EU seeks power to impose emergency cap on gas prices

BRUSSELS – European Union officials seek power to enforce it emergency cover On the price of natural gas on the bloc’s main trading exchange, it is part of a package of proposals to protect consumers from price hikes and fill storage tanks next year before winter.

The European Commission, the EU’s executive arm, on Tuesday published proposals that include steps to encourage companies to pool their demand and buy gas together and rules for how gas can be shared across borders if some countries falter. Other measures seek to reduce volatility in energy markets and strengthen financial support that Can flow to consumers who suffer.

“Today’s package helps keep European families warm and the industry going,” said EU Executive Vice President Frans Timmermans.

The proposals represent the latest response from the European Union to Russian invasion of Ukraine and its decision To pressurize the gas supply for the continent. Moscow cut off the flow of gas through the Nord Stream pipeline entirely in late summer, which contributed to a sharp increase in European gas prices. Last month, the pipeline severely damaged In an explosion attributed by Western officials to acts of sabotage.

The commission separately made a recommendation on Tuesday calling on member states to conduct stress tests and identify vulnerabilities related to pipelines, underwater cables and other critical infrastructure amid growing concerns about the potential for future attacks. She also said she would work to improve coordination between countries and with NATO.

Natural gas prices in Europe have fallen in recent days to their lowest level since late June, with mild weather forecast Curb Demand Expectations Storage sites are filled to capacity.

EU officials met in Brussels in July to discuss ways to provide natural gas, with some capitals calling for caps on wholesale gas prices.


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Jon Teese/AFP/Getty Images

The proposal for a potential cap would apply to the continent’s standard gas contract, called the Royal Dutch Transfer Facility, or TTF, and would be a temporary measure while officials work to create a permanent standard for LNG prices. Officials said the cap is intended as a last resort and could also be extended to set a trading range for other centers in Europe.

The Commission said that several conditions must be met to impose the price cap, including ensuring that gas flows between EU countries are not interrupted, that gas consumption does not rise in response to the cap, and that derivatives markets. Continue to work effectively.

A senior EU official said the aim of the energy market proposals is to do something meaningful for the energy sector without hurting the financial sector. The official declined to comment on the actual level of the price ceiling on Tuesday.

Italy, France and more than a dozen other countries have called for caps on wholesale gas prices to ease the burden on businesses and households. Both Germany and the Netherlands opposed such a move, saying any price restrictions could drive up demand and divert gas to buyers who are willing to pay more.

The committee’s proposal appears to be aimed at finding a middle ground between these two positions. Officials said the order was inspired by supporters of a gas cap, but it also includes safeguards aimed at ensuring imports keep flowing and demand does not increase.

Night lights turn off Paris’ monuments and luxury stores in an effort to conserve energy. The move comes after Russia cut off the flow of natural gas to Europe. Photo: Lawrence Gay for The Wall Street Journal

“The more we clarify the possibilities, the more we can convince member states to work with us on this solution,” European Commission President Ursula von der Leyen said of the gas price cap proposal. She said the plan should help demonstrate that there are limits to the prices the EU is willing to pay for gas.

Mike Fulwood, senior researcher at the Oxford Institute for Energy Studies, said the ceiling and parallel proposal to create a new benchmark price based on LNG deals lacked specificity. “I think it’s just there to appease those EU member states that want some kind of cap, and they’re likely to die quietly,” he said. “There is nothing difficult, definitive, or doable in what they say.”

Officials said the cap proposal would go into effect in two steps. Countries will first need to agree on the general idea of ​​a contingency cap on fund prices. Then, the Commission will publish a second proposal outlining the technical details of how the cap will work, which also requires the approval of EU countries.

Leaders will discuss the plans at a summit in Brussels on Thursday and at a meeting of European Union energy ministers next week.

Another element of the EU proposal seeks to pool EU countries’ demand for natural gas in an effort to negotiate better prices with suppliers. The commission said that buying gas together should allow smaller countries to more easily access supplies and prevent member states from bidding against each other and raising prices.

To encourage member states to participate, the proposal calls for minimum requirements for the amount of application to be routed through the EU platform. The proposal said that purchases through the platform would be voluntary.

The committee’s proposals also set new rules for how to distribute gas between countries and between consumers in case of severe shortages. While she says vulnerable households will continue to be protected from interruptions in gas flow, governments could have the option of curbing gas supplies from households who may be using more gas than they need.

One element not included in the package on Tuesday was a price cap for gas used to generate electricity, which the commission previously said it supports and will reflect a system already in use in Spain and Portugal. Officials said more work is needed to ensure that implementing this system across Europe will not lead to increased consumption or other problems.

Tuesday’s package of proposals did not include a cap on the price of gas used to generate electricity.


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Ronald Wittek/Shutterstock

write to Kim McCrael at [email protected] and Joe Wallace at [email protected]

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