It is back to talk about gas price cap. The European Commission has proposed a security "price cap" of 275 euros on TTF derivatives of the previous month. A high figure that aims to be "a mechanism of last resort", explained Brussels.
Gas price ceiling: the European Commission's proposal
“We know that the EU pays very high prices for gas” and although prices have gone down “we remain exposed to speculative dynamics on energy costs,” said EU Energy Commissioner Kadri Simson. For this reason, Brussels has presented a legislative proposal on the price cap which sets a 275 euros the price per megawatt hour according to the TTF index.
This is a very high threshold that will surely make price cap supporters turn up their noses. So much so that Brussels has already put its hands forward, explaining that “Our it is not a regulatory intervention to fix the price of gas but a mechanism of last resort that is triggered” under certain conditions and in any case “when the default price of gas exceeds 275 euros per megawatt hour for two weeks,” said Simson, adding that such a high ceiling serves to “respect the security of supply".
How the gas price ceiling proposed by Brussels works
Based on the provisions, the price cap should trigger when the settlement price of the derivative exceeds 275 euros for two weeks and, in parallel, “when the spread between the price on the TTF and the global price of LNG is equal to or greater than 58 euros for ten days of transactions". "This is the crucial condition to ensure that the" corrective intervention on the market "takes place only when the TTF gas prices no longer reflect the market fundamentals" and it is "also crucial to ensure that we will be able to continue to attract LNG in this difficult moment for the EU”, highlighted Simson in Strasbourg.
The objective of the measure is to prevent a repeat of the situation seen in August, when the price of gas exceeded 300 euros per Mwh, remaining above 225 for two consecutive weeks. The proposal could enter into force on 1 January 2023.
Pice cap: the next steps
The proposal will be discussed on Thursday EU energy ministers, but the chances that even on this occasion the Member States will not be able to find an agreement are very high.
In fact, the possibility of introducing a cap on the price of gas has been under discussion for months. Among the major supporters of this measure there is also Italy, which first with the Draghi Government and now with the Meloni Executive has always supported the need for Community intervention on prices. Even today, in the press conference to present the 2023 Budget Law, the president of the council, Giorgia Meloni, reiterated that a European ceiling” on the price of gas “is fundamental”."There are those who ask for the deviation, what needs to be done will be done but for me, giving 30 billion to speculation doesn't make me happy: they are resources that I would like to spend otherwise, it is a bottomless pit if there is no European solution - he continued – There will be a council meeting in December, we hope for a solution so that after March we have another situation”. “We reason either to have other tools, such as Sure, otherwise greater flexibility on already existing funds,” Meloni said.
Other important appointments are scheduled for December that could help unblock the situation: the first is the European Council scheduled for December 15 and 15, the latter is the Energy Council set for December 19th.
