Czech Minister Urges EU Nations to Push for Gas Price Cap Deal

(Bloomberg) -- Czech Industry Minister Jozef Sikela called on European Union governments to break a deadlock over a proposed price cap for natural gas to help limit energy costs for households and business. 

EU ambassadors are due to resume talks on the proposal on Monday to prepare the ground before an emergency meeting of energy ministers a day later that Sikela will chair because his country holds the EU’s rotating presidency.

Negotiations will take place against the backdrop of a rift among member states over the design of the measure, with Germany, the Netherlands and Denmark urging a cautious approach to avoid endangering the security of supply. Meanwhile, countries including Belgium, Greece, Italy and Poland want a more aggressive mechanism.

“I do not want to think about that we fail,” Sikela said when asked about the likely outcome of the ministerial meeting on Dec. 13. “I simply can’t imagine that I go in front of the cameras and microphones to explain to the people of Europe we do not have a deal.”

Under pressure from a majority of member states, the European Commission proposed a cap on gas prices to contain a spike in energy costs triggered by a cut in supplies from Russia, previously Europe’s biggest provider.

The so-called gas market correction mechanism would kick in when the price of month-ahead contracts on the Dutch Title Transfer Facility exceeded €275 per megawatt hour and the gap between world prices was greater than €58.

Divisive Stance

The Czech government has proposed cutting that to €220 and the spread between EU and world markets to €35. That’s still too little for supporters of an aggressive cap and too much for the bloc urging a more cautious stance. 

Failure to reach a deal on Tuesday would mean the cap would have to be discussed by the bloc’s heads of government at a summit on Dec. 15 before another gathering of energy ministers four days after that if no decision is reached.  

At that point, it would be up to the Czech presidency to decide if it wants to call a vote to attempt to pass the proposal by a qualified majority.

Sikela warned that a delay in agreeing a cap could risk undermining member-state support for Ukraine if that were to lead to higher energy prices.

On Friday, the more hawkish group of 12 nations told the EU that they wanted the price cap to apply to off-exchange trades, a move staunchly opposed by the likes of Germany and the Netherlands. As a potential concession, the more aggressive bloc is open to exclude “emergency over-the-counter contracts,” according to EU diplomats.

Veto Votes

Both groups have enough votes to veto an agreement if their demands aren’t met, said the diplomats, who asked not to be identified as talks on the measure are private.

Sikela said that the market intervention measure should also include a mechanism that would prevent member states outbidding each other when seeking to refill gas storage at any cost, a factor that contributed to a record spike in prices last year.

With gas storage at record level at this time of the year, lower demand from China and favorable weather, the bloc is likely to get through the winter without major problems, according to Sikela. 

But the next filling season will be more difficult because most of the reserves will be used up and there’s no certainty whether Russian gas — used for storage this season — will be flowing, he said.

--With assistance from .

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