"EU energy ministers reached a political agreement on a Council regulation that sets a market correction mechanism to protect citizens and the economy against excessively high prices," the statement said.
The EU sets the price cap on the Title Transfer Facility (TTF) at 180 euros.
"The market correction mechanism will be automatically activated if the following 'market correction event' occurs: The month-ahead price on the Title Transfer Facility (TTF) exceeds 180€/MWh for three working days," according tot he Council of the EU; The month-ahead TTF price is 35€ higher than a reference price for LNG on global markets for the same three working days.
The Council of the EU said that the mechanism will apply starting February 15, 2023, and will be monitored by the Agency for the Cooperation of Energy Regulators (ACER).
At the same time, the Council added that the EU's temporary mechanism to limit excessive gas prices will not apply to over-the-counter trades, as well as day-ahead exchanges and intra-day exchanges.
"The ceiling will not apply to over-the-counter (OTC) trades (where participants trade directly between two parties, without being listed on an exchange), day-ahead exchanges and intra-day exchanges," the statement said. The mechanism will apply to month-ahead, three months-ahead and a year-ahead derivative contracts.
In late November, the European Commission proposed capping gas prices, with the initial plan intended for triggering the cap under two conditions: if the front-month price on the Dutch gas exchange TTF, Europe's main natural gas futures market, exceeds 275 euros ($293) per MWh for two weeks and if, at the same time, TTF prices are 58 euros higher than the liquefied natural gas global reference price for 10 consecutive trading days.