At a European Council meeting in Brussels on Thursday 20 October, the 27 heads of state or government of European Union Member States will try to come to an agreement over common conclusions on EU action against soaring energy prices, despite continuing divisions over the capping of gas prices.
Unlike the informal EU summit in Prague on Friday 7 October (see EUROPE 13038/1), the EU27 now have a specific proposal from the European Commission to feed their discussion (see EUROPE 13045/1).
The legislative text on the table provides in particular for a “market correction mechanism”. This mechanism would allow the EU Council, on a proposal from the European Commission, to establish a maximum dynamic price at which transactions on the fossil gas spot market can take place at the TTF exchange point (the benchmark in Europe for gas prices).
It would therefore be a non-automatic instrument, but also a temporary one, pending the development of an alternative benchmark to the TTF for import prices for EU liquefied natural gas (LNG).
However, several Member States want to go further. While some (for example France) would like to cap the price of gas used for electricity generation – similar to the system in place in the Iberian Peninsula (see EUROPE 12968/4) – others, such as Belgium, would rather advocate the introduction of a price cap covering all gas transactions on the wholesale market (including LNG - see EUROPE 13031/8).
“The most controversial issues are the capping of gas prices, the correction mechanism or the dynamic corridors. There are different ways of naming it”, summarised a senior European official.
Regarding these points, the latest draft conclusions of the European Council call on the European Commission to “examine the possibility of a temporary dynamic price corridor on natural gas transactions” as well as “proposing a temporary European framework for capping the price of gas in electricity generation”. The wording pertaining to rolling out of the Iberian model to the whole of the EU could reflect an openness of Member States to this option, as the previous version of the text used the verb “examine” rather than “propose”.
The President of the European Commission Ursula von der Leyen told MEPs on Wednesday 19 October that this model “really deserves to be studied at EU level”. She added: “Questions remain, but I don't want to leave any stone unturned. So let’s go ahead and examine that model, and let’s work on that basis”.
In particular, this includes ensuring that such a system would not lead to increased gas consumption. Other questions relate to the costs of this option and how to cover them, as it requires subsidising electricity producers.
According to a senior European official, some Member States are also concerned that the mechanism will result in electricity leakage to countries that are connected to the EU grid but are not members of the Union. Switzerland and the UK, for example, could benefit from cheaper electricity, since it would be subsidised by EU citizens.
These issues are likely to make it difficult to reach a consensus in the European Council, a political body that is not designed to take decisions on such technical issues.
The development of an alternative index to the TTF, the mechanism for mandatory joint gas purchases and the future structural reform of the EU electricity market would, however, be more consensual.
See the new draft conclusions: https://aeur.eu/f/3oj (Original version in French by Damien Genicot with the editorial staff)