EU approves cap on pure fuel costs

EU power ministers agreed on Monday to a “dynamic” cap on pure fuel costs after two months of intense talks.

The introduction of a cap on fuel costs has proved controversial for European authorities. Whereas many EU member states have argued that the measure is important to cut back extraordinarily excessive power prices for customers, others have raised considerations concerning the coverage’s potential market implications.

“We did our job, we’ve the deal. One other unattainable mission completed,” Jozef Sikela, the Czech Republic’s business minister who chairs the Council of the European Union, advised a press convention.

The power ministers overcame their variations and agreed on what they’re calling a market reform mechanism. It is going to routinely be activated underneath two circumstances: If front-month fuel contracts on the Dutch title switch facility exceed 180 euros ($191) per megawatt hour – Europe’s major benchmark for pure fuel costs – for 3 consecutive working days; And the worth is 35 euros larger than the reference worth for liquefied pure fuel in international markets for a similar interval.

The measure will come into impact from February 15. When carried out, it’s going to set a “dynamic bidding restrict” on pure fuel futures transactions for 20 working days.

To keep away from adversarial results, international locations together with Germany known as for sure circumstances to set off the suspension of the mechanism. These would come with a fall within the LNG reference worth and premium falling under 180 euros per megawatt hour for at the least three working days, or if the European Fee declares a state of emergency.

Dutch TTF traded round 109 euros per megawatt hour on Monday.

Kremlin spokesman Dmitry Peskov mentioned the measure was an assault on market pricing and was “unacceptable”, Reuters reported, citing Russia’s Interfax information company. Russia’s invasion of Ukraine and the following rush by the EU to finish its heavy dependence Contributed to power shortages on Russian fuel which have pushed costs up sharply and created market volatility.

Sikela pressured that this isn’t a tough restrict, as costs may doubtlessly go above the restrict if costs within the LNG market go above a sure degree. “In different phrases, it isn’t a set boundary however a dynamic one,” Sikela mentioned.

European Commissioner for Power Kadri Simson advised a press convention: “It’s a means to stop episodes of extreme fuel costs that don’t mirror world market costs. Now we have seen this occur, for instance this 12 months In August when fuel costs rose by greater than 300 euros per megawatt hour.”

“Excessive and extremely unstable fuel costs are hurting our economic system. They’re additionally hurting our properties and companies. The purpose is to take away the struggle premium, the mark-up in comparison with international LNG costs, which ends up in larger costs. Europe pays as TTF market,” he mentioned.

“At present, we reached an settlement on a proposal for a market reform mechanism to guard residents and the economic system in opposition to extreme excessive [energy prices]Tinne Van der Straten, Belgium’s power minister, wrote on Twitter.

“From the start there was a typical aim: to maintain costs underneath management and guarantee safety of provide. At present, we’ve achieved this aim.”