisis
The Commission has announced some proposals for next Tuesday 18 October: new actions to facilitate joint purchases; possible decisions in order to act on the price of gas; new incentives to reduce the demand for gas and, finally, new interventions to ensure solidarity between countries.
Mandatory joint gas purchases for 15% of stocks
One of the largest news present in the draft is the Commission's proposal "to provide the EU with legal instruments for the joint purchase of gas", through a common platform to be maintained at least until 2025. This should "coordinate the filling of stocks, with mandatory participation of the Member States to aggregate the demand for at least 15% of the filling volume' of the Community reserves. Furthermore, it should be possible to use up to 10% of EU cohesion funds to purchase gas.
It also seems that the measure could be approved even without unanimity, thanks to article 122 of the European Union treaty, which allows for the intervention to be voted by an absolute majority.
New price index for LNG in the EU plan against the energy crisis
The Commission proposes to separate the price of gas that arrives by pipeline from that that arrives by ship, liquefied natural gas. The European Union Agency for the Cooperation of Energy Regulators will be in charge of «gathering the information necessary to create this new benchmark by the end of 2022» and «the index should be available in time for the next filling season of the storage at the beginning of 2023".
"Dynamic" gas price ceiling and intraday price ceiling
In the meantime, therefore, a "mechanism to limit prices through the FTT is envisaged, to be activated in case of need". It's about the famous dynamic price cap, and the dynamism depends on how the price cap is applied. The limit would be established on a temporary basis. Not only that, the draft of the EU plan reads about the introduction of an intraday price cap which should put a stop to possible speculation, marking a daily climax. The tool is known as an “anti-speculation switch”.
However, the introduction of a price cap is subject to a number of conditions listed in Article 23: «The Council, on a proposal from the Commission, may adopt a decision providing for a mechanism to limit the consequences of episodes of extreme prices» but must meet certain criteria. First, it must bring about a dynamic market correction mechanism for natural gas transactions. It must also not affect off-exchange gas trading. It cannot affect the security of the Union's gas supply and must not lead to an increase in gas consumption, as Corriere della Sera explains.
Solidarity between EU countries in the EU plan against the energy crisis
Since not all member states have agreements of mutual solidarity, the Commission proposes agreements directly applicable in the absence of such agreements: the price of gas that one State will supply to another will be the average market price of the last 30 days of the month preceding the request for assistance. Furthermore, he proposes to extend thesolidarity obligation in the event of an emergency to Member States not connected to LNG plants. L'Article 25, in fact, establishes that «the Council, on a proposal from the Commission, may adopt a decision providing for a price fixing mechanism (…) and to allocate gas capacities to supply the Member States for which an emergency has been declared regional or Union".
Cohesion funds for households and businesses against high bills
Finally, cohesion funds should be able to be used to intervene to help households and businesses against the dear bills. The Member States will "probably" have 10% of the funds available for the 2014-2020 period, for a maximum of 2023 billion in 5 for the entire Union.
