(MENAFN- Trend News Agency) European Union energy ministers agreed to a“dynamic” cap on
natural gas prices Monday after two months of intense negotiations,
trend reports
citing cnbc .
Introducing a limit on gas prices has proved controversial for
European officials. While many EU member states have argued that
the measure is essential to bring down sky-high energy costs for
consumers, others have worried about the potential market
implications of the policy.
“We did our job, we have the deal. Another mission impossible
accomplished,” Jozef Sikela, industry minister of the Czech
Republic, which holds the EU Council presidency, said in a press
conference.
Energy ministers overcame their differences and agreed to what
they're calling a market correction mechanism. It will be
automatically activated under two conditions: If front-month gas
contracts exceed 180 euros ($191) per megawatt hour on the Dutch
Title Transfer Facility - Europe's main benchmark for natural gas
prices - for three working days in a row; and the price is 35 euros
higher than a reference price for liquid natural gas on global
markets for the same period.
The measure will apply from Feb. 15. When applied, it will set a
“dynamic bidding limit” on natural gas futures transactions for 20
working days.
The Dutch TTF traded around 109 euros per megawatt hour on
Monday.
Sikela stressed that it is not a strict cap, as prices could
potentially go above the limit if prices on the LNG market go above
a certain level.“In other words, this is not a fixed cap but a
dynamic one,” Sikela added.
Kadri Simson, European commissioner for energy, said in a press
conference:“It is an instrument to prevent episodes of excessive
gas prices which do not reflect world market prices. We have seen
this happening, for example in August this year when gas prices
spiked to more than 300 euros per megawatt hour.”
“High and extreme volatile gas prices are damaging our economy.
They are also damaging our households and businesses. This aims to
take away the war premium, the mark-up compared to global LNG
prices, that Europe pays due to the way prices form on the TTF
market,” she said.
“Today, we reached an agreement on a proposal for a market
correction mechanism to protect citizens & economy against
excessively high [energy prices],” Tinne Van der Straeten,
Belgium's energy minister, wrote on Twitter.
“From the start there was a common goal: keeping prices under
control & securing security of supply. Today, we achieved this
goal.”