EU leaders have agreed to continue with plans to introduce a cap on the wholesale price of gas in an attempt to bring down electricity prices in member states.
Stipulations will apply to the cap to avoid a reduction in supply due to less attractive prices, or a rise in consumption.
The agreement was reached after hours of discussion in Brussels overnight, which concluded this morning (October 21). President of the European Commission Ursula von der Leyen confirmed the development at a press conference and said:
“We are going to establish a market correction mechanism, exactly to limit excessive episodes of gas prices and to make sure that there is a clear order in the build-up of the market.
“We will work with energy ministers to submit a legal proposal to operationalise this market correction mechanism.”
The price cap would come into effect at the Title Transfer Facility (TTF) in Amsterdam, which acts as the EU’s main benchmarker for gas prices. However, Ireland secures the majority of gas from the UK market, meaning it is not yet clear what the exact effect of the cap will be here.
People should begin to reap the benefits of this measure shortly according to president of the European Council Charles Michel who was also heavily involved in the discussions. He stated:
“I am confident that very soon the effects will be seen, because we are sending a clear signal to the markets that we are ready to act together and we need to work very hard and urgently to implement these measures that are on the table.”
Von der Leyen also stated that leaders are also set to discuss what the financial impact would be of introducing mechanisms to limit the influence of high gas prices on electricity costs.
“We had a frank discussion which further clarified, on the one hand, the opportunities and, on the other hand, highlighted the challenges. We will analyse the financial impact on those countries with a lot of gas in their electricity production,” she concluded.