Coordinating gas purchasing, reliable price benchmarking and exchanging gas across borders

KEY POINTS

Russia’s unprovoked war of aggression against Ukraine and the reduction of natural gas supplies from Russia to Member States undermines the EU’s security of supply. This weaponisation of the gas supply and manipulation of the markets through intentional gas flow disruption have led to skyrocketing energy prices in the EU, endangering the EU economy.

The regulation represents a coordinated response from the EU to protect its citizens and its economy by reducing dependency on Russian gas and bringing excessive prices down.

Pooling demand and buying jointly

To avoid outbidding each other and to have better leverage over gas suppliers, Member States, together with the Energy Community countries, under the regulation, are able to submit their gas import needs to a service provider engaged by the European Commission, which then:

• calculates the aggregated demand;
• seeks offers on the global markets for suppliers to meet the total demand; and
• allocates access rights to supply, taking into account a proportionate distribution between smaller and larger participants.

Gas companies and companies consuming gas:

• must use the service for gas volumes equivalent to 15% of their respective gas storage filling obligations for 2023 – a total of around 13.5 billion cubic metres for the EU – beyond which aggregation will be voluntary but based on the same mechanism;
• may then choose to purchase gas through the platform from suppliers able to meet the aggregated demand;
• may coordinate elements of the purchase contracts or use joint purchase contracts, provided they comply with EU competition law.

Russian gas is excluded from joint purchasing.

Gas price benchmarking

The Agency for the Cooperation of Energy Regulators (ACER) shall develop a new price benchmark to stimulate stable and predictable pricing for liquid natural gas by 31 March 2023.

The regulation, through the European Securities and Markets Authority (ESMA), sets an intra-day volatility management mechanism¹ for same-day transactions on trading venues on which energy-related commodity derivatives are traded, to prevent:

• excessive price volatility during a trading day; and
• derivative price fluctuation beyond the upper and lower limits.

Member State solidarity to ensure electricity supply continuity and protection of essential industries and protected customers²

The rules make it possible for Member States to:

• reduce non-essential gas consumption (such as outdoor heating or heated residential swimming pools), in order to supply gas to essential services and industries;
• define what constitutes non-essential gas consumption;
• request solidarity from other Member States where they are not able to secure the critical gas volumes needed for their electricity system;
• clarify exceptions to these rules, for instance solidarity-protected customers³ (households and certain social services), gas supplies for electricity needed to produce and transport gas, certain critical infrastructure, and installations crucial for the functioning of military, national security and humanitarian aid services;
• safeguard protected customers (such as indoor domestic heating, schools and hospitals) in all circumstances; and
• share gas supplies in the event of a genuine emergency.

They also set default rules for providing solidarity to other Member States in the event of an emergency under Regulation (EU) 2017/1938 (see summary) if the Member States concerned have not agreed on such arrangements.