“Europe today pays a high gas price,” said European Energy Commissioner Kadri Simson, during a press conference on the proposal. “In August this year we saw prices of 220 to 320 euros per megawatt hour. At the moment the price of gas is around 116 euros per megawatt hour, but we remain vulnerable to extremely high prices, like last summer. That’s why we propose that there is a maximum price of 275 euros per megawatt hour.”
The Commission’s proposal foresees that the price cap mechanism will enter into force automatically – in the sense that there will be no more gas transactions exceeding the agreed limit – when the following two conditions are met:
- When the price of gas “futures contracts” (concluded one month in advance) on the TTF exchange exceeds 275 euros for two weeks
- When this TTF price is €58 higher than the LNG reference price on the global market for 10 consecutive trading days within those two weeks
When the two conditions are no longer met, the correction mechanism will automatically stop as well. “We are also aware of the risks,” assures Simson. “That is why the measure can also be prevented or reduced if, for example, security of supply or market stability are jeopardised.” He calls the mechanism on the table “a last resort to avoid exceptionally high prices.”
