Tuesday, November 29, 2022

Europe’s gas price cap leaves some nations dismayed

Commissioner for vitality Kadri Simson is speaking to media. EU international locations are debating new steps to cope with the vitality disaster.

Thierry Monasse | Getty Pictures Information | Getty Pictures

A number of EU member states should not proud of the bloc’s proposed cap on pure gas costs — at 275 euros per megawatt hour — which goals to stop sky-high prices for customers.

Introducing a cap on gas costs has been one of many extra controversial measures for Europe amid an acute vitality disaster following Russia’s invasion of Ukraine.

The 27 EU leaders gave political backing to the idea in late October, after a number of months of discussions. However, a handful of nations are demanding concrete safeguards earlier than greenlighting the proposal, whereas others say the cap is simply too excessive.

“A price cap on the ranges that the fee is proposing isn’t actually a price cap,” Kostas Skrekas, Greece’s setting and vitality minister, advised CNBC’s Julianna Tatelbaum Tuesday, hours after the proposed stage was set by the European Fee, the chief arm of the EU.

“So [a] price cap at 275 euro isn’t a price cap, no person can, can stand shopping for gas at this costly price for a very long time. We absolutely imagine that the price cap beneath 200 euro, between 150 and 200 euro could be extra real looking,” he added.

EU vitality ministers are attributable to meet Thursday to debate the price cap proposal.

Poland, Greece, Belgium and Spain are among the many nations supporting the cap. The Netherlands and Germany have been extra skeptical about the advantages of the measure. Presenting a cap that appears robust to implement, in follow, might be a means for the European Fee to carry all of the 27 nations collectively on the problem.

Greek energy minister: EU gas price cap at 275 euros/MWh is 'not a price cap'

“Will probably be a gathering with grumpy individuals,” an EU official, working for one of many member states and who most popular to stay nameless because of the delicate nature of the discussions, advised CNBC concerning the upcoming assembly.

The identical official stated the fee must current additional ensures on how the measure won’t distort markets.

Talking at a press convention Tuesday, Kadri Simson, the European commissioner for vitality, stated the proposal is “balanced” and it’ll assist the bloc keep away from excessively excessive costs.

A bunch of vitality exchanges in Europe, Europex, additionally stated earlier this week it was “deeply involved” a few market correction mechanism, given it might influence monetary stability — but in addition safety of provide.

Simson stated the proposal, generally known as the Market Correction Mechanism or MCM, has taken this into consideration and “the dangers are minimal” for provide.

The fee proposed the introduction of a cap when costs on the front-month Title Switch Facility [TTF] — Europe’s major benchmark for pure gas costs — reaches 275 euros per megawatt hour and when costs are 58 euros ($59.53) larger than the LNG reference price for 10 consecutive buying and selling days inside the two weeks. Each situations must be met for the cap to be triggered.

Dutch TTF costs reached a historic excessive of 349.9 euros per megawatt hour in August. Underneath the proposal, the price cap would haven’t been triggered because it was solely a quick spike.

“This isn’t a silver bullet,” Simson stated at a press convention Tuesday. She added, nonetheless, the measure gives “a strong device that we are able to use once we want it.”

“All people is conscious of the potential dangers however there’s a clear expectation. We are going to ship indicators that regardless of the troublesome state of affairs, we won’t pay at regardless of the market platform will carry to market individuals — prefer it occurred in August,” she stated.

European pure gas costs closed at 124.5 euros per megawatt hour on Tuesday night.

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