EU proposes energy measures, avoids immediate gas price cap

EU proposes energy measures, avoids immediate gas price cap

Updated: 1 month, 16 days, 13 minutes, 6 seconds ago

BRUSSELS, Oct 18 (Reuters) - The European Commission proposed another set of emergency measures on Tuesday to tackle high energy prices, but steered clear of an immediate cap on gas prices as EU countries remain split over the idea.

The proposals, which need approval from European Union member states, are the bloc's latest effort to address the spike in energy prices and fuel supply crunch that have gripped Europe since Russia cut gas flows after invading Ukraine.

The measures did not include an immediate gas price cap, which most EU countries say they want. But the Commission asked for EU countries' approval to draft a proposal to set a temporary "maximum dynamic price" on trades at the Title Transfer Facility (TTF) Dutch gas hub, which serves as a benchmark price for European gas trading.

The Commission described this as a "last-resort measure", and said the price limit would need to meet conditions, including that it doesn't cause Europe's gas demand to rise.

The EU proposed other measures to attempt to tame high prices by tweaking energy market rules. Trading venues would be required by Jan. 31 to impose upper and lower price limits each day on front-month energy derivatives, to limit volatility.

The EU would also task energy regulators with launching an alternative benchmark price for liquefied natural gas (LNG) by March 31, 2023. A separate proposal would launch joint gas buying among EU countries, to attempt to refill depleted storage caverns in time for next winter, and negotiate lower prices.

Countries would be required to jointly purchase 15% of the volume needed to hit the EU's target to fill gas storage to 90% by Nov. 1 2023. Countries would be responsible for rallying their local companies to take part in the scheme, which would not buy Russian gas.

"We know that we are strong when we act together... The member states and the energy companies should leverage their joint purchasing power," European Commission President Ursula von der Leyen said.

Another proposal would allow energy companies to use bank or public guarantees to cover "margin calls" on energy trades, after soaring energy prices left some firms struggling to do this with cash.

The plans would also redirect nearly 40 billion euros of unspent EU budget funds to help vulnerable citizens and businesses hit by high energy prices.

The proposals are unlikely to placate all 27 EU countries, whose leaders will discuss them at a summit on Thursday and Friday. Ministers and diplomats will then attempt to fast-track negotiations on the proposals to agree final laws next month.

PRICE CAP DEBATE

The EU has already agreed on targets to fill gas storage and curb electricity demand, but countries have struggled to agree their next move, debating for weeks whether and how to cap EU gas prices.

More than 15 EU countries, including Italy, Poland, Greece and Belgium, have called for an EU gas price cap, but disagree on its design. Germany and the Netherlands warn capping gas prices could leave countries struggling to attract fuel from global markets during a winter with scarce Russian supply.

European Council President Charles Michel said EU leaders would discuss a range of energy price cap options at their meeting this week - including those not proposed by the Commission.

That includes a scheme launched locally this summer by Spain and Portugal to cap the price of gas used in power generation, which countries including France want rolled out EU-wide.

Von der Leyen said Brussels was still assessing how this scheme could work across Europe, including how companies would be compensated for the difference between the capped price and the market price for gas.

Reporting by Kate Abnett, Gabriela Baczynska, Philip Blenkinsop and Charlotte Van Campenhout; Editing by Susan Fenton and Nick Macfie

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