European Union member states reached an agreement on Monday on a maximum trading price for natural gas in order to reduce high energy prices. The Czech presidency of the EU announced it on Monday. The Netherlands saw little of us, but they had to lose in Europe.
The maximum price is set at 180 euros per megawatt hour, according to documents held by the news agency Reuters. This price applies to the major TTF trading exchange and takes effect when the price is above the cap for three consecutive days.
The idea is that energy companies can offer consumers and businesses lower rates if they have to pay less for gas. The measure will come into force on February 15, 2023.
If the plan had already been implemented this year, it would have depressed prices especially between the end of July and the beginning of October. During that period, the price of gas was almost constantly above 180 euros. Since then the price has dropped significantly. For example, traders paid about 110 euros for a megawatt-hour on Monday.
The Netherlands and Germany initially did not want a maximum price, as it would have had the opposite effect. For example, they feared that energy companies would sell their gas outside Europe because they might charge higher prices. Many other EU countries think it ensures that energy bills for households and businesses do not rise too much. Germany eventually agreed, while the Netherlands abstained from voting. Hungary was the only country to vote against.
The new maximum price is significantly lower than a previous proposal of 275 euros per megawatt hour. When those plans became known, there was immediate criticism. The price was too high and there were all kinds of preconditions. Even with last summer’s high prices, this earlier proposal would have had no effect.
Prices have risen due to Russian supply cuts
Energy prices have risen sharply since the fall of 2021. This is mainly due to Russia cutting off its supply of natural gas to Europe. When the country attacked Ukraine in February, the tap was turned off further and the price rose even more. Since then, more and more consumers have seen their energy bills rise often by hundreds of euros a month.
The European price cap is separate from the Dutch price cap, which takes effect on January 1st. It also works differently. The European plan concerns the commercial price, while the Dutch maximum price concerns the amount that households pay to their energy supplier.
Now that the price cap is in place, the way is also paved for other measures against the energy crisis. The joint purchase of gas and the faster issuing of permits for renewable energies, which in reality EU countries had already agreed to, were recently suspended due to slow negotiations.
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