Brussels will set in advance the maximum price of the TTF that activates the cap on gas

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The European Comission has sent to the 27 member states of the European Union the first details of its scheme to cap the price of gas if they reach certain maximum levels set in advance. This mechanism, with which the EU intends to correct the volatility of the gas market, will cap prices from the moment they reach previously set maximum levels, so that their effect is “immediate”.

According to the draft, consulted by Europa Press before being officially presented, the Commission proposes that the mechanism establish a cap one month in advance on the products of the Dutch TTF futures market, which is used as a benchmark for the price of gas across the EU. This stop will be activated if the Dutch price base reaches a predefined maximum level to be fixed in advance and if the price increase does not correspond to a similar increase on the world market.

The aim of Brussels is “achieve an immediate effect” in the market although it also raises, as a preventive measure, the possibility of suspend the mechanism if it causes “serious disturbances” in the market. In addition, the price cap will be automatically deactivated if a monthly review shows that the conditions for its application are no longer met. The total duration of the measure is expected to be a maximum of one year, since it must be of a temporary nature.

The proposal responds to the demand of countries such as Spain and France for take urgent action to tackle high energy prices but its scope will not be known until the maximum prices that activate the mechanism are specified. In this regard, the Commission recognizes that unless it is set at a sufficiently high level, the cap could prevent the formation of a futures curveaffecting the functioning of the markets.

The general lines of the corrective mechanism in which Brussels works have been transferred this Wednesday to the capitals, which now have until the next EU Energy Council, on November 24, to study it and take a position. The Community Executive promised to present a legislative proposal but is reluctant to do so until it listens again to the Member States.

Source: lainformacion.com

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