EC sets forth emergency rules to fight high gas prices and ensure security of supplies
European Commission (EC) has proposed a new emergency regulation to address high gas prices in the European Union (EU) and ensure the security of supply this winter.
On 18 October, the EC made additional proposals to fight the energy crisis through joint gas purchasing, price limiting mechanisms on the TTF gas exchange, new measures on transparent infrastructure use and solidarity between the Member States, and continuous efforts to reduce gas demand.
The new emergency regulation contains the following main elements:
- Aggregation of EU demand and joint gas purchasing to negotiate better prices and reduce the risk of Member States outbidding each other on the global market, while ensuring the security of supply across the entire EU;
- Advancing work to create a new LNG pricing benchmark by March 2023, and in the short term proposing a price correction mechanism to establish a dynamic price limit for transactions on the TTF gas exchange, and a temporary collar or bandwidth to prevent extreme price spikes in derivatives markets;
- Default solidarity rules between the Member States in case of supply shortages, extending the solidarity obligation to the Member States without direct pipeline connection to involve also those with LNG facilities; and a proposal to create a mechanism for gas allocation for the Member States affected by a regional or Union gas supply emergency.
The Commission said that, in combination with already agreed measures on gas and electricity demand reduction, gas storage, and redistribution of surplus energy sector profits, these new steps will improve stability in European gas markets this winter and beyond.
In addition, the EC will carry out a needs assessment on REPowerEU to speed up the clean energy transition and avoid fragmentation in the single market, with a view to making proposals to enhance the EU financial firepower for REPowerEU.
The Commission is also proposing a targeted flexible use of Cohesion Policy funding to tackle the impact of the current energy crisis on citizens and businesses, using up to 10% of the total national allocation for 2014-2020, worth close to €40 billion.
President Ursula von der Leyen said: “Russia’s war on Ukraine has severe consequences on global and European energy markets. We act in unity and have prepared well for the winter ahead, filling our gas storages, saving energy, and finding new suppliers. Now we can tackle excessive and volatile prices with more security. We will introduce a temporary mechanism to limit excessive prices this winter, while we develop a new benchmark so that LNG will be traded at a fairer price.
“We provide legal tools for joint EU purchasing of gas, ensure solidarity in security of supply for all Member States and negotiate with our reliable gas suppliers to secure gas at affordable prices. But we must also accelerate investment in renewables and infrastructure. Investing more and faster in the clean energy transition is our structural response to this energy crisis.”