What does the Commission’s draft for a cap on natural gas, presented today, foresee?

A mechanism with a “cutter” in the daily fluctuations of natural gas prices and measures to reduce the demand for natural gas is proposed, among other things, by European Commission in the draft for the new package of measures on the energy crisis, which is the product of a compromise after hard negotiations.

The European Commission will disclose the “dynamic” ceiling intraday in natural gas to counter price volatility. The price cap is designed to prevent price spikes on Europe’s biggest gas exchanges.

The Commission is set to present its proposal for a “dynamic” cap on the price of natural gas after weeks of wrangling, sometimes bitter, over the issue, according to Reuters.

The European Union’s executive arm is set to table the proposals as part of the bloc’s efforts to protect consumers from high prices, which have soared since Russia’s invasion of Ukraine, and the bloc’s decision to respond by ending reliance on Russian fossil fuels.

The European Energy Commissioner described the plans Country Simpson after a meeting of European Union energy ministers in Prague, and were later confirmed by Czech Industry and Trade Minister Jozef Sikelá, as reported by Reuters. The proposals outlined by Sikela referred to “a dynamic price ceiling for natural gas in the European Union and mandatory limits on the daily fluctuations of trading prices”.

The Commission also proposes possible interventions in the Dutch TTF, which is used as a reference point for the formation of contracts, and thus of natural gas prices in Europe. Natural gas futures are linked to market volatility, which is heavily influenced by the unpredictability of Russian flows to the old continent this year.

Regarding the formation of an energy platform, the aim is for the EU to use its unified bargaining power to procure natural gas at competitive prices, which will mainly benefit the smaller member states. The Commission also wants a solidarity mechanism to ensure gas is directed where it is needed most, while referring to measures to reduce demand within and between member states.

Any proposal would have to be agreed by EU member states, with leaders set to discuss options at a summit on Thursday. For several weeks now there has been an impasse, with her Hungary to be one of the strongest opponents of any kind of gas price cap. Hungarian Foreign and Trade Minister Péter Szyzarto said on Facebook earlier in September that “a plan to impose a price cap exclusively on Russian natural gas coming from pipelines is completely against European and Hungarian interests.”

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