Today the Commission's legislative proposals on energy - The scenarios

The Commission's legislative proposals on energy are expected today, Tuesday 18/10, after the College of Commissioners meeting in Strasbourg.

The European Commission presents a new package of proposals to tackle soaring energy prices, reiterating the measures that have created consensus among Member States and taking into account their disagreement on the possibility of imposing a price cap.

The scenarios that have been considered and those that are being discussed:

-Regulation of the gas market benchmark

The Commission is seeking a revision of the Dutch TTF market index, which is used as a reference for European gas transactions. According to Brussels, its surge was fuelled by speculation and investor concerns that led to artificially inflated prices.

The European Commission wants to create within the next six months an alternative index, more representative of the reality of supply, which will be in operation for the next period of filling of stocks.

Until then, the Commission proposes a «temporary mechanism» to correct prices. According to a European source, this would be a «dynamic corridor», a gap that would frame the price fluctuation on the TTF market and allow for the mitigation of gas price volatility. A short-circuit would limit the exceptional overheating.

A joint letter from Greece, Italy, Poland, Belgium, Belgium and the Netherlands, as well as other unnamed countries, last Thursday referred to a «price corridor» for the wholesale market, noting that there is a difference of opinion on its feasibility, its economic efficiency and the risk of supply disruption.

The same text states that an alternative could be to amend the reference to the TTF in all existing contracts.

Implementation of the common market for gas

The European Commission is seeking to strengthen measures to implement common gas supplies at EU level, so that under the specific weight of the European bloc, better prices can be achieved to replenish stocks before winter 2023.

The aim is also to avoid a price spike being fuelled by competition between European countries, as happened last summer when countries were trying to pay for their stocks at the same time.

The 27 agreed at the end of March on a «platform» for joint procurement, but so far no transactions have taken place in this framework and many states have continued their own uncoordinated negotiations.

The Commission now wants to conclude its talks with «credible» producers such as Norway, the United States... and will favour increased private sector participation by bringing together energy importing groups in a consortium or «cartel» of buyers.

Reduced demand, increased solidarity

Brussels will present tools to further reduce gas demand, as countries have so far shown varying degrees of effort.

One proposal will aim to strengthen solidarity in favour of countries vulnerable to the risk of shortages and which have not concluded agreements with their neighbours to secure their supplies.

Adjustment of the price of natural gas for electricity generation

France defends the idea of imposing a cap on the price of gas used to generate electricity in the European Union. But, according to a European source, this measure will not be included in the Commission's proposals.

The measure, which has already been implemented in Spain and Portugal, consists of reducing the gas bills of power companies (where the difference with the market price is covered by a state subsidy), with the aim of reducing the price of electricity.

However, the idea of extending this measure throughout the European Union is being met with reluctance from countries that are opposed to state intervention in the markets, such as Germany and the Netherlands, who are concerned about the uncertainties surrounding the financing of the measure and the risks of undermining efforts to reduce demand in the face of a struggling supply.

At the beginning of September, the Commission considered that such an EU-scale «Iberian mechanism» could result in an increased demand for gas of 45 billion cubic metres per year, equivalent to 10% of European gas consumption in 2021, on the part of producers who would be motivated to increase electricity production.

Since Spain and Portugal do not have an extensive connection to the European grid, the mechanism could not work as effectively in other countries, with the risk, for example, that Belgium could subsidise electricity exported to the UK, a European official says.

However, European Union heads of state and government are likely to agree on Thursday and Friday to discuss the measure, making sure that the cap set «will not cause an overall increase in gas consumption», according to draft conclusions of the European summit obtained by AFP.

Brussels will not propose a cap on the price of European gas imports: the idea was mentioned by Commission President Ursula von der Leyen in early November, but Germany is opposed for fear of disrupting supplies in a global market where LNG carriers can easily find new destinations.