Europe’s gas cost cap leaves some countries upset

Greek energy minister: EU gas price cap at 275 euros/MWh is 'not a price cap'

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Commissioner for energy Kadri Simson is speaking with media. EU nations are discussing brand-new actions to handle the energy crisis.

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Several EU member states are not delighted with the bloc’s proposed cap on gas costs– at 275 euros per megawatt hour– which intends to avoid sky-high expenses for customers.

Introducing a cap on gas costs has actually been among the more questionable steps for Europe in the middle of a severe energy crisis following Russia’s intrusion of Ukraine.

The 27 EU leaders provided political support to the concept in late October, after a number of months of conversations. But, a handful of countries are requiring concrete safeguards prior to greenlighting the proposition, while others state the cap is too expensive.

“A price cap at the levels that the commission is proposing is not in fact a price cap,” Kostas Skrekas, Greece’s environment and energy minister, informed CNBC’s Julianna Tatelbaum Tuesday, hours after the proposed level was set by the European Commission, the executive arm of the EU.

“So [a] cost cap at 275 euro is not a rate cap, no one can, can stand purchasing gas at this pricey cost for a long period of time. We definitely think that the cost cap listed below 200 euro, in between 150 and 200 euro would be more reasonable,” he included.

EU energy ministers are because of fulfill Thursday to discuss the cost cap proposition.

Poland, Greece, Belgium and Spain are amongst the countries supporting the cap. The Netherlands and Germany have actually been more doubtful about the advantages of the procedure. Presenting a cap that looks hard to carry out, in practice, might be a method for the European Commission to bring all the 27 countries together on the problem.

“It will be a meeting with grumpy people,” an EU authorities, working for among the member states and who chose to stay confidential due to the delicate nature of the conversations, informed CNBC concerning the upcoming conference.

The exact same authorities stated the commission requires to provide additional assurances on how the procedure will not misshape markets.

Speaking at an interview Tuesday, Kadri Simson, the European commissioner for energy, stated the proposition is “balanced” and it will assist the bloc prevent exceedingly high costs.

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A group of energy exchanges in Europe, Europex, likewise stated previously today it was “deeply concerned” about a market correction system, provided it might affect monetary stability– however likewise security of supply.

Simson stated the proposition, called the Market Correction Mechanism or MCM, has actually taken this into factor to consider and “the risks are minimal” for supply.

The commission proposed the intro of a cap when costs on the front-month Title Transfer Facility [TTF]– Europe’s primary criteria for gas costs– reaches 275 euros per megawatt hour and when costs are 58 euros ($5953) greater than the LNG recommendation cost for 10 successive trading days within the 2 weeks. Both conditions require to be satisfied for the cap to be set off.

Dutch TTF costs reached a historical high of 349.9 euros per megawatt hour inAugust Under the proposition, the cost cap would have not been set off as it was just a short spike.

“This is not a silver bullet,” Simson stated at an interviewTuesday She included, nevertheless, the procedure supplies “a powerful tool that we can use when we need it.”

“Everybody is aware of the possible risks but there is a clear expectation. We will send signals that despite the difficult situation, we will not pay at whatever the market platform will bring to market participants — like it happened in August,” she stated.

European gas costs closed at 124.5 euros per megawatt hour on Tuesday night.

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