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The European Union’s energy ministers approved on Tuesday a plan to extend the emergency cap on natural gas prices for another year until the end of January 2025.
The original cap on gas prices, the so-called “market correction mechanism,” was introduced at the end of last year to shield industry and households from excessive spikes in gas and power prices after the record-high levels seen at the end of the summer of 2022, when Russia cut off most of its pipeline gas supply to Europe.
After months of negotiations, the EU finally agreed in December 2022 to set a price cap on natural gas to protect consumers from excessive price spikes and limit inflationary pressure and industrial damage to European economies.
At the end of last year, the EU energy ministers reached a political agreement on a regulation that sets a so-called “market correction mechanism,” which came into effect on February 15, 2023 and was due to expire in February 2024.
The market correction mechanism will be triggered if the month-ahead price on the Title Transfer Facility (TTF), Europe’s key benchmark, exceeds $197 (180 euros) per MWh for three working days, and the month-ahead TTF price is $38 (35 euros) higher than a reference price for LNG on global markets for the same three working days.
Since the mechanism was introduced, the emergency cap has never came into effect because prices haven’t spiked this year amid milder 2022/2023 winter and strong LNG imports, which allowed the EU to fill up its gas storage sites ahead of this winter.
“Despite the relatively good start of the winter, the geopolitical situation remains very fragile,” EU Energy Commissioner Kadri Simson said today, as carried by Reuters.
“And these emergency measures help us to shield our consumers against excessive energy prices,” the EU commissioner added.
