As widely anticipated, this week the EU Commission (EC) proposed (click here) a one-year extension to the emergency measures put in place following the Russian invasion of Ukraine in 2022 which includes the natural gas price cap or “Market Correction Mechanism” (MCM). The MCM was originally due to expire on 1 February 2024 and imposes a dynamic bidding limit that is triggered if TTF prices exceeds €180/MWh for 3 working days and if TTF prices are €35/MWh higher than an LNG reference price for the same three working days. Further information on the MCM may be found here.
The overall package is comprised of two other measures including the so-called gas solidarity measures (click here) and the temporary rules related to accelerated permit-granting for renewable energy projects (click here). The EC’s proposal must now be agreed by the EU Council and does not require the approval of the EU Parliament. The EC hopes that the EU Council can adopt the proposed extension before the end of 2023.
While prices are far off the highs experienced when the cap was first conceived, firms should still ensure that they have arrangements in place to respond should market conditions change without warning.
