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    European Commission "prepared" to discuss cap on gas price in light

    October 5, 2022 - CE Noticias Financieras


      The President of the European Commission, Ursula von der Leyen, assured on Wednesday that the institution is "prepared" to discuss gas price caps for electricity production in the European Union (EU), "first step" to reform the electricity market.

      "High gas prices are driving up electricity prices, [so] we need to limit this inflationary impact of gas on electricity across Europe. That's why we are ready to discuss a cap on the price of gas that is used to generate electricity," Ursula von der Leyen said.

      Speaking in a debate at the European Parliament's plenary session in the French city of Strasbourg, the head of the EU executive pointed out that this cap, similar to the one that already exists in Portugal and Spain with the Iberian mechanism, "would also be a first step on the way to a structural reform of the electricity market."

      Read also Brussels wants to study better price cap on imported Russian gas "But we also have to look at gas prices beyond the electricity market" and therefore "we will also work together with Member States to reduce gas prices and limit the volatility and impact of price manipulation by Russia," Ursula von der Leyen indicated, without concretizing.

      The position comes at a time when member states - such as Italy, France, Spain and Belgium - are pressuring the European Commission to intervene in the gas market by putting price caps on prices, a measure that is opposed by Germany.

      The EU executive should even have already put a working paper with these possible caps on gas prices on the table (for example, in the case of Russian imports), but this has not happened yet.

      Read also Energy suppliers that do not apply the Iberian ceiling may be fined In a working paper released on September 7, the European Commission even suggested a price cap for gas imports by pipeline from Russia to the EU to circumvent the "extremely high values", but a week later the European Commissioner for Energy, Kadri Simson, pointed out that "further studies are needed" on the impacts, particularly in countries most dependent, such as Germany.

      What is certain is that, since mid-June last year, a temporary mechanism has been in place to limit the price of gas in electricity production on the Iberian Peninsula until 2023.

      At stake is the temporary Iberian mechanism to put limits on the average price of gas in electricity production, at around 50 euros per Megawatt-hour (MWh), which was requested by Portugal and Spain last March due to the energy crisis and the war in Ukraine, which put even more pressure on the energy market.

      "In March, we already offered this as an option. [...] The situation has evolved critically since then and today, compared to March, more member states are open to this measure and we are better prepared," Ursula von der Leyen listed.

      For her, "such a gas price cap must be properly designed to ensure security of supply.

      Noting that the current reference index for gas, the Title Transfer Facility (TTF), "is no longer representative of the [European] market, which also includes liquefied natural gas today," Ursula von der Leyen said that a cap on gas prices for light would then be "a temporary solution until a new EU price index is developed that ensures better market functioning."

      "The Commission has kicked off work on this issue," he concluded.

      Geopolitical tensions due to the war in Ukraine have affected the European energy market, not least because the EU depends on Russian fossil fuels such as gas and fears supply cuts this fall and winter.


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