The threshold is 180 euros per megawatt hour. The Germans eventually joined this mechanism.
Correspondent in Brussels
On Monday, European energy ministers finally managed to reach an agreement on the gas price cap, which the Commission also calls the “market correction mechanism”. It is activated as soon as the prices observed on the TTF (European leading index) reach 180 euros per megawatt hour (MWh) for three days.
They fluctuated around 110 euros on Monday afternoon. These prices recorded on the TTF must also be at least 35 euros above the global average price for LNG (liquefied natural gas) over those three days. The cap will not come into effect as planned from January 2023, but later, namely on February 15, 2023. The mechanism will be activated for periods of twenty days and will be automatically deactivated after this period.
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At the request of several Member States fearing market disruption, the Commission will also have the option to suspend the gas price cap in certain situations. In particular, when “the demand for gas increases by 15% in a month or by 10% in two months, LNG imports decrease significantly”, specifies the Council.
Czech Energy Minister Jozef Sikela describes the compromise reached as “a realistic and effective mechanism that contains the necessary guarantees that keep us away from the risks that weigh on security of supply and the stability of financial markets”.
dangerous game
This is a pincer agreement between Member States keen to better protect households and businesses and other countries for which market intervention is a very dangerous game. The energy ministers had drawn a blank at two previous meetings. Late last week, during their annual summit, the Twenty-Seven urged their ministers to “finish” their work. The Commission last month proposed a cap of €275 per MWh, which several countries have criticized as too high and ineffective.
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Germany pointed out the supply risks and feared that a cap that was too low would divert supplier countries to other markets, particularly in Asia. She had to let go of the ballast when she would have been outvoted on this issue, which requires a qualified majority. During the vote organized on Monday afternoon, Berlin raised no objection, unlike the Netherlands and Austria, who fear the impact of such a mechanism on the markets. Asked on Monday morning about the possibility of an agreement without Germany, Minister Robert Habeck had few illusions. “Obviously that would be an undesirable result,” he said. For Polish Prime Minister Mateusz Morawiecki, the decision is a step in the right direction. “It means the end of market manipulation by Russia and its company Gazprom,” he tweeted.
For its part, the Kremlin denounced “a violation of the market process for price formation”. “Any reference to a price cap is unacceptable,” said Kremlin spokesman Dmitry Peskov.