The EU proposes to set a price ceiling of 275 euros per megawatt hour for natural gas

The European Commission proposed on the 22nd that a price limit mechanism for natural gas should be implemented from January next year. Once the natural gas price fluctuation in the European market meets the preset conditions, the mechanism will be launched and the upper limit of natural gas price will be set at 275 euros per megawatt hour.

According to the proposal, the trigger condition of this natural gas price limit mechanism is that the Dutch Transfer of Ownership (TTF) natural gas futures price, as the European natural gas benchmark price, exceeds 275 euros per megawatt hour for two consecutive weeks, and the price difference between the TTF natural gas price and the global LNG price reaches or exceeds 58 euros for ten consecutive trading days. At the same time, the European Commission said that when the market price no longer meets the set conditions, or the price limit affects European energy security, the mechanism will be suspended at any time.

Caderie Simson, member of the European Commission in charge of energy affairs, said at the press conference that Europe is paying high natural gas prices, which has harmed European industry and brought huge burdens to families.

Market analysts pointed out that the current price ceiling is higher than expected, which may not be effective, but will affect the operation of the energy market. At present, the TTF natural gas price remains at around 120 euros per megawatt hour.

Prior to this, EU member states have been in disagreement on setting the price ceiling of natural gas. Some countries, including Belgium, Greece, Italy and Poland, strongly demanded the implementation of a gas price ceiling, while Germany, the largest economy in the EU, took the lead in opposing it. It believed that setting a gas price ceiling might make it more difficult for the EU to obtain the urgently needed gas supply, and reduce the incentive to curb natural gas consumption.

This proposal will be discussed at the forthcoming special meeting of EU energy ministers on the 24th.