The threshold is set at 180 euros per megawatt hour. The Germans ended up rallying to this mechanism.
Correspondent in Brussels
European energy ministers finally managed on Monday to reach an agreement on the cap on the price of gas, also called ” market correction mechanismby the Commission. It will be activated as soon as the prices observed on the TTF (European benchmark index) reach 180 euros per megawatt hour (MWh) for three days.
They were hovering around 110 euros on Monday afternoon. These prices recorded on the TTF must also be at least 35 euros higher than the average price of LNG (liquefied natural gas) worldwide, during these same three days. The cap will come into effect, not from January 2023 as planned, but later, namely on February 15, 2023. The mechanism will be activated for periods of twenty days and deactivated automatically once this period of time has elapsed.
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At the request of several Member States who fear market disruptions, the Commission will also have the possibility of suspending the gas price cap in certain situations. Especially if “Gas demand increases by 15% in one month or 10% in two months, LNG imports decrease significantly”says the Council.
Czech Energy Minister Jozef Sikela describes the compromise reached as “a realistic and effective mechanism that includes the necessary guarantees that will keep us away from the risks weighing on the security of supply and the stability of the financial markets” .
dangerous game
This is a forceps agreement between Member States anxious to better protect households and businesses and other countries for which market intervention is a very dangerous game. The energy ministers had drawn a blank in two previous meetings. At the end of last week, at their summit of the year, the Twenty-Seven urged their ministers to ” finish “their works. The Commission had proposed, last month, a cap of 275 euros per MWh which had been criticized by several countries judging it too high and ineffective.
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Germany pointed to the risks on supplies and feared that too low a ceiling would divert supplier countries to other markets, in Asia in particular. She was forced to let go of the ballast when she would have been outvoted on this subject which requires the qualified majority. During the vote organized on Monday afternoon, Berlin did not object, unlike the Netherlands and Austria, which fear the effects of such a mechanism on the markets. Asked Monday morning about the possibility of an agreement without Germany, Minister Robert Habeck seemed to have few illusions. “That would obviously be an undesirable result”, he said. For Polish Prime Minister Mateusz Morawiecki, the decision is a step in the right direction. “It means the end of market manipulation by Russia and its company Gazprom”he tweeted.
The Kremlin, for its part, denounces “a violation of the market process for price formation”.“Any reference to a price cap is unacceptable”reacted the spokesman of the Kremlin, Dmitry Peskov.