Gas prices have fallen sharply since August.

Nevertheless, many EU countries are still pushing for a price cap.

The warnings from the EU Commission and the Federal Government of unforeseeable consequences, especially for the gas supply, do not change anything.

Henrik Kafsack

Business correspondent in Brussels.

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Last Friday, Greece, Italy and Poland even threatened to block all decisions to lower prices at the next meeting of energy ministers on November 24th if the Commission did not come up with a concrete proposal for a price cap.

She has now acted on it and presented a first draft of a law with which she wants to introduce a price cap for the Amsterdam gas price index TTF.

The draft is available to the FAZ.

Specifically, the EU would limit the price for deliveries in the following month ("month-ahead") to a previously defined level.

The lid should take effect automatically, i.e. without further political decisions.

The prerequisite is not only that a previously defined price level is exceeded for a certain period of time, but also that the price remains at a minimum distance from the world market price for liquefied gas (LNG).

In other words: if the LNG prices on the world market also shoot up, nothing will happen.

It is unclear where the price cap lies

Where the EU Commission wants to collect the price cap is left open in the draft.

However, she makes it clear several times that it is only about "phases of extraordinarily high gas prices".

As a reference, she mentions the record prices in August, when a megawatt hour of gas cost around 350 euros in month-ahead trading.

Most recently, the price even fell below 100 euros for a short time.

If the price cap is activated, it should be checked monthly whether the requirements are still met.

If this is not the case, it is automatically deactivated.

In addition, the EU Commission wants to introduce a security mechanism to prevent the cap from leading to "serious market distortions that could endanger security of supply and trade within the EU".

The EU Commission should then be able to unilaterally suspend the price cap.

This should also be possible if the EU misses its savings targets for gas consumption.

The Commission is thus largely following on from the package it presented before the last EU summit in October to lower high gas prices.

At the time, for example, she had suggested that a new gas price index be drawn up by spring, which would be less affected by the failure of Russian gas supplies than the TTF.

That alone should lower the price, especially since the TTF is also the reference price for many long-term contracts.

In the meantime, the Commission had promised a temporary "price corridor" for the TTF - but still on the spot market - as is now outlined in the draft.

Whether that is enough for the supporters of the price cap is uncertain.

After all, according to the Commission's draft, the lid should only be raised in absolutely exceptional situations.

In addition, it can be easily bypassed because it only applies to TTF month-ahead trading.

Contracts that are concluded directly or through an intermediary between supplier and buyer ("Over the counter", OTC for short) would not be affected.

In the paper accompanying the draft (“non-paper”), the Commission warns that a price cap could jeopardize trade because OTC trade is less transparent.

Irrespective of this, the price cap could not only jeopardize the gas supply because suppliers sell their gas elsewhere, but also because the price no longer provides incentives for long-term investments.

In principle, the Commission maintains that the other proposals from the October package are better suited to reducing prices.

This includes joint gas purchasing and speeding up the approval process for the expansion of renewable energy.

In fact, the gas price was so high in the summer because the EU countries - especially Germany - outbid each other when buying to fill their storage tanks.