The European Union's energy ministers are meeting in Brussels on Monday to reach an agreement on a natural gas price cap to help households and businesses cope with excessive price surges.

The Czech Republic, the current rotating chair of the Council of the EU, has prepared a proposal that can serve as the starting point for the compromise on the matter.

Last week, the ministers failed to agree on the upper ceiling on gas prices when they rejected the European Commission’s proposal describing it as a too-high limit.

In late November, the EC proposed a Market Correction Mechanism to protect EU businesses and households from episodes of excessively high gas prices in the EU.

“The proposed mechanism consists essentially of a safety ceiling for the price of month-ahead TTF-derivatives (‘TTF-price’), which plays a key role as a reference price in the European wholesale gas market.”

“The ceiling is activated if the TTF-Price basis reaches a pre-defined level and if the price hike does not correspond to a similar hike at world market level, reflected by means of daily average price of the price of the LNG assessments ‘Daily Spot Mediterranean Marker (MED)’ and ‘Daily Spot Northwest Europe Marker (NWE)’, published by S&P Global Inc., New York,” the EC says in its proposal for the mechanism.

Thus, according to the EC, the mechanism will be activated provided that the front-month TTF derivative settlement price exceeds EUR 275 for two week(s) and that the TTF European Gas Spot Index as published by the European Energy Exchange (EEX) is EUR 58 higher than the reference price during the last 10 trading days before the end of the period concerned.

“The cap is designed to be activated only in exceptional circumstances to address potentially short-lived episodes of genuine excessive prices, so as to not increase natural gas consumption. Indeed, when prices are ‘excessive’, demand elasticity is expected to be very low and the short-lived additional increases of prices avoided by the cap would not be expected to result in a significant reduction of consumption. Finally, the mechanism is not meant to structurally lower the prices which is what, if passed on to final consumers, may lead to more gas consumption,” the EC said in late November.

The Czech presidency proposes the activation as soon as the gas price reaches €188 per megawatt-hour in three days.

A few countries, including Germany, Austria, the Netherlands and Hungary, are against the idea of intervening in the gas market as they fear that intervention could actually redirect the necessary gas supplies from Europe and disrupt the energy market functioning.

Energy Commissioner Kadri Simson said on Monday morning that the agreement is reachable if all demonstrate the readiness to have it.

Croatia is being represented by Economy Minister Davor Filipovic who said that Croatia’s pipeline operator JANAF would be mentioned during the discussions on stability factors in providing oil supplies to landlocked member-states.