EU proposes gas price cap at 275 euros per MWh

By Trend

A European gas price cap at 275 euros (283 U.S. dollars) per megawatt hour (MWh) has been proposed, Energy Commissioner Kadri Simson announced in Strasbourg, France, Trend reports citing Xinhua.

"We propose an upper ceiling on the month-ahead TTF (Title Transfer Facility) price in case it exceeds 275 euros per megawatt hour. Beyond that price, transactions will not be able to take place."

The market correction mechanism will be triggered when two conditions are met, the Commissioner explained. Firstly, when the gas price exceeds 275 euros for two consecutive weeks. Secondly, when the spread between the TTF price and global liquefied natural gas (LNG) price is 58 euros or more for ten consecutive trading days.

When both these conditions are in place, the mechanism will be automatically activated, and will not require any additional procedures or decisions.

Simson told a press conference that this is not a regulatory intervention to set the price on the gas market at an artificially low level; rather, it is a last resort solution to prevent episodes of excessively high prices which are not in line with global price trends.

However, she added: "This is not a silver bullet that will bring gas prices down. But it provides a powerful tool that we can use when we need it, complementing our more structural efforts to lower prices, namely by controlling our demand and ensuring sufficient gas supply for Europe through joint purchasing and active external energy policy."

The proposals will be debated by energy ministers from the bloc's 27 member countries on Nov. 24.

However, the Association of European Energy Exchanges said that the mechanism poses a serious threat to the region's security of supply and financial stability, and will do little to achieve the goal of lowering energy costs.

In August, prices on the TTF virtual trading point surged from 220 euros to almost 320 euros per MWh, while global LNG prices were significantly lower. Since then, gas prices have fallen considerably, to 116 euros currently. (1 euro = 1.03 U.S. dollars)