Regulation 2023/2920 - Amendment of Regulation (EU) 2022/2578 as regards the prolongation of its period of application - Main contents

Official Journal

of the European Union

EN

Series L

2023/2920

29.12.2023

Council Regulation (EU) 2022/2578 (1) establishes a temporary market correction mechanism (‘MCM’) for orders placed for trading derivatives linked to the Union’s virtual trading points (‘VTPs’) with maturities between month-ahead and year-ahead. The MCM therefore applies to any commodity derivative, traded on a regulated market, the underlying of which is a transaction in gas in any VTP in the Union.

The MCM is to be activated when a market correction event occurs, that is, when the front-month Title Transfer Facility (‘TTF’) derivative settlement price, as published by ICE Endex B.V. (the Netherlands), exceeds EUR 180/MWh and is EUR 35 higher than the reference price for three working days. Regulation (EU) 2022/2578 sets a dynamic bidding limit, according to which, upon the occurrence of a market correction event, market operators are not to accept and market participants are not to submit orders for derivatives with prices of EUR 35/MWh above the reference price published by the European Union Agency for the Cooperation of Energy Regulators (‘ACER’) on the previous day.

In their effects assessment reports published on 1 March 2023 in accordance with Article 8 of Regulation (EU) 2022/2578, the European Securities and Markets Authority (‘ESMA’) and ACER analysed a number of indicators to assess the impact of the MCM since the entry into force of that Regulation. ESMA and ACER concluded that the MCM had not been activated and no negative effects on the security of supply, intra-Union flows of gas or financial stability had arisen until the publication of their respective reports.

Building on the indicators analysed by ESMA and ACER in their reports of 1 March 2023, the Commission extended the analysis in order to assess market developments subsequent to the time period analysed by those reports. No negative effects have been identified since Regulation (EU) 2022/2578 entered into force and the MCM has never been activated.

However, severe difficulties persist for the Union’s security of energy supply. The global situation on the gas market remains very tight. Gas prices are still considerably higher than they were prior to the beginning of the crisis in Europe following Russia’s weaponisation of energy and Russia’s war of aggression against Ukraine, with inevitable consequences on Union citizens’ purchasing power and on the competitiveness of Union businesses.

Gas market volatility is also a consequence of the market tightness resulting from geopolitical risks, and represents an additional risk for the economy of the Union. The episodes of pronounced price volatility observed in summer and early autumn of 2023, when prices increased by more than 50 % in a few weeks, show that markets are still fragile and remain vulnerable to even relatively small shocks on demand and supply, as evidenced by price movements following recent events such as the strike in Australian liquefied natural gas (LNG) facilities, or the disruption of the Balticconnector. The ongoing crisis in the Middle East constitutes an additional significant geopolitical risk with a potential impact on gas prices and supply.

Global gas markets are currently very tight and are expected to remain tight for a certain time. Global LNG supply has grown only modestly in the past two...