EU 'ready to discuss' cap on wholesale gas prices

Commission president Ursula von der Leyen will set out proposals to European leaders

European Commission president Ursula von der Leyen addresses members of the European Parliament in Strasbourg. EPA

The European Union is “ready to discuss” a cap on wholesale gas prices to lower the cost of electricity, European Commission president Ursula von der Leyen said on Wednesday.

Ms von der Leyen said more EU countries than before were open to the idea after Europe’s energy squeeze became more critical.

She is expected to set out proposals on reducing electricity costs in a letter to the EU’s 27 leaders before they meet in Prague on Friday. They will take part in a wider pan-European summit on Thursday.

“High gas prices are driving electricity prices. We have to limit this inflationary impact of gas on electricity everywhere in Europe,” Ms von der Leyen told the European Parliament.

“This is why we are ready to discuss a cap on the price of gas that is used to generate electricity.”

Her spokesman Eric Mamer subsequently clarified that Ms von der Leyen was suggesting a cap on wholesale prices on the European market, rather than a direct cap on imports.

The cap would not be limited to Russian gas. EU countries separately on Wednesday agreed to enforce a price cap on Russian oil by denying transport and insurance to cargoes that flout the limit.

Ms von der Leyen acknowledged concerns from some member states, including Germany, that a price cap on gas would further squeeze Europe’s scarce energy supplies.

“We don’t support an absolute maximum, a price cap, because there is a danger that we can no longer buy enough gas on the world market,” a German government spokeswoman said last week.

High gas prices are leading to higher costs to generate electricity at plants such as this one in Germany. AP

But Ms von der Leyen said any cap would be a temporary solution while wider changes are made to the electricity market.

These would include replacing the benchmark TTF gas price with one that better reflects Europe’s energy mix, she said.

High gas and electricity prices have forced several European governments into expensive bailouts to protect consumers from runaway winter bills.

In another move to reduce prices, EU countries will be encouraged to jointly “step up our negotiations” with gas exporters such as Norway and the US.

Member states agreed in March on the principle of voluntary joint purchasing, an idea compared by officials to the EU-wide acquisition of coronavirus vaccines.

“As the European Union, we have considerable market power. And many of our suppliers want to conclude deals with us, which are beneficial for both sides,” Ms von der Leyen said.

“We have to avoid a scenario where member states are again outbidding each other on world markets and driving prices up for Europe.”