The European Union’s executive body plans to propose a mechanism to limit price volatility in the bloc’s largest gas market and prevent extreme price spikes in derivatives trading to curb energy crisis in the region.
The interim mechanism designed by the European Commission will impose dynamic price limits on transactions on the Dutch Title Transfer Facility, whose primary index is the benchmark for all gas traded on the Netherlands. this continent. Commission President Ursula von der Leyen said earlier this month that the TTF no longer reflects the bloc’s energy reality after Russia cut off supplies to Europe and its share of gas from Moscow fell from 40% to around 7%. .
“This will help avoid extreme volatility and price increases, as well as speculation that could lead to difficulties in the supply of natural gas to some member states,” the commission said in a draft document. draft viewed by Bloomberg News.
The EU’s executive body has a policy of not commenting on unpublished documents, and the draft is still subject to change before its expected adoption on Tuesday. In the next step, the package will be discussed by EU leaders at their summit on 20-21 October in Brussels.
The package of measures will also include a temporary intraday spike cap mechanism to avoid sharp volatility in the energy derivatives market, according to the draft. The aim is to “ensure a more reasonable price formation mechanism,” insuring energy companies in the region from large spikes and helping them secure supply over the medium term.
The Commission has come under increasing pressure from national governments to impose gas price caps. Italy, Greece, Poland and Belgium last week proposed limits on the largest malls in the region, which would, for example, include a corridor allowing prices to fluctuate around 5%. They suggest price ranges will be regularly reviewed to reflect levels of other key energy benchmarks such as crude oil, coal and gas prices in North America and Asia.
Dynamic price caps will be introduced while the EU works on a new additional standard for liquefied natural gas, according to the commission’s draft. The new index will be launched in late 2022, with benchmarks expected to be available in time for the next gas storage filling season in early 2023.
Several countries have also called for severing the link between gas prices and electricity prices through the imposition of price ceilings on fuels used for power generation, an idea the commission does not plan. put into operation. While such a model has depressed prices in Spain and Portugal, it will bear some risk if introduced across the bloc, it said in the draft.
The Commission is also planning to apply tools to promote liquidity in the energy market by increasing the threshold for clearing non-financial counterparties to €4 billion and expanding the list of sufficient assets. conditions can be used as collateral for one year.
To increase its resilience and leverage in negotiations with alternative gas suppliers, the committee wants to strengthen its common purchasing platform, which coordinates the refilling of gas reserves. According to the draft, if reserve supply runs out by the end of this winter, meeting the 90% fill target by November 2023 could be more difficult than this winter.
The plan is to oblige member states to jointly buy gas that makes up at least 15% of their reserves and allows companies to form a European consortium. Russian supplies will be excluded from participation.
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