Member state rebellion over a proposed cap on wholesale gas prices has forced the EU to delay formal approval of a package of measures aimed at tackling the continent’s energy crisis.
EU Energy Commissioner Kadri Simson said political agreement had been reached on five key issues, including plans for joint gas purchases and gas sharing agreements between member states, as well as facilitating the issuance of renewable energy permits.
But these measures were not formally adopted as the official vote was delayed until the December meeting as price capists sought to increase their influence in the negotiations.
Czech Energy Minister Josef Sikela, who put on a brave face over the controversy over the cap, told a press conference in Brussels that he expects consensus on the issue to be reached at a special meeting scheduled for mid-December – “There is too much at stake.” he insisted.
Politicians across Europe have been forced to take action as a sharp decline in pipeline gas imports from Russia sent gas and electricity prices skyrocketing this year, hurting vulnerable businesses and consumers financially.
Ahead of the meeting, the European Commission submitted a proposal to cap the price of the Dutch TTF gas futures contract one month ahead – a widely used reference price – at €275 per MWh ($83 per million Btu).
But the restriction will only be activated if the prices of the month-ahead contracts on the Dutch TTF futures market exceed the level of 275 euros for two consecutive weeks and if the price is 58 euros higher than the world price of LNG for 10 days.
Price cap or raffle?
Simson insisted that the restriction remains a proposal and “will never be agreed upon today”.
But before the meeting, it was already clear how far apart the Member States were.
Politicians from Poland and Italy said it was too high to be effective and would not even be activated during record high gas prices in the summer.
“Limiting the price of gas … currently does not satisfy any country. For us, this is a kind of joke, ”Krzysztof Czozewski, Minister of Energy of Poland, told reporters. “It’s already minus 10 in Poland, so we don’t want to continue the discussion about solidarity and renewable energy permits… it’s winter now, so we need to discuss the gas price cap.”
States such as Germany and the Netherlands oppose any restriction that threatens the security of gas supplies to Europe.
“The proposal now on the table regarding a market mechanism is wrong,” Dutch Energy Minister Rob Jetten told reporters. There is a big risk of violating … the security of supply, as well as the stability of financial markets.”
Emergency measures held hostage
Simson promoted the idea of a “political” agreement on a package of changes as essential to EU energy policy, even if their official implementation was delayed.
Regarding joint gas purchases, the EU said it has put in place a process “that will allow us to pool our needs through the EU Energy Platform and purchase 13.5 billion cubic meters of gas together next year to replenish our storage on time,” she said.
The EU Energy Regulators Cooperation Agency will be working on developing a new EU benchmark for LNG by the end of March. “The current most popular benchmark, [Dutch] The TTF no longer reflects the situation in the EU gas market and an additional tool is needed.”
Simson also said an agreement had been reached to develop “circuit breakers” for intraday derivatives trading to avoid volatility and “easing liquidity pressures for energy companies.”
Finally, she said the states had agreed to “strengthen… EU energy solidarity to ensure that in the event of an emergency, no member state is left alone.”
In practice, an EU diplomat told Energy Intelligence that solidarity is a sore point.
EU states were supposed to conclude bilateral agreements with border states six years ago under a 1938 law to ensure the safe supply of gas through the Union, but to date only three bilateral agreements have actually been concluded.