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EU to Weigh Feasibility of Gas Price Cap Before Energy Talks

Ewa Krukowska
·3 min read

(Bloomberg) -- The European Union’s executive arm plans to discuss the feasibility of imposing a price cap on natural gas in a document to be presented to member states Wednesday, postponing the publication of a broader action plan on how to deal with soaring costs of the fuel.

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The European Commission is under pressure from the bloc’s 27 governments to come up with proposals to rein in an unprecedented energy crisis that fuels inflation and threatens to spark a recession. But while some EU nations want a ceiling on the price of gas, the commission has been wary of such a solution, arguing it needs more time to assess the impact on demand for the fuel and on the region’s security of supply.

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The commission’s action plan detailing future steps to lower gas prices, ease volatility and increase trading volume in energy markets, tentatively planned for Sept. 28, is being moved to a later date, possibly next week, according to EU diplomats who declined to be named on private talks. Instead, the commission will on Wednesday discuss, in a more technical document, whether price caps can be implemented.

The EU’s executive arm told member states earlier this month that new measures being planned to lower the price of gas would take into account concerns over security of supply, seek to head off any increase in gas demand, support the internal market and stay tuned with climate goals, the diplomats said. All those issues were raised over the past several months by opponents of price caps on imports or wholesale markets.

The document on gas price caps will first be discussed by representatives of national governments in Brussels on Sept. 28 before it is taken up by energy ministers at an extraordinary meeting on Sept. 30, when they aim to reach a deal on an emergency intervention package. The package includes a windfall levy, a price cap on lower-cost electricity and a mandatory power demand-reduction target. Further measures to improve liquidity, cut volatility and reduce gas prices would come later.

A group of at least 10 member states, including Poland and Greece, are planning to urge the commission to propose, as soon as possible, introducing a price cap on all wholesale natural gas transactions, according to officials.

“We’ll see what the proposal is,” Cyprus Foreign Minister Ioannis Kasoulides said in Bloomberg TV interview on Monday. The minister said that Cyprus isn’t opposing, but “usually goes along with other partners.”

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The energy crisis will also be a key topic during an informal meeting of EU leaders in Prague on Oct. 7, and a quarterly summit scheduled for Oct. 20-21 in Brussels.

A gas price cap is poised to reverberate during those gatherings after more than half the EU nations called for such a measure at the last meeting of the bloc’s energy ministers earlier this month. But supporters of the idea differ on how it should be implemented.

In an internal document earlier this month, the commission assessed options to subject the Dutch Title Transfer Facility, the continent’s key gas market place, to financial supervision to avoid speculation, and to set up a complementary benchmark to ensure a better functioning market with less volatility. As a last resort in case of supply disruption, the EU could also explore temporarily pegging the TTF to the JKM Asian benchmark as a dynamic cap, the document seen by Bloomberg showed.

The Commission was also considering establishing an EU clearing center “to receive reporting of all outright prices of LNG or other imports,” according to the internal paper. Such a move would support the bloc’s joint purchasing platform, a voluntary mechanism to boost the bargaining power of participating member states and secure lower prices.

(Updates with comment from Cyprus foreign minister in seventh paragraph)

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