The European Commission took the first step on Tuesday to introduce a flexible ceiling on the price of gas purchases in response to the exorbitant energy prices caused by the war in Ukraine, reports EFE agency, quoted by Agerpres.

The measure will be scrutinized by European leaders this week and later by energy ministers, and if the 27 member states give the green light, Community Services will determine the technical details of the measure.

“This will mean a softening of the prices agreed in the EU, and this is something that can come into force as soon as we develop our proposals,” the head of the Community’s executive, Ursula von der Leyen, said at a press conference. Energy Commissioner Kadri Simson, who was present at the conference, assured that the department headed by him can “quickly” receive the bill.

In particular, a “dynamic price limit” will be temporarily set for transactions on the Dutch TTF market, so that those above a set ceiling, which will be flexible, will be prohibited.

It expires in the spring, when an alternative PFT index may be introduced, which is strictly tied to the quotation of gas from pipelines and does not adequately take into account the price of liquefied gas supplies.

Although Brussels has recently shown a willingness to develop a mechanism similar to the “Iberian exception” to limit the price of gas in the electricity market throughout the European Union, the proposal presented on Tuesday does not contain any initiatives in this regard, writes the Spanish agency EFE.

Von der Leyen explained that this is a measure “that deserves to be taken into account”, but she also stressed that it creates a number of uncertainties that must be resolved before moving forward with the development of a regulatory act.

First, the compensation to be paid to gas plants (the difference between the real price of hydrocarbons and the capped price) may cause an imbalance in the EU bloc, since countries that mainly use this resource in the energy balance will have to pay more than those that do not. that have more renewable or nuclear resources.

And secondly, ways must be found to prevent the low price from increasing electricity exports to neighbors such as the UK or the Balkans, leading to more gas consumption for electricity generation.

Joint gas purchases

While the EU authorities work on these “open questions”, the new package includes a proposal to oblige member states to jointly buy 15% of the gas needed to fill storage facilities in the winter of 2023-2024.

According to Simson, this would mean buying 13.5 billion cubic meters of gas through the European procurement platform, an amount equivalent to the combined consumption of Greece, Bulgaria, Croatia and Slovenia.

In addition, Brussels proposes standardized rules for solidarity between member states in the event of a gas emergency, culminating in a centralized distribution of hydrocarbon reserves among affected countries at a price set by regulation.

The community leadership also offers new ideas to “proactively” reduce the consumption of “optional” gas, for example, by limiting air conditioning in private swimming pools.

The European Commission has also taken measures to ease the liquidity problems faced by a number of energy companies due to rising prices, which means increasing the collateral they have to provide to cover exposure to energy-derived instrument contracts, which I usually do in cash.