EU proposes gas price cap

BRUSSELS, Nov 23, (KUNA): The European Commission Tuesday proposed a new mechanism to impose limit on gas prices to reduce the volatility on European gas markets while safeguarding the security of gas supply.

The EU’s executive body in a press release said the socalled ‘market correction mechanism’ consists of a safety price ceiling of 275 euro (USD 283) on the month-ahead TTF derivatives.

The Title Transfer Facility (TTF), which is the EU’s most commonly used gas price benchmark, plays a key role in the European wholesale gas market, it noted.

Meanwhile, EU Energy Commissioner Kadri Simson said: “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”.

Speaking at a press conference in the European Parliament in Strasbourg this evening, she said: “we are aware that this kind of market intervention entails a number of risks. If security of supply, our demand reduction efforts or market stability are in jeopardy, the mechanism can be suspended immediately by the Commission”. She noted that last August, prices on the TTF virtual trading point surged from 220 euro (USD 226) to almost 320 euro (USD 329) /MWh while global LNG prices were significantly below those levels.

“Since then, we have seen the gas prices fall considerably, to 116 euro (USD 119) now. That reflects the action we have taken to reduce demand, fill our underground gas storage and diversify our supplies. But we remain exposed to these damaging price hikes, which harm European industry and place a burden to our households,” she said.