Depth report

　　

The European Commission on Monday proposed a price-fixing mechanism for natural gas to take effect from January next year. The mechanism will be activated and the price will be capped at €275 per megawatt hour once the price fluctuations in the European market meet pre-set conditions.

Under the proposal, the gas cap mechanism would be triggered if the Dutch Transfer of Title Centre (TTF) gas futures price, the European gas benchmark, exceeded €275 per megawatt hour for two consecutive weeks and the spread between TTF gas prices and global LNG prices reached or exceeded €58 for ten consecutive trading days. The commission also said the mechanism would be suspended at any time when market prices no longer meet the conditions set, or when the limits affect Europe's energy security.

Kadri Simson, the European Commission's energy commissioner, told a news conference that Europe was paying high gas prices that were hurting European industry and placing a huge burden on households.

Market analysts say the higher than expected price caps may not be effective and affect the functioning of the energy market. At present, TTF gas prices remain at around 120 euros per megawatt hour.

Eu member states have been at odds over capping gas prices. Some countries, including Belgium, Greece, Italy and Poland, have pushed for a gas price cap, while Germany, the EU's biggest economy, has led the opposition, arguing that a cap could make it harder for the bloc to secure much-needed supplies and reduce incentives to curb gas consumption.

The proposal will be discussed at an extraordinary meeting of EU energy ministers on Monday.