Energy, gas price ceiling: the proposal of the EU Commission

The words of the European Commissioner for Energy, Kadri Simson. Gentiloni: “It’s a signal, we’ll see if it’s enough”

The European Commission proposes to introduce a market correction mechanism for natural gas, with a ceiling of 275 euros for the price per megawatt hour on TTF derivatives with delivery in one month. The cap would be triggered automatically in the simultaneous presence of two conditions: the settlement price of the one-month derivative of the TTF exceeds 275 euros per megawatt hour for two weeks and the prices are at least 58 euros higher than the reference price of liquefied natural gas for ten consecutive trading days within two weeks. “The proposal must take into account the concerns for the security of supplies and the ceiling must be high enough” to avoid an “increase in gas consumption” in Europe, explained the European Commissioner for Energy Kadri Simson at a press conference in Strasbourg.



The ceiling on the price of gas as proposed today by the European Commission would not have been triggered even last August, when the prices of the TTF shot up, exceeding 300 euros per megawatt hour. One of the two conditions is that the settlement price of the one-month derivative on TTF gas exceeds 275 euros per megawatt hour for two weeks.

According to data published by Investing.com, the one-month delivery gas derivative traded on the TTF closed above €275 in only four sessions (August 22, 24, 25 and 26). Repeatedly questioned by reporters to understand if the price cap would have been triggered if it had been in force last August, Commissioner Simson has repeatedly answered the question, without answering on the point.

The proposal put forward by the European Commission “is a signal”, but “that it will suffice…we’ll see”, said the European Commissioner for the Economy Paolo Gentiloni, answering a question in Strasbourg from Italian TV correspondents.

Furthermore, for the European Commission, in 2023-24 euro area member states should give households and businesses “targeted support” to tackle the energy crisis, by setting up a system of administered prices for “vulnerable” consumers. For the EU executive, the states of the Eurozone must “continue to coordinate fiscal policies to support the timely return of inflation to the medium-term objective of 2% of the ECB; support a high level of public investment to promote resilience social and economic situation and support the green and digital transitions”.

They must also “ensure that the support provided to households and businesses that find themselves in financial difficulty due to the energy crisis is affordable, temporary and targeted at vulnerable ones, in particular SMEs. In this regard, the recommendation suggests setting up a system “two-level energy pricing system that provides incentives for energy savings, replacing wide-ranging price measures. Under this system, vulnerable consumers could benefit from regulated prices”.

It is also necessary “to promote wage developments that protect the purchasing power of employees while limiting the secondary effects on inflation; develop and adapt the social support system as needed; further improve active labor market policies and address the skills shortages; ensure the effective involvement of social partners in decision-making and strengthen the social dimension; further improve the business environment and preserve macro-financial stability”.



Source-www.adnkronos.com