BRUSSELS – Prime Minister Kyriakos Mitsotakis, in a letter to European Commission President Ursula von der Leyen, outlined a proposal for a six-point plan for dealing with the economic repercussions of soaring energy prices.

The letter was sent on Tuesday, with copies also sent to European Commission Vice President Frans Timmermans, in charge of the European Green Deal, European Commissioner for Energy Kadri Simson and the Commission’s Director-General for Energy Juul Joergensen Ditte.

In this, the prime minister refers to the increasing economic threat from soaring prices on the wholesale natural gas market, stressing the necessity for immediate and decisive action to avert an additional cost for EU citizens, EU economies and the successful implementation of the European Green Deal.

Mitsotakis noted that the market’s benchmark prices for natural gas in recent months, especially after December, were no longer driven by the normal forces of supply and demand, citing the findings of a recent study by the European Union Agency for the Cooperation of Energy Regulators (ACER) and the European Commission’s Gas Coordination Group.

“In reality, a decisive role in shaping prices is now played by political statements and the fears arising from the Russian invasion of Ukraine, which lead to uncertainty, huge price fluctuations and profiteering,” he said.

Mitsotakis noted that the crisis underway in Ukraine has sidelined the natural mechanism for setting prices and that all EU efforts had so far failed to counterbalance the huge burden this placed on households and businesses. This was occurring even though neither the production capacity nor the natural gas supply chains had been affected by the current crisis, he pointed out.

“This means that we do not have a problem of quantity but we have a problem with prices,” he added.

While this could be mitigated in the medium and long-term by reducing the EU’s dependence on Russian natural gas, Mitsotakis said, some targeted and temporary measures were necessary in the short-term to normalise the situation, focusing on gas prices rather than quantity, with a clearly defined time frame, conditions for activation and exit clauses.

“With such an intervention in the market, our Union can protect its members, stopping the ‘instrumentalisation’ of natural gas at the expense of our economies and uncoupling geopolitics from the energy crisis, without affecting the production and supply of natural gas in the short term,” the prime minister said.

Mitsotakis said the problem was extremely unlikely to be eliminated when demand for gas used in heating fell, warning that it would continue for electricity rates, which were linked to natural gas prices via the wholesale market, during summer and spring, placing a huge burden on households and businesses.

The prime minister’s plan called for:

1. A price cap for the Title Transfer Facility (TTF), using as a benchmark the highest price for natural gas before the crisis.

2. Daily Price Limit as a protective measure, restricting TTF price fluctuations within a fixed range (for example, +/- 10 percent)

3. Setting TTF prices as an emergency measure if there are announcements concerning the flow of natural gas through pipelines from Russia.

4. Imposing a cap on gross profit margins on the wholesale electricity market, possibly of the order of 5 pct, based on a monitoring of production costs by market regulators and the Levelised Cost of Energy (LCOE) at power plants.

5. Only permitting trade with physical delivery for a specified time period

6. Boosting liquidity in the natural gas market by linking the EU/US/Asia markets (for example, by enhancing cooperation with China on LNG shipments, with a possible cap on transportation costs to eliminate incentives for profiteering).

Mitsotakis noted that all the above options were significant market interventions that have been used before in emergency situations for other markets, in order to balance them, while for some markets they are permanent.

“I am firmly convinced that extraordinary times call for extraordinary measures. These actions only seek to protect the normal function of the wholesale gas market, which has come under great pressure due to the constantly intensifying crisis in Ukraine, with serious repercussion on electric power produced using natural gas,” the prime minister stressed.

He said that the six-point plan has been designed to protect and restore the gas and electricity markets, ensuring that the European Union’s citizens and economies but also the global economy were not made to suffer without reason at a time of great challenges.