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EU may apply €275 cap on gas prices starting 2023

EU may apply €275 cap on gas prices starting 2023

ArabFinance: The European Union (EU) is proposing setting a safety price ceiling of €275 on derivatives of the block’s natural gas prices benchmark, the Title Transfer Facility (TTF), to be applied as of January 1st, 2023, according to an official statement by the European Commission on November 22nd.

The decision is in response to the current natural gas shortage in Europe caused by the suspension of Russian supplies, which pushed prices higher.

The European Commission’s statement highlighted that the hike in natural gas prices in August was “damaging for the European economy” and transferred to inflation in electricity prices.

Under the new decision, the commission will apply the price cap in case the TTF derivate settlement price exceeds €275 for two weeks or TTF prices rise €58 higher than the reference price of the liquified natural gas (LNG) for 10 consecutive trading days within the two weeks.

The price cap mechanism will be applied through a correction notice by the Agency for the Cooperation of Energy Regulators (ACER) in the Official Journal of the European Union and inform the Commission, European Securities and Markets Authority (ESMA), and the European Central Bank (ECB).

The price cap shall be applied as of the day following the submission of the notice.

According to eurostat, Year-on-year (YoY) household gas prices in the first half (H1) of 2022 increased in all of the 24 EU Member States, except Hungary, while YoY non-household gas prices in H1 2022 increased in all 25 EU Member States that reported those prices. The increase ranged from 67% to 271%.

 

 

 

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