Press Releases

PRESS RELEASE : Opening remarks by Commissioner Simson and Commissioner McGuinness at the press conference on a new package of measures to fight high energy prices and ensure security of supply [October 2022]

The press release issued by the European Commission on 18 October 2022.

Opening remarks by Commissioner Simson and Commissioner McGuinness at the press conference on a new package of measures to fight high energy prices and ensure security of supply.

Thank you President, good afternoon, everyone.

The EU has been fighting the energy crisis for a year. As the crisis has evolved, we have responded together, protecting our people and businesses, directing revenues to support consumers, ensuring sufficient gas storage, reducing demand and negotiating with old and new suppliers.

These steps have helped to bring prices down, compared to the record levels in August. But they are still high and the risk of further price hikes and gas supply disruptions for this winter is real.

President von der Leyen has already laid out very clearly the context of today’s proposals and their main elements. Let me go into some more detail.

First, the joint purchase of gas. This is a topic where the groundwork has already been done. In April, we put in place the Energy Platform and since then, we have created five regional task forces to better understand our gas needs and infrastructure opportunities.

Today, we are proposing the tools to make joint purchasing possible. This is a no-regret option, as buying together gives us more leverage. On the other hand, it is not easy to implement. Gas is in the EU usually bought by companies, not Member States, let alone the Commission. We have worked very closely with EVP Vestager and her team to find a solution that is in line with the EU competition policy.

We propose a two-step approach. First, we will aggregate the demand, pooling the gas needs of the companies willing to participate. The Commission will contract this procedure out to a service provider, who will collect the necessary data via an IT-tool.

Following that, the companies can conclude their contracts with the suppliers. They can also form a gas purchasing consortium and buy gas together, coordinating volumes, prices, delivery points and times.

There is a mandatory element, which is that the aggregation has to cover an amount of gas equivalent to 15% or their storage filling requirement.

This is around 13.5 billion cubic meters of gas – equivalent to the annual gas use of Greece, Bulgaria, Croatia and Slovenia combined. Or the joint consumption of Portugal, Ireland and Finland. So, it is a meaningful amount that would be attractive to sellers and helpful in terms of refilling storage. The participating companies will be free to aggregate and purchase more than 15%, we are only setting the absolute minimum.

But joint purchase alone will not be enough to address the level of prices we are seeing due to Russian manipulation and very tight global markets.

We need a new price benchmark that better reflects today’s market reality, better than TTF. While TTF was a good proxy for the EU gas prices when we received large amounts of Russian pipeline gas, this is no longer the case. Now, TTF prices are pushed up by infrastructure bottlenecks and regional dynamics.

We have therefore tasked ACER to immediately prepare a price assessment tool. Our proposal grants them the necessary powers to collect real-time information on all daily LNG transactions. Based on this, they can establish a benchmark by the end of March.

Until then, we propose to create a market correction mechanism that could be used to limit prices when needed. We envisage it in the form of a TTF cap – a ceiling on the maximum value of the TTF Virtual Trading Point. More work is needed, in cooperation with the Member States, to develop the details. Me and my services are ready to complete this work fast and with the right safeguards, if given the mandate by the Council.

In addition, we aim to end the excessive volatility on EU energy derivatives markets. Mairead will tell you more about this in a minute.

As we make every effort to keep prices predictable and gas flowing to Europe, we cannot exclude a real supply crisis with a shortage of gas. For this, solidarity and demand reduction are key.

In the worst-case scenario, all our Member States need to be supported by their neighbours and countries with LNG facilities. Solidarity rules will apply automatically even if the Member States don’t have a bilateral agreement in place. Solidarity should be non-negotiable.

In addition to households and other protected consumers, solidarity obligation will now also apply to critical gas-fired power plants, to avoid an electricity crisis. In case of an emergency, there will be an allocation mechanism determining how gas is distributed and at what price.

It is also absolutely critical that we continue to reduce our gas demand. In today’s proposal, we give the Member States more flexibility to do this and continue work on other fronts. For example, this Friday, I will host with IEA executive director Fatih Birol an event on helping our small and mediumsized enterprises through the crisis. Energy savings and efficiency can play a key role in this.

Increasing our energy efficiency is also a central tenet of the Digitalisation of Energy Action Plan that the Commission adopted today. Many of the solutions touched upon there are relevant to our current situation: smart meters, remotely-controlled devices and innovative renewable solutions all make energy more affordable and accessible.

As we fight the current crisis, we are laying the foundations of a cleaner and more modern energy system which will serve us well in the years and decades to come.

Thank you.




Commissioner Mairead McGuinness:

Thank you President, and Kadri.

Good afternoon everyone. Just to focus on the financial side of the energy issues. What we are doing today is working on the nexus between energy markets and financial markets.

And as you know my role as Commissioner, it has financial stability at its very heart.

So the measures we propose – and I will give you details shortly – are both targeted and time-limited.

And they are focusing on easing the liquidity stress that some energy companies have faced in meeting their margin requirements, and on tackling the extreme price volatility on energy derivative markets.

In doing this we worked really closely with our regulators – so ESMA and national regulators – and sought their guidance as to how we could do this, mindful of the need to address the liquidity issues, but clearly mindful of the need for financial stability.

And I want to thank our finance ministers for their contribution, and indeed our work with the European Parliament is paramount to deliver.

So first I want to deal with the trading side. We’re proposing a temporary measure as part of the emergency instrument: a so-called “intra-day price spike collar”.

Now what this is about smoothing out is smoothing excessive volatility and price spikes in gas and electricity derivative markets.

It is a price collar that limits extreme changes in a short period of time.

And in that sense, it is not intending to prevent prices from moving upwards or indeed downwards, but rather to ensure that these movements are more incremental than what we observed at some times over the past months.

EU trading venues for energy derivatives will have to put such a tool in place by the end of January, under the control of national and European regulators.

But in the interim period, we will be asking EU trading venues to set up an intraday volatility tools that would broadly achieve the same result.

My second point is on the issue of collateral.

We know some energy market participants have experienced pressures on liquidity because of higher margin calls linked to rising energy prices.

Usually collateral is provided in the form of cash.

Today we are adopting a delegated act that expands the list of what these companies can use as collateral. We are doing this on a temporary basis.

Energy firms will be allowed to use uncollateralised bank guarantees.

And all market participants will be allowed to use public guarantees.

Again we’re following the advice of ESMA on this, and striking the right balance between helping energy operators and maintaining financial stability.

The third measure is also related to energy derivatives markets.

And this is an amendment to another delegated act for energy firms using OTCs – over the counter – derivatives.

We are raising the clearing threshold from €3 billion today to €4 billion.

And below this €4 billion threshold, firms using over-the-counter derivatives will not have to provide margins for the bilateral trades.

And again, this is in line with ESMA’s recommendations, reflecting the sharp price rises in energy derivatives.

On benchmarks, I think Kadri you have covered that very well and we work together on achieving the proposal you have outlined.

And clearly, also, to encourage when the benchmark is in place, that it is used so that it will impact derivative markets as well.

I believe that what we are proposing today on the nexus between the financial markets and energy will make a real difference to energy operators and to energy markets.

And in the short to medium term, that will help alleviate pressure on consumers and businesses who are experiencing energy price rises right now.

But at the same time, we are staying vigilant when it comes to financial stability.

Thank you.