Europe’s gas price cap leaves some countries baffled, saying it is way too high

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Energy Commissioner Kadri Simson is in talks with the media. EU countries are discussing new steps to deal with the energy crisis.

Thierry Monasse | Getty Images News | Getty Images

Several EU member states are not happy with the ceiling on natural gas prices proposed by the bloc – at 275 euros per megawatt hour – which is intended to prevent sky-high costs for consumers.

Putting a cap on gas prices has been one of Europe’s more controversial moves amid an acute energy crisis following Russia’s invasion of Ukraine.

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The 27 EU leaders gave political support to the idea at the end of October, after several months of discussions. But a handful of countries demand concrete safeguards before the proposal gets the green light, while others say the limit is too high.

“A price cap at the levels proposed by the commission is not in fact a price cap,” said Kostas Skrekas, That’s what Greece’s environment and energy minister told CNBC’s Julianna Tatelbaum on Tuesday, hours after the proposed level was set by the European Commission, the EU’s executive arm.

“So [a] price cap at 275 euros is not a price cap, no one can, can buy gas at this expensive price for a long time. We certainly believe that a price cap below EUR 200, between EUR 150 and EUR 200 would be more realistic,” he added.

EU energy ministers are meeting on Thursday to debate the proposal for a price cap.

Poland, Greece, Belgium and Spain are among the countries supporting the cap. The Netherlands and Germany are more skeptical about the benefits of the measure. Presenting a limit that seems difficult to implement in practice could be a way for the European Commission to bring all 27 countries together on this issue.

Greek energy minister: EU gas price cap of 275 euros/MWh is 'not a price cap'

“It’s going to be a meeting of grumpy people,” an EU official working for one of the member states, who preferred to remain anonymous due to the sensitive nature of the discussions, told CNBC of the upcoming meeting.

The same official said the commission should provide further assurances on how the measure will not distort markets.

Speaking at a press conference Tuesday, Kadri Simson, Europe’s energy commissioner, said the proposal is “balanced” and will help the bloc avoid excessively high prices.

A group of energy exchanges in Europe, Europex, said earlier this week that it was also “deeply concerned” about a market correction mechanism, as it could affect financial stability, but also security of supply.

Simson said the proposal, known as the market correction mechanism, or MCM, has taken this into account and that “the risks are minimal” to the offering.

The committee proposed the introduction of a limit on the prices on the title transfer facility for the first month [TTF] – Europe’s main benchmark for natural gas prices – reaches €275 per megawatt hour and when prices are €58 ($59.53) higher than the LNG reference price for 10 consecutive trading days within two weeks. Both conditions must be met for the limit to activate.

Dutch TTF prices reached a historic high of 349.9 euros per megawatt hour in August. Under the proposal, the price cap would not have been triggered as it was only a short spike.

“This is not a panacea,” Simson said at a press conference on Tuesday. However, she added that the measure is “a powerful tool that we can use when we need it”.

“Everyone is aware of the potential risks, but there is a clear expectation. We will send signals that despite the difficult situation, we will not pay for whatever the market platform brings to market participants – as it happened in August,” she said.

The European natural gas price closed on Tuesday evening at 124.5 euros per megawatt hour.



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