The Czech Presidency of the Council of the European Union suggested to Member States that minor adjustments are made to the conditions for activating gas price capping on Thursday 1 December in a first draft compromise on the ‘Market Correction Mechanism’.
Presented on 22 November (see EUROPE 13068/2), the European Commission’s legislative proposal provides for the automatic introduction of a cap for the price of gas traded on the TTF derivatives market – the benchmark generally used in the European Union – when two conditions are met simultaneously: (1) the settlement price for TTF derivatives exceeds €275 for 2 consecutive weeks; (2) the TTF European Gas Spot Index is €58 higher than the reference price for liquefied natural gas during the last 10 days before the end of the above-mentioned two-week period.
While Member States in favour of a price cap found these conditions far too stringent, the European Commission’s proposal goes too far for countries who are opposed to any form of capping, such as Germany or the Netherlands (see EUROPE 13070/1).
In order to find a compromise, Prague has suggested lowering the price limit above which the cap would be triggered from €275 to €264 and increasing the two periods required to activate the mechanism to 5 days.
However, the new figure of €264 and the figure of €58 appear in brackets in the text “to reflect the uncertainty of the methodology used for both conditions”.
The draft compromise also changes the scope of the mechanism. It would no longer be limited to month-ahead TTF derivatives, but would also cover those that have a maturity of between 1 and 3 months (‘three-month ahead’).
Furthermore, Prague is proposing to remove the obligation for Member States to notify the European Commission of measures that have been taken to reduce gas and electricity consumption in the event that the mechanism is activated.
At the time of going to press, the changes suggested by the Presidency were being discussed by the Member States’ ambassadors to the EU (Coreper) on the evening of Friday 2 December.
See the draft compromise: https://aeur.eu/f/4f9 (Original version in French by Damien Genicot)