EU countries seek way out of impasse over gas price caps

The question of how, when and whether to cap gas prices is set to dominate another meeting of European Union countries on Wednesday, as they pursue a joint plan to target high gas prices – a compromise that has eluded them for weeks.

The 27-country EU is plotting its next move to tame soaring energy prices and shield consumers from surging bills, as Europe heads into a winter of scarce Russian gas, a cost of living crisis and the looming threat of recession.

“We need to find a quick solution that will be applicable to all the European Union,” a senior EU official said. “National solutions are not a way forward.”

EU energy ministers meet in Prague on Wednesday to attempt to provide clearer instructions on what the European Commission should propose as the bloc’s next emergency energy measure.

But countries still cannot decide what they want.

With gas prices almost 90% higher than a year ago, most EU countries say they want a gas price cap, but disagree on its design. Some countries, including Germany, Europe’s biggest gas market, remain opposed.

Talks among EU leaders last week did little to clarify the next steps. Those discussions “went in all directions,” one EU diplomat said – referring to the numerous options being floated, including a price cap on all gas, pipeline gas, or just gas used to produce electricity.

Another EU diplomat said no “unified signal” had come out of the leaders’ talks. “I’d say expectations are low,” the diplomat said of Wednesday’s meeting.

Others were more hopeful a consensus was emerging. The senior EU official said countries were leaning towards the “Iberian model” of capping the price of gas used for power generation as a quick fix.

Spain and Portugal implemented that scheme in June, which helped curb local power prices. The idea has gained support among other countries, although some worry it could raise EU gas demand, since Spain’s gas use increased under the measure.

EU countries have already rushed through emergency energy windfall profit levies, gas storage filling obligations, and electricity demand curbs to address the surge in energy prices driven by Russia slashing gas supplies since it invaded Ukraine.

But the pressure to agree more EU-wide measures has increased after Germany said it would spend up to 200 billion euros to shield its consumers and businesses from high energy costs – prompting a backlash from some countries about the uneven rollout of national support. [Reuters]