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EU leaders fail to agree on gas price cap, but to keep studying

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BRUSSELS, BELGIUM - European Parliament President Roberta Metsola (C), Prime Minister of Finland Sanna Marin (R) and Prime Minister of Luxembourg Xavier Bettel (L) attend the European Union (EU) Leaders' Summit in Brussels, Belgium on October 20, 2022. (Dursun Aydemir - Anadolu Agency)
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Oct 21, 2022 - 11:38 AM

BRUSSELS (AA) – The EU leaders failed to reach an agreement whether to put a ceiling price on natural gas after a debate ending in the early hours of Friday, but they decided to carry out studies to determine the possible consequences of a price cap.

“We do now have a very good and solid roadmap to keep on working on the topic of energy prices.

“The leaders have given the strategic guidance we wanted on the proposal that we have put on the table on Tuesday,” European Commission President Ursula von der Leyen told reporters at the end of the first day of the EU leaders’ summit in Brussels.

Fifteen EU members, including France, Italy, Spain, and Belgium, seek a price cap on imported natural gas, but Germany, the Netherlands, Denmark and some countries do not support this idea.

The countries opposing the price cap say it would jeopardize the security of energy supply and could harm the natural gas supply, especially in the winter months.

The EU energy ministers will gather on Oct. 25 to discuss measures and the price cap, Leyen said.

The EU president also said some topics were discussed intensively at the meeting which will last two days, with joint gas purchase topping them.

“Leaders supported very much the idea to allow companies for the joint purchase to build consortia and to work together to join forces so to increase common market power for the demand of gas,” she further said.

“There’s one binding element in it – that is when we, at the beginning, aggregate the demand, 15%, are binding to be aggregated as demand on the market together as a joint aggregated demand,” von der Leyen explained, saying the focus is on how to limit extremely high gas prices.

She said that the leaders also evaluated the European benchmark for gas prices, called the Title Transfer Facility (TTF), and added that the TTF mainly reflects pipeline gas in the past, but today the market is shifting and more liquified natural gas is coming.

The TTF no longer reflects the real market situation, therefore, the commission will develop a new complementary index to better reflect the LNG price situation, she stressed.

Von der Leyen also said the commission will take a temporary measure in the process until the LNG price index is developed.

New mechanism in gas market

The commission will establish a market correction mechanism to limit excessive increases in gas prices, she said, adding that the commission will work with the energy ministers to prepare a legal proposal to activate this mechanism.

She further said: “Leaders also discussed a second topic, which is a potential mechanism to limit the influence of high gas prices on the cost of electricity.”

European Council President Charles Michel also said the leaders reached an agreement for a measure package in energy, which was a strong step.

Final declaration

The EU will remain united to protect its citizens and businesses and to take urgent action against Russia’s use of energy as a weapon, the European Commission said in a final declaration which was partially released following the meeting.

The leaders agreed on reducing demand across the union, ensuring supply security, lowering energy prices for households and businesses, and protecting the integrity of the single market, the statement said.

The Commission was asked to complete the work on joint gas purchase, filling gas tanks and accelerating negotiations with reliable partners, and to quickly prepare concrete proposals, it added.

Work on establishing a temporary price corridor in natural gas transactions to limit prices immediately and establishing a temporary framework to limit gas price in electricity generation was also asked from the Commission.

 

*Writing by Gokhan Ergocun in Istanbul

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