The European Commission on Thursday unveiled the mechanism that would cap gas prices in the European Union, presented the day before to member states.
This proposal, eagerly awaited by the Twenty-Seven, has long been demanded by a number of countries to protect individuals and businesses from soaring energy prices.
However, they risk becoming disillusioned as the European executive is showing infinite caution so as not to offend the other States – Germany in particular – who fear the effects of such a cap on supplies.
Brussels also wants to avoid creating disruptions in an eminently complex and already very disrupted market.
"Ideally,
(this mechanism)
would never be activated, because the market would have understood that Europe is not ready to pay any price at any time"
warns a European official.
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It is more of a tool of
"deterrence"
intended to reduce the enormous peaks of volatility than of a mechanism of intervention on the markets strictly speaking, still insists this same official.
Concretely, the cap would relate not to the over-the-counter market but to the one-month contract of the Rotterdam TTF, an index used as a benchmark for natural gas and which defines retail selling prices.
It would intervene as soon as two conditions are met simultaneously: if the market price exceeds a ceiling (which the Commission has yet to announce) and if the price diverges too much from world prices.
Once the mechanism is activated, orders placed on the TTF at a price above the ceiling set by Brussels could no longer be executed.
The implementation of the cap would therefore be automatic, whereas the Member States had asked to be associated with the decision.
In a document, the European executive says that there would be
"no delay between the price increase and the activation"
of the mechanism.
The cap would be deactivated once prices return to “normal”.
“We are not thinking of a mechanism that could be activated 35 or 40 times a year!”
tempers an EU official.
Acer (association of energy regulators), the European Central Bank and ESMA (European Securities and Markets Authority) would support the Commission in monitoring prices and spreads observed worldwide.
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The Commission, which fears the negative effects of a possible price cap, once again warns Member States of the need to have a cap higher than world LNG prices and the risk of seeing suppliers withholding supplies until when the mechanism is deactivated.
If supply blockages were observed, the cap would be suspended
“immediately”
.
The Commission's proposal will be discussed next Thursday in Brussels by European energy ministers at a new exceptional meeting.
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