EU Council agrees on gas price capping mechanism

That’s according to the Council’s press release, Ukrinform reports.

“EU energy ministers reached a pitical agreement on a Council regulation that sets a market correction mechanism to protect citizens and the economy against excessively high prices. The regulation aims to limit episodes of excessive gas prices in the EU that do not reflect world market prices, while ensuring security of energy supply and the stability of financial markets,” the report reads.

Read also: Ukraine needs EU help to purchase gas, electricity – President Zelensky

The market correction mechanism will be automatically activated if the flowing 'market correction event' occurs:

– The month-ahead price on the Title Transfer Facility (TTF) exceeds 180€/MWh for three working days;

– The month-ahead TTF price is EUR35 higher than a reference price for LNG on global markets for the same three working days.

The regulation will now be formally adted by the Council by written procedure and published in the EU Official Journal.

The regulation will enter into force on February 15, 2023. The regulation is temporary and will apply for one year.

The regulation includes a suspension mechanism, if risks to security of energy supply, financial stability, intra-EU flows of gas, or risks of increased gas demand are identified.

The Commission, ESMA and ACER will constantly monitor and review the functioning of the market correction mechanism from the day of entry into force of the regulation on 1 February 2023. At any time, when such risks or market disturbances materialise, the Commission will adt an implementing decision to suspend the market correction mechanism.

The market correction mechanism will be suspended, notably if gas demand increases by 15% in a month or 10% in two months, LNG imports decrease significantly, or traded vume on the TTF drs significantly compared to the same period a year ago.

The suspension decision will be published in the EU's Official Journal and enter into force on the next day.

“We have succeeded in finding an important agreement that will shield citizens from skyrocketing energy prices. We will set a realistic and effective mechanism, which includes the necessary safeguards that will steer us clear from risks to security of supply and financial markets stability. Once again, we have proved that the EU is united and will not let anybody use energy as a weapon,” said Jozef Sikela, Czech Minister of Industry and Trade.

Read also: Eure must make this the last winter of weaponized Russian energy exports

As Ukrinform reported earlier, one of the consequences of Russia's war against Ukraine was a sharp rise in energy prices, including for natural gas, in Eure and the world. After Russia began to exploit energy as a weapon, the EU announced a course to gradually get rid of dependence on Russian fossils and began diversifying gas supply routes to work with reliable suppliers, in particular, the USA, Norway, Qatar, Azerbaijan, and others.

The EU has agreed on a joint gas procurement platform, which allows member states to avoid competing with each other on the global energy market and take full advantage of the Eurean Union's clective purchasing power.

Ukraine, Mdova and the nations of the Western Balkans are also participants in the platform.