The European Commission is finalizing the outline of what the future correction mechanism will be like to contain the gas prices in cases of emergency, requested by the leaders during the last European Council. According to a working paper distributed among the Twenty-seven Member States, to which EL PERIÓDICO has had access, the idea is to establish a safety cap for the price of derivatives of the TTF (the Dutch reference index on the European wholesale gas market) for the previous month. This cap would be activated if the TTF price base reaches “a predefined level & rdquor; and “if the price rise does not correspond to a similar rise on the world market” (comparison with LNG prices).
As the Commission argues, put a cap on the price of gas futures with delivery scheduled for the following month it will imply less risk than applying it to spot or day-in-advance products that could trigger supply and liquidity problems in the markets in the short term. “To guarantee an immediate effect, it is proposed that the values to activate the mechanism be set in advance, with the aim of avoiding lengthy decision-making procedures that could considerably delay its activation and the expected effect of damping prices& rdquor ;, he argues the Commission in a brief analysis in which at the moment there are no figuresneither on the price ceiling nor on the figure that would trigger the activation of the correction mechanism.
The Community Executive will present the guidelines on this future ceiling in the meeting of ambassadors scheduled for this Wednesday before submitting a legislative proposal in time for the Extraordinary Council of Energy Ministers next November 24. The call to establish a European cap on the price of gas has been on the table of Twenty-seven for months, at the request of Italy or Belgium, although the reluctance of Member States such as Germany or Netherlands have stopped any progress in this regard.
Both countries fear that setting a cap will increase the sourcing risk and reduce incentives to rreduce gas consumption. In fact, the document prepared by the Commission also echoes the advantages and disadvantages of establishing a correction mechanism and clarifies that it must include a safety brake that allows to leave it without effect in case of problems.
“With a view to possible changes in the market situation and in order to be able to react to possible unintended negative consequences of the price cap, effective safeguards should be built into the proposal to ensure that the mechanism can be suspended at any time if it leads to serious disturbances of the price cap. market that would affect security of supply and intra-community flows. The price limit would be automatically deactivated if a monthly review shows that the conditions for its activation are no longer met, “says the Commission.