The final piece needed to address the energy crunch has already cleared a key hurdle with the Twenty-Seven giving the go-ahead. After weeks of talks, European energy ministers agreed this Monday to a market correction mechanism aimed at curbing excessive gas price spikes. The plan activates when prices stay above the threshold for three straight days, specifically when the LNG price per megawatt-hour and the gap to the Dutch TTF benchmark reach a defined level. In short, the system triggers only under sustained elevated prices, coordinating the response across gas contracts tied to the TTF and other European indices, while leaving room for adjustments if markets shift.
“We did our job and we have a deal. It is the most important message,” stated Jozef Síkela, Czech minister and chair of the Council, after a marathon negotiation that stretched over seven hours. He quipped that he would convene energy councils as many times as needed. The moment carried a sense of accomplishment, echoed by Teresa Ribera, vice president and minister for ecological transition, who called the agreement a positive milestone after a long day of talks.
The agreement was deemed effective and realistic by the presidency, and it secured qualified majority backing, with a few notable reservations. Hungary opposed the plan, while the Netherlands and Austria supported the measure, and Germany consented to implement it starting February 15 for an initial year. The mechanism applies to contracts linked to the TTF and related indices, though it remains possible for some connections to be unlinked as circumstances evolve. Transactions that are not market-based, intraday, or daily changes will be excluded from the cap.
The impact: about 100 euros of relief
The cap lowers the European Commission’s initial target from 275 euros per megawatt hour by roughly 100 euros, narrowing the gap to world LNG prices and providing a premium to keep LNG shipments into Europe attractive. The limit settles at 35 euros above the LNG reference, replacing the earlier 58-euro figure proposed by Brussels. If the LNG reference price dips below 145 euros, the dynamic bid limit will stay at 145 euros plus the 35-euro margin. Ribera emphasized that signaling a willingness to pay a 35-euro premium helps maintain Europe’s attractiveness as a market for LNG.
Once activated, the dynamic limit will run for at least 20 working days. If the limit stays below 180 euros per MWh for the last three consecutive business days, it will automatically deactivate. The cap can also be lifted at any time if the European Commission declares a regional or EU-wide supply emergency, particularly when gas supply cannot meet demand. ACER will continuously monitor markets and issue a market correction notice if a correction event is detected.
Protection measures
Beyond the price cap itself, the agreement includes safeguards to address potential supply hiccups and market instability in Germany and other Northern European nations. A suspension mechanism is in place should security risks or demand surges emerge. For instance, the mechanism could pause if gas demand rises by 15% in a month or 10% across two months, or if LNG imports fall significantly or market trading volume in TTF weakens compared with the previous year.
Commissioner Kadri Simson noted that the mechanism includes both benefits and risks, considering liquefied natural gas, financial market liquidity, and overall gas consumption. ACER and ESMA will assess potential adverse effects and report back. The European Commission has the option to suspend activation in advance if analyses from the ECB, ESMA, and ACER indicate that risks outweigh benefits.
Some member states pressed Prague to bend the ceiling lower toward 160 euros, arguing that a higher cap would render it ineffective. Northern European governments remained cautious about higher limits due to supply concerns and the risk of directing gas to third countries. With the cap approved, two other files—joint gas purchasing and faster renewable energy permits—move forward. Ribera also highlighted that countries like Spain, Germany, Portugal, and Greece are pushing to raise renewable energy targets, aligning with broader climate and security goals.