Brussels on Tuesday proposed a temporary mechanism to cap wholesale prices on the benchmark gas market. An “insufficient” proposal, according to Spanish Prime Minister Pedro Sanchez.
The Spanish government on Wednesday accused the European Commission of “pay the head of the world” with a gas price cap proposal considered inapplicable, while Paris denounced a “political display”.
“We had asked the Commission to draw up a proposal and, at the last minute, it presented us with this proposal, which is not one”Spanish Ecological Transition Minister Teresa Ribera told reporters, calling it a “joke” the mechanism desired by Brussels.
“What this proposal will generate is the opposite of the desired effect: it will cause a greater increase in prices, jeopardizing all control policies” inflation, continued the Minister, accusing the Commission of “to get the head of the world”.
Following him, the French Ministry of Energy Transition criticized on Wednesday a device “insufficient, which does not correspond to the reality of the market”. “The Commission must propose an operational text, not simply a text that makes political display and which can potentially have perverse or null effects”scolded the cabinet ofAgnes Pannier-Runacher.
A “strong indignation”
Brussels on Tuesday proposed a temporary mechanism to cap wholesale prices in the EU benchmark gas market. This proposal is “clearly insufficient” and “not going in the right direction”protested Spanish Prime Minister Pedro Sanchez.
According to Teresa Ribera, the text arouses a “strong indignation among a majority of member states”. Madrid is going to“strongly oppose” to this mechanism during Thursday’s meeting of European energy ministers, she warned, believing that the Commission “will hear very harsh things from the vast majority of ministers”.
Lack of a new text “serious”Spain could “just stop supporting the Commission’s proposals on other issues important to it”she warned.
Cap monthly contract prices for one year
The device unveiled by Brussels consists of capping for one year the prices of monthly contracts (for delivery the following month) on the Dutch reference market TTF.
It would be put in place automatically as soon as these prices exceed 275 euros/MWh for two consecutive weeks, and provided that they are at least 58 euros higher than a “average world reference price” liquefied natural gas (LNG) for ten days so that Europe remains sufficiently attractive for LNG ships.
But monthly contracts only exceeded 275 euros/MWh this year during a very brief period at the end of August, when the Twenty-Seven were competing to fill their reserves. And prices are currently hovering around 120 euros.
A Commission spokeswoman confirmed that given the terms of the mechanism, it would not have been triggered during the August price spike, when the €275 cap was only breached. a handful of days, well below the required two weeks.
A major flaw
However, “we have made” this mechanism “to anticipate and prevent this situation from occurring in the future”she clarified. “It’s a safety net which is very very low, you have to have had a good free fall before being in it”we laugh in the team of Agnès Pannier-Runacher.
Paris also criticizes the Commission for not targeting over-the-counter transactions (outside regulated markets), at the risk of leaving a major flaw in the mechanism.
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