Brussels to propose temporary gas price ceiling to curb extreme prices

Brussels is planning to propose an emergency mechanism to curb the price of gas when it reaches extreme levels, as the EU seeks to get a grip on the bloc’s energy crisis.

According to a draft European Commission proposal, the EU should be able to set a maximum “dynamic price” at which gas transactions can take place on the Dutch Title Transfer Facility, a benchmark for gas traded in the bloc.

The aim was to empower the EU to intervene in cases of extreme natural gas prices while not hurting the security of supply or encouraging consumption, the draft said, adding that any emergency ceiling should only last three months.

The draft proposal, seen by the Financial Times, emerged as member states prepare for a summit in Brussels on Thursday and Friday aimed at finding joint solutions for curbing the energy crisis. EU capitals have been at loggerheads over how best to tackle the energy price surge together, with the question of capping gas prices proving particularly contentious.

The commission proposals also float measures to limit volatility in energy derivatives markets, as well as a longer-term project to create a new benchmark for liquefied natural gas. The draft advocates urgent measures to ensure member states co-operate more effectively on gas purchasing, with a particular focus on refilling storage facilities next year.

The plans follow an extraordinary meeting of EU commissioners on Sunday and will still need to be debated among member states ahead of a meeting of the European Council on Thursday and Friday in Brussels.

Germany, which has the largest gas market in the bloc, has been among the member states sceptical of the idea of imposing cap on gas prices, fearing that it could end up bolstering demand or undermining supplies.

“There is no agreement among leaders on a price cap — it is very controversial,” said one EU official ahead of the weekend meeting. “Each form of the cap would have different effects [depending] on where you are in Europe.”