European Union (EU) member countries have agreed to cap the price of natural gas inside the bloc at 180 euros ($191) per megawatt-hour (MWh) in an effort to ensure the security of energy supply, EU officials said on Monday.
“We have reached a very important agreement on the gas price cap. Europe will thus have a set of measures to help it prepare for next winter and to protect citizens and businesses from extreme price fluctuations” said Jozef Sikela, Czech Minister of Industry and Trade, who chaired a meeting of energy ministers on Monday.
“Ministers have taken a very bold new step to respond to the energy crisis by reaching agreement on the (European) Commission’s proposal for a market correction mechanism,” said Kadri Simson, European Commissioner for Energy.
This market correction mechanism will be automatically activated if the sale price for the coming month of the Dutch Title Transfer Facility (TTF), which is the main reference instrument for measuring wholesale gas prices in Europe, exceeds 180 euros per MWh for three consecutive working days, and if the TTF price for the coming month is 35 euros higher than a reference price for liquefied natural gas (LNG) on world markets during the same three working days.
A suspension mechanism is put in place to ensure that the EU remains attractive to gas suppliers, and that a sufficient quantity of gas is supplied to EU member countries.
“This market correction mechanism will be suspended, in particular if the demand for gas increases by 15% in one month or by 10% in the course of two months, if LNG imports decrease substantially, or if the volume of transactions on the TTF drop considerably compared to the same period of the previous year”, indicated the Council of the EU.
This mechanism will enter into force on February 15, 2023.
