The European Commission has today (Tuesday, October 18) proposed new emergency regulation to address high gas prices in the EU and ensure security of supply this winter.
While the EU has made strong progress on filling its gas storage for this winter, achieving over 92% filling as of today, the commission said it needs to prepare for possible further disruption.
Proposed measures include joint gas purchasing to negotiate better prices; price limiting mechanisms to prevent extreme price spikes on the gas market, and solidarity between EU member states.
The commission proposed to contract a service provider to organise demand aggregation at EU level, grouping together gas import needs and seeking offers on the market to match the demand.
This measure includes a mandatory participation by member states’ undertakings in the EU demand aggregation to meet at least 15% of their respective storage filling targets.
“By taking measures now and developing the tools to buy gas together instead of outbidding each other, we can again head into the next heating season with enough gas in storage.
“The next few winters will be tough, but today’s package helps to keep European families warm and industry going,” according to the executive vice-president Frans Timmermans.
Solidarity and demand reduction
The commission seeks to allow member states to further reduce non-essential consumption to ensure that gas is being supplied to essential services and industries, and to extend solidarity protection to cover critical gas volumes for electricity generation.
However, this should under no circumstances affect the consumption of households that are vulnerable customers, according to the commission.
The commission is closely monitoring demand reduction measures reported by member states, and preliminary analysis shows that in August and September EU gas consumption would be around 15% lower than the average of the previous five years.
As not all member states have put in place the necessary bilateral solidarity agreements, the commission seeks to set default rules to ensure that any state facing an emergency will receive gas from others in exchange for fair compensation.
The obligation to provide solidarity will be extended to non-connected member states with liquefied natural gas (LNG) facilities, provided that the gas can be transported to the member state where it is needed.
“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,” president of the European Commission, Ursula von der Leyen said.
Commission proposes LNG pricing benchmark
Although wholesale gas prices have decreased since the peak of summer 2022, they remain unsustainably high for many Europeans, therefore the commission seeks a more targeted intervention in market gas prices.
The commission proposed a price benchmark which will provide for stable and predictable pricing for LNG transactions by March 2023.
“Many gas contracts in Europe are indexed to the main European gas exchange, the Title Transfer Facility (TTF) which no longer accurately reflects the price of LNG transactions in the EU.
“While this benchmark is being developed, the commission proposes to put in place a mechanism to limit prices via the main European gas exchange, the TTF, to be triggered when needed,” according to the commission.
Von der Leyen also highlighted the need to accelerate the EU’s transition to renewables, saying that investing more and faster in the clean energy transition is the commission’s structural response to the energy crisis.