Germany, Netherlands set out red lines on EU gas price cap

FILE PHOTO: European Union flags flutter outside the EU Commission headquarters in Brussels

By Kate Abnett

BRUSSELS (Reuters) - Six European Union countries, including Germany and the Netherlands, have warned that they cannot accept other member states' attempts to lower further the level at which the bloc will cap gas prices, according to an email seen by Reuters.

The group, which also includes Austria, Denmark, Estonia and Luxembourg, laid out their red lines on the proposed EU-wide gas price cap, which countries are aiming to approve at a Dec. 13 meeting of energy ministers in Brussels.

"We are concerned by the lowering of the figures. The figures of the [gas price cap] ceiling and the triggers cannot be lowered any further or replaced," ambassadors from the six countries said in the email to the Czech Republic, which holds the EU's rotating presidency.

The six countries are sceptical of capping prices, which they warn would disrupt the normal functioning of Europe's energy market and make it harder to buy fuel, if gas suppliers divert cargoes to regions where prices are not capped.

The European Commission last month proposed a price cap that would kick in if the front-month contract on the Dutch Title Transfer Facility exceeds 275 euros/MWh for two weeks and is also 58 euros higher than a Liquefied Natural Gas (LNG) reference price for 10 days.

Belgium, Italy, Poland and Greece are among the countries who say a price cap is needed to shield their economies from high gas costs. They want a far lower price limit than the one proposed by the Commission.

EU countries are negotiating the proposal and have already moved to lower the price limit. The latest compromise being discussed is a 220 eur/MWh cap with less stringent conditions to trigger it, according to a document seen by Reuters, although that is expected to be revised further before a deal is reached.

Germany and the other cap sceptics also demanded stronger safeguards in case the price cap caused unintended consequences - which gas market participants have warned could be severe.

They proposed "red light criteria" that would trigger an automatic suspension of the price cap in an emergency, for example if Europe's gas demand jumps. Under the original EU proposal, only the Commission could suspend the cap.

(Reporting by Kate Abnett; Editing by Catherine Evans)