EU energy ministers to discuss gas price cap
BRUSSELS: European Union (EU) energy ministers will discuss options to rein in soaring energy prices, including gas price caps and emergency credit lines for energy market participants, a document seen by Reuters shows.
EU ministers will meet on Friday to discuss urgent bloc-wide measures to respond to a surge in gas and power prices that is hammering Europe’s industry and hiking household bills after Russia curbed gas deliveries to the bloc.
A draft document, seen by Reuters, said the ministers will consider options, including a price cap on imported gas, a price cap on gas used to produce electricity, or temporarily removing gas power plants from the current EU system of setting electricity prices.
According to the document drafted by the Czech Republic, which holds the EU’S rotating presidency, energy market participants facing very high margin calls will also consider offering urgent “pan-european credit line support”.
Finland and Sweden on Sunday announced plans to offer billions of dollars in liquidity guarantees to power companies in a bid to prevent ballooning collateral requirements from toppling firms.
“The margin requirements for futures contracts have increased commensurately with increased daily price fluctuations.
“This makes it almost impossible for an increasing number of companies to keep their hedging positions open, triggering their withdrawal from the futures markets,” the EU document said.
Utilities sell most of their power a few years in advance to guarantee a certain price, in an arrangement which requires them to deposit a “minimum margin” into an account as a safety net in case they default before the power is produced and actually enters the market.
Soaring European power prices in recent months have triggered margin calls, putting a liquidity squeeze on market participants.
European gas and power buyers were bracing for further price pain when the markets opened yesterday, after Russia said one of its main gas pipelines to Europe would remain shut indefinitely.