The European Commission has Prepared a Detailed Proposal for a Gas Price Cap

Following a proposal containing the general principles and several non-papers, the European Commission on Tuesday detailed its long-awaited “market correction mechanism” to cap excessive prices on the wholesale gas market.

 

The price cap will automatically come into effect if the gas price rises too high and deviates too much from the prices on the international markets.

The Commission proposal comes two days before the European energy ministers meet again to discuss the energy crisis. Various countries – including Belgium – have been asking for months for a detailed proposal that caps volatile and excessively high gas prices. European Commissioner for Energy Kadri Simson has now completed that proposal.

The Commission is convinced that it has built the necessary safeguard clauses to prevent gas suppliers from looking for customers outside Europe and causing supply problems here. “If we fixed the ceiling, we would jeopardize our supply. But by working with a dynamic ceiling (that moves with global markets, ed.), we prevent this,” explains a Commission source.

It is not said that the price cap will ever be activated. But if it does, it will be automatically deactivated again if the two ‘triggers’ for activation are no longer met. In addition, the ceiling will be constantly monitored to be adjusted or suspended if necessary.

With its proposal, the Commission puts the ball in the court of the energy ministers. She hopes the emergency ordinance that will shape the price cap can be approved by January 1, 2023. However, the legal text will be temporary and would be repealed after 1 year.

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