Brussels proposes an almost inapplicable cap on gas: it exceeds the prices of the worst of the crisis

The European Commission has presented this Tuesday a proposal for an emergency cap on gas of 275 euros MWh, a level so high and which also contains so many conditions that it makes this kind of emergency brake outlined almost inapplicable. And it threatens to leave disgruntled countries that have been demanding a way to stop skyrocketing and distorted prices for months, compared to others that, like Germany, are wary of any restraint measure that could cause a supply shortage.

The solution presented by Brussels should serve as the basis for negotiation in the extraordinary meeting of ministers on Thursday, which will be followed by a last appointment in December. It consists of the so-called market correction mechanism being activated automatically when the price of the Dutch TTF reference market for futures contracts for delivery in the following month exceeds 275 euros MWh. But, and it is a big but, this handbrake will only activate if that price is maintained for two weeks and, in addition, the increase shows a divergence of more than 58 euros with respect to the reference price of liquefied natural gas (LNG). ) for 10 days in a row.

“This is not about setting an artificially low market price, but about an emergency mechanism to prevent episodes of excessive prices,” said the Energy Commissioner, Kadri Simson, at a press conference from Strasbourg.

The reference used to propose this cap, which, according to European sources, has generated divergences within the Commission itself due to how conservative it is, has been the price peak suffered in mid-August, when the TTF once exceeded the 300 euros MWh. Simson, however, has avoided answering the question of whether this mechanism now suggested, with so many conditions, could have been activated in the August crisis, the worst sustained episode to date in the almost constant gas price crisis.

“No”, answers, on the contrary, and without hesitation, the MEP Nicolás González Casares, who declares himself “disappointed” by a ceiling that he considers “very high”. For the socialist, a member of the European Parliament’s Committee on Industry and Energy, Brussels has carried out an exercise in pure gattopardism by proposing a change so that, deep down, nothing really changes, as countries like Germany or the Netherlands are looking for, Very opposed to a cap on the throttle from the start. “We have been discussing for months and now the solution is to propose something that would not have solved anything that has already happened and what can happen. Somehow, the Commission accepts that it puts this chap or a ceiling in case prices still climb much more than they have already climbed, but certainly not to solve problems like the ones we are experiencing ”, laments the MEP in a telephone conversation.

The European Commission, however, defends this framework. “It has been carefully calibrated on the basis of the TTF prices observed in 2022”, points out the European Executive, for which “the proposed level will minimize the potential risks to the financial stability of the EU, in addition to preventing a disruption of deliveries that could jeopardize the security of supply” of the Twenty-seven. The cap has also been chosen “carefully” so as “not to jeopardize our ability to attract LNG from the global market to Europe”, he adds. Despite not responding to what was requested by up to fifteen countries, including Spain, the mere fact of presenting a proposal could, however, have an “ibuprofen effect” to lower the tension of the Thursday meeting, diplomatic sources say. according to which, despite this, very tough negotiations are still expected to try to lower the fixed price.

Beyond the high ceiling, the European Executive adds a whole battery of safeguards that respond to the “many questions” that Berlin and The Hague continue to have before a type of mechanism of this type, according to community sources. Thus, the Commission assures, the corrective mechanism “is designed in such a way as to guarantee the continued operation of the energy and financial markets in the EU”, in addition to containing safeguards to “avoid risks to the security of gas supply and stability financial”, mantras repeated by those opposed to a price cap.

In this sense, in addition to having to exceed the price of 275 euros MWh for two weeks and with a divergence of 58 euros from the LNG reference price, several organizations must agree that the conditions are in place to activate the mechanism. Thus, before the decision is made, the Agency for the Cooperation of Energy Regulators (ACER) must inform the Commission, the European Financial Markets Authority (ESMA) and the European Central Bank (ECB).

In addition, in another attempt to guarantee that the demand for gas does not increase -another of the obsessions of Brussels and of the suspicious countries-, the Member States must notify, “within two weeks from the activation of the mechanism”, what measures they have adopted to “reduce gas and electricity consumption”. In July, the EU already agreed to a voluntary gas consumption saving of 15% as the first measure to combat price rises. Germany would now like – and this is how it should propose this Thursday at the Brussels meeting – that this ceiling be raised to 25% savings.

The idea is that this Tuesday’s proposal, which can still change in the negotiations in the coming weeks and which must be adopted by a qualified majority — 55% of the Member States representing at least 65% of the total population of the EU, that is, at least 15 countries, is activated from January 1 and, in principle, for one year.