Brussels' gas price cap proposal dismissed as symbolic
The European Commission has proposed introducing a cap on month-ahead gas prices at the Dutch TTF hub, but experts have criticised the move as largely as symbolic gesture.
EU member states have been debating the introduction of a cap on wholesale gas prices for months, but progress has been slow, over disagreement about what form the mechanism should take.
The commission suggested on November 22 that a "safety price ceiling" of €275 ($286)/MWh should be introduced for front-month TTF derivatives. But critically, the mechanism will only be triggered when the €275/MWh threshold is exceeded for two weeks, and if TTF prices are €58/MWh higher than the LNG reference price for 10 consecutive trading days within the two weeks.
"Gas prices in the EU have fallen since August thanks to demand reduction, mandatory storage filling, diversification of supplies and other measures proposed by the commission in recent months," EU energy commissioner Kadri Simson said in a statement. "But we have been missing in our toolkit a way to prevent and address episodes of excessively high prices."
"Today, we propose to put a ceiling on the TTF gas price to protect our people and businesses from extreme price hikes," she continued. "The mechanism is carefully designed to be effective, while not jeopardising our security of supply, the functioning of EU energy markets and financial stability."
The proposal is a "curious one," Javier Blas, an energy market columnist at Bloomberg, commented in a tweet, noting that even when gas prices rose to an all-time high of €342/MWh in late August, they did not remain about the €275/MWh threshold for two consecutive weeks.
"We now have a cap that doesn't cap," he said. "A Brussels cap."
"Much ado about nothing," Anne-Sophie Corbeau, energy expert at Columbia University's School of International and Public Affairs, told NGW.
"The EC has been saying that prices have been too high especially in August and have come up with a measure that would not have prevented that episode from happening," she said. "They had to propose something, so they came up with something that will not change anything, maybe in the hope that it would secure consensus from member states."
"They pretend to do something while doing nothing."
Thierry Bros, another energy expert at Po Paris, warned, though, that the proposed cap could be negotiated downwards at an energy ministerial meeting that will take place on November 24.