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Europe fails to iron out details of gas price cap

by SuperiorInvest

EU energy ministers did not agree on a ceiling for natural gas prices. New extraordinary session in mid-December.

Kenzo Tribouillard | Afp | Getty Images

BRUSSELS – European energy ministers failed to reach a compromise on a cap on natural gas prices after “hot”, “ugly” and “tough” discussions.

27 EU leaders agreed in late October on political support for capping natural gas prices after months and months of discussions on how best to tackle the current energy crisis.

The European Commission, the EU’s executive arm, and the bloc’s energy ministers were then tasked with resolving their more specific and practical differences over the measure.

However, the differences are so acute this week in Brussels that energy ministers failed to find a compromise and instead convened a new emergency meeting in mid-December.

“The tension was palpable,” one EU official who watched the discussions but spoke on condition of anonymity because of the sensitive nature of the talks told CNBC by phone. The same official said the talks were “very tough” because of a “false price ceiling”.

In an effort to get everyone on board, the European Commission proposed a cap of 275 euros per megawatt hour. The cap would also only come into effect when prices are 58 euros ($60.46) above the global benchmark LNG (liquefied natural gas) price for 10 consecutive trading days over a two-week period.

Countries eager to introduce the cap, notably Poland, Spain and Greece, say the proposal is unrealistic because it is so high it is unlikely to ever be implemented.

“The gas price ceiling that is in the document is currently not met by any country. It is a kind of joke for us,” said Polish Climate Minister Anna Moskwa in Brussels on Thursday.

Other EU officials, who spoke to CNBC on condition of anonymity, mentioned how “heated” the talks were. One of them went so far as to say that “it got really ugly at one point”.

This reflects how the EU’s poorer and more indebted states are feeling the energy crisis that has hit the region since Russia’s invasion of Ukraine in February. With less fiscal space to support domestic consumers, these countries need EU-wide measures to reduce household energy costs.

“Hopefully we’ll get there next week,” another official told CNBC on condition of anonymity after the meeting.

Czech Minister of Industry and Trade Jozef Sikela also said at Thursday’s press conference: “We are not opening the champagne yet, but we are putting the bottle in the fridge.”

We don't have several months, says Malta's energy minister on the gas price ceiling

Energy ministers are expected to meet again on December 13, just before heads of state meet in Brussels for the final EU summit of the year. Until then, the commission’s proposal is likely to undergo changes in the hope of attracting everyone.

Prices of the European benchmark Title Transfer Facility (TTF) for the first month closed on Thursday at around 129 euros per megawatt hour. They reached an all-time high in August at almost 250 euros per megawatt hour.

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