EU plans new measures to tame energy markets and ease gas prices

(Bloomberg) — The executive arm of the European Union plans to outline further measures to contain an unprecedented energy crisis by reducing market volatility, boosting liquidity and lowering natural gas costs.

The European Commission aims to publish a document on September 28 detailing future steps to mitigate volatility and increase trading volumes in energy markets where higher prices have inflated margin orders, as well as measures the bloc could take to lower fuel prices, according to people with knowledge of the matter.

But while some member states are calling for a cap on the price of gas, the commission is not planning to propose any regulation next week, and may instead expand on a range of ways to tackle the problem, people said.

With consumers in the 27 member states of the European Union reeling from record energy bills after Russia cut off supplies of natural gas, governments are pushing the Commission to find region-wide solutions to mitigate the crisis. They will build on a previously proposed intervention package that includes a windfall tax, a price cap for low-cost electricity and a mandatory target for reducing energy demand.

The planned document – known in EU language as a liaison – will give governments assurances about further actions to come as it aims to reach agreement on an initial emergency intervention plan at a ministerial meeting on September 30. An effective action plan, usually followed by detailed organizational proposals that need to be approved by member states.

The energy crisis will be a major topic during an informal meeting of EU leaders in Prague on October 7, and a quarterly summit scheduled for October 20-21 in Brussels.

A cap on gas prices is expected to resonate during those meetings after more than half of countries called for such a measure at the last meeting of EU energy ministers earlier this month. But supporters of the idea disagree on how to implement it. Italy favors a cap on physical and financial transactions across all EU centers, Greece supports a cap at the Royal Dutch conversion facility – the continent’s main gas market – while Poland wants a price cap on imported gas from suppliers including Russia.

Countries that oppose a price cap say such a move would effectively encourage increased fuel consumption at a time when the European Union seeks to reduce its use.

In an internal document earlier this month, the commission was assessing options to subject the fund of funds to financial supervision to avoid speculation, and to establish a complementary standard to ensure better market performance with less volatility. The document seen by Bloomberg News showed that, as a last resort in the event of a supply disruption, the EU would also explore linking a temporary trust fund (TTF) to the JKM Asian standard as a dynamic cap.

The commission was also considering setting up an EU clearing house to “receive reports on all direct prices for LNG or other imports,” according to the internal paper. Such a move would support the bloc’s Common Purchasing Platform, a voluntary mechanism to enhance the bargaining power of participating member states and secure lower prices.

© Bloomberg LP 2022

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