“We propose a higher ceiling on the TTF (Title Transfer Facility) price for next month in case it exceeds 275 euros per megawatt hour. Beyond that price, no transactions will be possible.”
The market correction mechanism will be activated when two conditions are met, explained the Commissioner. In the first place, when the price of gas exceeds 275 euros for two consecutive weeks. Second, when the differential between the TTF price and the global price of liquefied natural gas (LNG) is equal to or greater than 58 euros for ten consecutive business days.
When both conditions are met, the mechanism will be activated automatically and will not require any additional procedure or decision.
Simson told a press conference that this is not a regulatory intervention to set the price in the gas market at an artificially low level; rather, it is a last resort solution to avoid episodes of excessively high prices that are not in line with world price trends.
However, he added: “This is not a silver bullet that will drive gas prices down. But it does provide a powerful tool that we can use when we need it, complementing our more structural efforts to bring down prices, that is, controlling our demand and ensuring sufficient gas supplies for Europe through joint purchases and an active foreign energy policy”.
The proposals will be debated by the energy ministers of the bloc’s 27 member countries on November 24.
However, the Association of European Energy Exchanges said the mechanism poses a serious threat to the region’s security of supply and financial stability, and will do little to achieve the goal of lowering energy costs.
In August, prices at the TTF virtual trading point increased from €220 to almost €320 per MWh, while global LNG prices were significantly lower. Since then, gas prices have dropped considerably, to the current 116 euros. (1 euro = 1.03 US dollars) ■