The leaders of the Twenty-seven agreed at the end of October on a road map to curb the rise in energy prices after the war in Ukraine. In particular, they called on Brussels to prepare a “temporary” mechanism to limit gas prices, despite strong reservations from certain countries, including Germany, which fear disruptions in European supplies.
The “market correction mechanism” set up by the Commission will be discussed by EU energy ministers meeting in Brussels on Thursday, but according to a senior diplomat no deal is expected to approve it at this stage; some states require a detailed impact study.
The purpose of the device is to limit for one year, from January 1, the prices of monthly contracts (for delivery the following month) on the Dutch gas market TTF, the European “Gas Exchange”, used as a reference in the majority of transactions by operators in the European Union (EU).
From 275 euros/MWH
It would be automatically implemented as soon as these prices exceed 275 euros/MWh for two consecutive weeks, and as long as they are at least 58 euros higher than the world average price of liquefied natural gas (LNG) for ten days – in order to continue attracting LNG ships to Europe that they can easily find other customers in Asia. Therefore, transactions over 275 euros would no longer be authorized. The mechanism would be deactivated as soon as the conditions were no longer met.
However, monthly contracts only exceeded 275 euros/MWh this year for a very brief period at the end of August, with a peak around 350 euros, when the Twenty-seven competed to fill their reserves.
“Robust Safeguards”
And “robust safeguards” have been introduced, he insisted to the press in Strasbourg. In fact, the mechanism could be suspended at any time by Brussels “in the event of a risk to security of supply, to market stability or to the efforts of Europeans to reduce their demand for gas.”
Daily spot prices on the TTF and over-the-counter transactions between traders outside of regulated markets would not be affected, providing an additional safety valve to maintain European supplies.
Source: BFM TV
