Presented on Tuesday 22 November, the European Commission’s legislative proposal to address excessive fossil gas prices by capping the settlement prices of energy derivatives traded on the virtual Title Transfer Facility (TTF), the benchmark generally used in the European Union, has been widely criticised, particularly among Member States.
Particularly disappointed by the text on the table, the Spanish Minister for Ecological Transition, Teresa Ribera, described the proposal as a “joke” on Wednesday 23 November, on the eve of an extraordinary meeting of Member States’ energy ministers (see EUROPE 13068/3).
“The Commission will hear very tough words from the vast majority of ministers tomorrow”, said the proponent of a cap on gas prices.
Similar criticism was voiced by several MEPs, such as Dan Nica (S&D, Romanian), Pedro Marques (S&D, Portuguese) and Alexandr Vondra (ECR, Czech), during a debate in the Chamber on the energy market.
A defective mechanism?
For Spain, France and Poland, the ‘market correction mechanism’ proposed by the Commission is insufficient in relation to the mandate given to it by the European Council (see EUROPE 13068/2, 13047/1).
The cabinet of the French Minister for Ecological Transition, Agnès Pannier-Runacher, thus considered that the design of the mechanism did not allow it to be effective or even operational, due to the conditions necessary for its activation (settlement price of TTF ‘month-ahead’ derivatives higher than €275/MWh for a fortnight and TTF index higher than the reference price of liquefied natural gas by €58 or more over the last ten trading days).
“In concrete terms, it would only be triggered in circumstances where gas transport or supply infrastructure is destroyed”, a cabinet member stressed, while criticising the Commission’s choice to exclude the over-the-counter market from the scope of the mechanism.
As designed, the Commission’s proposed cap would not have been activated in the second half of August when fossil gas prices had reached historic highs (above €300/MWh), as the peak did not last 2 weeks.
On the other hand, countries opposed to the very idea of capping, such as Germany or the Netherlands, consider that the Commission’s proposal already goes too far. “Our fundamental issues with such an approach remain unchanged (...) This proposal has such high risks that it would actually endanger our security of supply”, said a European diplomat.
Wishing to ensure that the mechanism, or any other type of cap, does not lead to an increase in gas use, Germany has reportedly proposed raising the gas consumption reduction target from 15 to 25%. While the country seems to be rather isolated on this point, several Member States support Berlin on the idea of making the 15% target binding. (Original version in French by Damien Genicot)