EU unveils ‘safety ceiling’ on natural gas to grapple with high energy prices

The planned price cap for wholesale natural gas from the European Union was made public on Tuesday, but it was unclear if or when it would be used because it is set very high. 

If approved, the cap, or “safety ceiling,” as the European Commission referred to it in its proposal, would take effect in January at a fixed price of 275 euros per megawatt-hour. 

After months of disagreements between EU nations about the high energy prices brought on by Moscow’s conflict in Ukraine and its determination to restrict gas supplies, a suggested price cap was finally agreed upon. 

It coincides with an initiative by EU members to voluntarily reduce their use of natural gas by 15 per cent throughout the winter in the northern hemisphere.

The cap, however, would not go into effect until gas prices in the European Union, which are determined based on in-advance purchases made through the Title Transfer Facility (TTF), the key benchmark for gas pricing in the EU, exceed that level for two weeks in a row. 

Additionally, the cap was subject to the TTF price of liquified natural gas, a kind of gas that can be sent anywhere in the globe and is easily transportable, rising beyond 58 euros for 10 days during that same two-week period. 

The proposed price cap, according to EU Energy Commissioner Kadri Simson, is planned for the “filling season” of gas storage that will take place the year before winter.

(with inputs from agencies)

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