EU Energy Ministers Discuss Gas Price Cap, Emergency Liquidity Assistance – Document

EU countries’ energy ministers will discuss options to stem rising energy prices, including gas price caps and emergency credit lines for energy market participants.

U ministers will meet on September 9 to discuss urgent bloc-wide measures to respond to a surge in gas and electricity prices that is sending Europe’s industrial and household bills soaring after Russia cut gas supplies to the bloc .

A draft document seen by Reuters said ministers would consider options including a price cap on imported gas, a price cap on gas used in power generation or the temporary removal of gas-fired power plants from the current EU system for setting electricity prices.

Ministers will also consider urgently offering “pan-European credit line support” for energy market participants facing demands for very high margins, according to the document authored by the Czech Republic, which holds the EU’s rotating presidency.

Finland and Sweden on Sunday announced plans to offer billions of dollars in liquidity guarantees to energy companies to prevent companies from being toppled by rising security demands.

“Margin requirements for futures contracts have increased in line with increased daily price volatility. This makes it almost impossible for an increasing number of companies to keep their hedging positions open, triggering their exit from the futures markets,” the EU document said.

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

A margin call occurs when the balance in the account falls below the minimum margin requirement for a trade, forcing the company to back it with more cash.

The rising European electricity prices in recent months have triggered calls for additional payments and brought liquidity bottlenecks to market participants.

European gas and power buyers brace for more price pain when markets open on Monday after Russia announced one of its key gas pipelines to Europe will remain closed indefinitely.

Lower gas flows from Russia before and after February’s invasion of Ukraine have pushed European gas prices up nearly 400 percent over the past year. Moscow has attributed the disruption to technical problems.

Any EU contingency measures would likely need to be proposed by the European Commission, which is currently preparing proposals.

The document echoed proposals contained in a draft Commission communication last week for EU-wide cuts in electricity consumption and an electricity price cap for non-gas generators.

EU energy ministers will also discuss possible caps on the margin limits energy exchanges can demand and a temporary suspension of Europe’s power derivatives markets, the document showed, which is subject to change before the meeting. EU Energy Ministers Discuss Gas Price Cap, Emergency Liquidity Assistance – Document

Fry Electronics Team

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