EU gas cap seen in place for one year, countries spar over price level

This picture taken Jan 1, 2022 shows the European Union flag under the Arc de Triomphe, on the Place de l'Etoile in Paris.(ALAIN JOCARD / AFP)

BRUSSELS – The European Commission proposed introducing a gas price cap for one year from Jan 1, 2023, according to draft legislation seen by Reuters that has so far left the actual ceiling level blank.

The idea to cap prices has divided EU countries for many months. The Commission's latest proposal will be debated by energy ministers from the bloc's 27 member countries on Thursday.

An EU official said the Commission would propose a price higher than backers of the cap want

An EU official said the Commission would propose a price higher than backers of the cap want.

One diplomat from that camp said the majority group expected the limit at around 150-180 euros per megawatt hour (MWh) for the cap to be activated several times in a year.

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"Otherwise, we'll have a cap on paper that will in practice never kick in," said the diplomat, who spoke under condition of anonymity.

The Commission's draft law – which needs to be approved by EU countries to take effect – says the market correction mechanism was to prevent any repeat of price spikes seen last August when month-ahead TTF prices approached 314 euros/MWh on Aug26 and stayed above 225 euros/MWh for two weeks in a row.

The ministers on Thursday will debate the formula of the cap, the exact ceiling level, as well as the size of the gap between the Title Transfer Facility (TTF) – the Netherlands-based gas exchange that serves as Europe's benchmark for pipeline gas – and global LNG prices.

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The sceptics raised a number of concerns including around ensuring a cap would not lead to increased gas consumption, legal risks to existing long-term contracts and pushing more trade to the over-the-counter (OTC) market and third countries, among others, according to diplomatic sources.

Divided as ever, EU countries are unlikely to agree on these crucial details of a cap this week, said the sources.

source https://eastmud.com/latest-news/eu-gas-cap-seen-in-place-for-one-year-countries-spar-over-price-level/