Home Trade industry EU energy ministers to discuss gas price cap and emergency liquidity support – document

EU energy ministers to discuss gas price cap and emergency liquidity support – document

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European Union flags fly in front of the European Commission headquarters in Brussels, Belgium, June 17, 2022. REUTERS/Yves Herman

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BRUSSELS, Sept 4 (Reuters) – Energy ministers from European Union countries will discuss options to curb soaring energy prices, including gas price caps and emergency credit lines for energy market players, according to a document seen by Reuters.

EU ministers will meet on September 9 to discuss urgent bloc-wide measures to respond to a spike in gas and electricity prices that is hammering European industry and driving up household bills, after that Russia has limited gas deliveries to the bloc.

A draft document, seen by Reuters, said ministers would consider options such as a price cap on imported gas, a price cap on gas used to generate electricity or the temporary removal of gas-fired power stations from the current EU electricity pricing system.

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Ministers will also consider urgently offering “pan-European credit line support” to energy market players facing very high margin calls, says the document drafted by the Czech Republic, which holds the presidency. rotating EU.

Finland and Sweden on Sunday announced plans to offer billions of dollars in liquidity guarantees to power companies in a bid to prevent increased collateral requirements from toppling companies. Read more

“Margin requirements for futures contracts have increased in proportion to the increase in daily price fluctuations. This is making it almost impossible for a growing number of companies to keep their hedge positions open, triggering their withdrawal from the futures markets” , says the EU document.

Utilities sell most of their electricity a few years in advance to secure a certain price, under an arrangement that requires them to deposit a “minimum margin” in an account as a safety net just in case. where they would fail before electricity is produced and actually enters the market.

A margin call occurs if funds in the account fall below the minimum margin requirement for a trade, forcing the company to back it up with more cash. Soaring electricity prices in Europe over the past few months have triggered margin calls, which have weighed on the liquidity of market participants.

European gas and power buyers are bracing for another drop in prices when markets open on Monday, after Russia said one of its main gas pipelines to Europe would remain closed indefinitely.

Falling gas flows from Russia before and after its invasion of Ukraine in February have driven European gas prices up nearly 400% over the past year. Moscow attributed the disruptions to technical problems.

Any EU emergency policy would likely have to come from the European Commission, which is currently drafting proposals.

The document echoes suggestions included in a draft Commission note last week, for EU-wide reductions in electricity consumption and an electricity price cap for generators that do not not run on gas. Read more

EU energy ministers will also discuss possible caps on the margin limits that energy exchanges can request, and a temporary suspension of European electricity derivatives markets, the document showed, which could still change before the meeting.

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Reporting by Kate Abnett; Editing by Hugh Lawson

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