After making hesitant adjustments to the legislative proposal on the ‘market correction mechanism’, the Czech Presidency of the Council of the European Union proposed during a meeting of national energy experts on Tuesday, 6 December, that Member States further relax the conditions for activating a cap on the price of gas negotiated on the TTF derivatives market—the benchmark for gas prices that is widely used in the EU.
Consequently, there are several changes worth noting compared to the previous draft compromise, with which the EU countries in favour of capping had not been satisfied (see EUROPE 13076/1).
The new Czech proposal introduces a more significant decrease in the price limit above which the cap would be triggered, lowering it from €275/MWh to €220/MWh (compared to €264/MWh in the first draft compromise).
With regard to the second condition needed for the cap to be automatically activated, Prague is proposing that the required price difference between the TTF European Gas Spot Index and the reference price of liquefied natural gas on the world market (LNG) be lowered from €58/MWh to €35/MWh.
The cap would thus be activated if the price of TTF derivatives exceeds €220 and if the difference with the rest of the gas market—reflected by the LNG reference price—is higher than €35 for 5 days (compared to 14 days and 10 days in the European Commission’s initial proposal) (see EUROPE 13068/2).
Moreover, the new draft compromise introduces a new provision according to which the European Commission would be required to adopt an implementing decision suspending the market correction mechanism when a regional or Union emergency has been declared in accordance with Article 12 of the EU’s Security of Gas Supply Regulation (2017/1938).
Prague is also proposing that the mechanism not be limited to ‘month-ahead’ TTF derivatives but also be applied to those with maturities between 1 and 3 months (‘three-month ahead’).
See the draft compromise: https://aeur.eu/f/4hz (Original version in French by Damien Genicot)