Advertisement

EU Spars Over Gas Price Cap With Week to Go Before Key Decision

John Ainger and Ewa Krukowska
·3 min read

(Bloomberg) -- European Union nations are still far apart on how to design a gas price cap with just a week to go before ministers are due to meet to try ironing out a deal.

Most Read from Bloomberg

The Czech Republic, which holds the rotating presidency of the EU, proposed a second compromise for a broader price cap -- lowering the intervention threshold to €220 ($231) from €275 suggested by the European Commission last month, according to a document seen by Bloomberg. A majority of member states had strongly criticized the level put forward by the bloc’s executive branch. Separately, two groups of countries have proposed their own solutions.

ADVERTISEMENT

A deal on a price cap is key to unblock the adoption of a broader package of emergency measures, including strengthening of joint purchases and limits on intraday volatility. While ministers agreed on the shape of the package last month, their final approval was put on hold to enable more talks on how to limit gas prices.

Read more: Seven EU Countries Make Fresh Push for Dynamic Gas Price Cap

The Czechs have also proposed cutting the number of days needed to trigger the gas price cap to five from the two weeks originally outlined. JPMorgan Chase & Co. said that to be “meaningful” continent-wide, this cap likely would have to be around €150 per megawatt-hour or even lower, basing the estimate off future market prices.

The EU “missed a great opportunity” to act on a gas price cap, Slovenian Prime Minister Robert Golob told reporters at the meeting of the bloc’s leaders in Tirana, Albania. Disunity among members and an “inadequate” proposal by the EU’s executive arm are sending “catastrophic messages to the markets, which is why we are paying higher price for energy,” Golob said.

But several countries continue to warn that too tight a cap could endanger gas supplies to the bloc.

“I’ve already said that we can’t have a cap that is too low; otherwise, we can’t have supplies,” French President Emmanuel Macron said in Tirana. “There must be a cap mechanism to prevent peaks. That’s what we’ve decided as Europeans.”

Read more: JPMorgan Says EU Needs Lower Gas Price Cap to Be ‘Meaningful’

The Netherlands pitched a separate a cap on prices for gas used for storage, which in the summer helped trigger an unprecedented surge as countries raced to fill up their underground facilities. They argue that a broader “price control mechanism” put forward by the commission could distort markets and harm supply, according to a document seen by Bloomberg.

“The current commission proposal has many drawbacks,” according to the document. “These drawbacks can be prevented by introducing a more targeted price-cap which is aimed at preventing episodes of excessive price peaks as during last August.”

Continued Discord

While the Dutch idea could be applied in addition to the EU’s broader price control mechanism, it highlights the continued disagreements on how best to bring down gas prices as winter temperatures drop. A group of seven EU nations last week called for a tighter cap on gas prices, arguing that the commission’s version would never be triggered because there are too many strict conditions attached.

EU energy ministers are seeking to reach a deal on the contentious issue on Dec. 13, though discussions could run into an EU leaders summit later in the week.

The Dutch paper says its idea would be to constrain “price-insensitive” buyers, which are controlled or supported by EU governments, from bidding too much during the filling season, which typically takes place after August. The price would be set lower than the level proposed by the commission and would be reviewed every month to ensure enough gas goes into storage.

“Consumer prices will come down because the general market prices will significantly decrease and this will ultimately bring down end user prices,” the document said, adding that it also could be applied in the future to hydrogen storage.

--With assistance from Jan Bratanic and Samy Adghirni.

(Updates with JPMorgan report in fourth paragraph.)

Most Read from Bloomberg Businessweek

©2022 Bloomberg L.P.