EU countries find political agreement on introducing a gas price cap

On Monday, European energy ministers found a political agreement on introducing a market correction mechanism for wholesale gas. Belga has learned this from good sources.

It was agreed that the mechanism could be activated as soon as the gas price in Europe reaches at least 180 euros per megawatt-hour for three days and is more than 35 euros above the international LNG price. A dynamic ceiling will then be triggered.

Several safeguards have been built at the request of countries like the Netherlands and Germany to prevent the mechanism from distorting the market. Therefore, once activated, it can also be deactivated immediately in case of unwanted side effects.

The mechanism was negotiated for months. On Monday, only Hungary disagreed with the final compromise text of the Czech Council presidency. The Netherlands and Austria abstained, but Germany was thus finally in favour.

Now that there is an agreement, the European Commission, the European energy regulator ACER and the market authority ESMA will undertake an in-depth impact analysis, a preliminary version of which will be delivered on 31 January. If it does not reveal any fundamental problems, the mechanism can be activated - if necessary - from 15 February. However, the final impact analysis will not be ready until the end of February.

Once the mechanism is activated, this does not mean that the gas price is capped at €180/MWh. Instead, it means that no price should be paid in Europe that is more than €35/MWh higher than the LNG reference price. In other words, if the latter were 200 euros/MWh, no more than 235 euros/MWh should be paid in Europe. Also, if the reference price for LNG is below €143, the ceiling will remain at €178 (€143 + €35).





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