EUROPEAN COMMISSION Strasbourg, 18.10.2022 COM(2022) 549 final 2022/0339(NLE) Proposal for a COUNCIL REGULATION Enhancing solidarity through better coordination of gas purchases, exchanges of gas across borders and reliable price benchmarks



EXPLANATORY MEMORANDUM CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal Responses to a changing context Russia’s unprovoked war of aggression against Ukraine and its weaponisation of energy supplies has exposed the Union’s dependency on Russian fossil fuels, tested our tools to ensure security of supply, and driven energy prices to unprecedented levels. Over the last year, the Commission has put forward and implemented several initiatives, gradually moving from providing guidance to Member States to setting up an integrated security of supply strategy, underpinned by legal instruments where necessary. This included, most recently, the emergency intervention to address high energy prices, featuring for instance a coordinated reduction of electricity demand (notably in peak hours), an improved Member States toolbox to protect consumers and companies from high energy prices, and a solidarity contribution for the fossil sector. Following the “REPowerEU” Communication, the Commission and Member States have asked for the creation of an EU Energy Platform, with a view to ensuring security of supply. This Platform should support, in a spirit of solidarity, Member States and Energy Community Contracting Parties and their gas undertakings in obtaining additional supplies of LNG and pipeline gas to replace missing Russian gas supplies. The need for further emergency action The current situation causes economic and social hardship, placing a heavy burden on citizens and on the economy. Rising energy costs are leading to reduced purchasing power for citizens and loss of competitiveness for companies. The shortage in gas and power supply and the relatively inelastic energy demand has led to significant increases in prices and volatility of gas and electricity prices in the EU. National measures to counter these trends may lead to fragmentation of the internal market and may not guarantee solidarity. At the same time, the weaponisation of gas supply and the Russian Federation’s manipulation of the markets through intentional disruptions of gas flows have led to skyrocketing energy prices in the Union, endangering not only the economy in the Union, but also seriously undermining security of supply. A coordinated and swift reply from the EU is therefore needed. Russian gas supplies decreased significantly, down to 9% of our pipeline gas supply in September 2022 and 14% when including LNG, compared to a 41% share of Russian pipeline gas and 45% when including LNG in 2021. The apparent sabotage of the Nord Stream 1 pipeline increases the need to substitute Russian gas volumes quickly and on a lasting basis. Beside demand reduction, energy efficiency measures and the increase of renewable energy sources, the supply gap will need to be filled, where no other means of substitution are available, by purchasing equivalent volumes of gas from other suppliers, mostly LNG. Compared to this winter, undertakings could face severe difficulties in meeting two additional challenges related to filling gas storage the following winter (2023/2024). First, it is highly probable that less and most likely no pipeline gas will arrive in the EU from Russia given the current political situation. Second, the target is to fill 90% of EU gas storage capacities as opposed to 80% for this winter as set out in the Gas Storage Regulation (EU) 2022/1032. In this situation, and building on existing legislation and other initiatives, aggregating the EU demand and joint purchasing could be a useful tool to help the Member States meet filling trajectories and targets enshrined in the Gas Storage Regulation. Aims of this proposal Therefore, the Commission proposes this emergency regulation, which aims at mitigating the impact on the price for gas by addressing demand and supply, ensuring security of supply across the entire European Union, and enhancing solidarity. The regulation contains four main elements that will work, in a coherent manner, towards lowering prices and reinforcing solidarity and security of supply. First, aggregation of EU gas demand and joint purchase of gas will allow the EU to use its collective purchasing power to negotiate better prices, reduce the risk of Member States outbidding each other on the already tight market and, in doing so, counter-productively driving up prices. It will improve transparency and help smaller Member States in particular, which are in a less favourable situation as buyers. The short-term focus under Article 122 will be on coordinating and aggregating (pooling) demand to support the filling of gas storage for the next, fast approaching, filling season.

Second, the proposal contains an entire package of measures on gas prices, to address excessive price levels and to ensure fair gas and electricity prices also in a crisis situation. The current proposal provides certainty as to the price to be used in a context of gas scarcity, when an emergency situation is declared. It also proposes a complementary benchmark on liquefied natural gas (LNG) supplies to ensure a representative benchmark for LNG imports not influenced by Russia’s manipulation. To deal with excessive volatility in the markets, it includes mechanisms to smoothen-out the volatility on futures markets by way of an intra-day price volatility management mechanism that limits extreme changes within a short time-period (“circuit breaker”). Third, a joint approach to limiting prices requires solidarity across the Union. As not all Member States have mutual solidarity agreements in place, the Commission proposes directly applicable arrangements in the absence of such solidarity agreements. It will also propose to extend the obligation to provide solidarity to non-connected Member States with LNG facilities. This will ensure that we will be prepared and ready to act in case these agreements will be needed. The Commission is also looking into the need for further proposals for situations where some regions are facing a larger supply crunch than others. Finally, further reduction of gas demand should be possible while also ensuring consumers continue to be adequately protected against supply shortages. The EU already has strengthened its tools for savings in gas and electricity. However, the implementation of the agreed regulations to their fullest extent is needed in order to reach the necessary demand reduction targets. This will help withstand further gas supply disruption, and ease pressure on international gas markets, and therefore on prices. The Commission will closely monitor demand reduction measures and stands ready to trigger the EU alert or even revise the gas demand reduction targets if voluntary demand reduction measures prove insufficient to ensure sufficient gas supplies over the winter Main elements of this proposal (1)Joint purchasing and efficient operation of gas infrastructure (a) Joint purchasing This proposal addresses these urgent issues by developing a temporary joint purchasing tool, in line with the request from Member States. There is considerable time pressure for this tool to be ready no later than in early spring 2023, and in particular ahead of the next storage filling season. Bearing this in mind, it is proposed to move quickly to establish the central tenets of joint purchasing under Article 122 as soon as possible, and therefore a number of these elements should apply on a provisional basis. The proposal for joint purchasing establishes a process consisting of two steps: first, demand aggregation of natural gas; second, possible joint purchasing under the Energy Platform. (i)First step: Demand aggregation In the first step, gas purchasing companies would aggregate their demand using a service provider organising this process, contracted through a public procurement procedure by the Commission for this purpose. Companies can submit their demand for gas (in terms of volume, delivery time, duration and place) to the service provider via an IT tool to collect this data. The service provider would publish these data, with appropriate protection of confidential information, on its website, seeking offers through a public tender process for volumes of natural gas that meet the aggregated demand. This step would be voluntary except that – given the importance of storage filling – Member States would have to require that volumes equivalent to at least 15% (around 13.5 bcm for the EU as a whole) of their storage filling requirements for next year were included by their companies in the demand aggregation process. The companies which participated in demand aggregation under a mandatory obligation could still decide whether to actually purchase the gas or not after the aggregation process. Further, the gas purchased does not necessarily need to be used for storage filling. Given the importance of storage filling in the coming year in particular, this mechanism to jointly purchase gas would benefit from market leverage from joint purchasing and help ease the uncertainties and abnormally high prices seen in the last filling season this year. Given the need for urgency, the service provider should be an existing company with detailed knowledge of energy markets and appropriate IT tools and expertise to perform these tasks. The joint purchasing is open to participation of companies from Energy Community Contracting Parties (Western Balkan, Ukraine, Moldova and Georgia). (ii)Second step: Coordinated gas purchasing In a second step, companies that have participated in the demand aggregation process described above may decide to form a gas purchasing consortium in order to enter into contracts with the suppliers that have offered gas under this process. They could thereby decide to purchase the gas on a joint basis, and coordinate elements of their positions such as volumes, prices, delivery points and time of delivery. A single gas purchasing consortium with strong buying power increases the likelihood of achieving better prices, but more than one gas purchasing consortium could emerge, given the very different demand pattern of undertakings across the EU. Respect of competition rules would have to be ensured (see “Consistency with other EU policies” below). (iii) Ad hoc governance arrangements The aforementioned measures should be accompanied by an adequate governance structure to ensure effective coordination to meet the objectives. Therefore, a Steering Board should be established on an ad hoc basis, composed of representatives of the Commission and Member States, to oversee both the process of (a) demand aggregation and (b) coordinated gas purchasing. The Steering Board can ensure transparency in the process and provide guidance so as to ensure that joint purchasing effectively respects security of supply and the principle of energy solidarity. The proposal is carefully balanced and respects the principle of proportionality. There are certain necessary mandatory elements – for example on pooling of demand for the filling-in of gas storages – but these in no way constrain the freedom of undertakings to decide on whether to buy or not depending on the conditions that are offered through the demand aggregation process. The objective of joint purchasing is to support EU undertakings in their efforts to obtain additional gas and help to ensure more equal access to new or additional gas sources in the face of the current acute threat to the security of supplies. In addition, the proposal addresses the strong interest in a number of Member States to be able to operate in gas purchasing consortiums, subject to the relevant competition considerations.

In particular, as described, the tendering of aggregated demand for gas by the Service Provider could play a pivotal role in helping Member States to fill gas storages for the winter 2023/2024. Indeed, it could also therefore strengthen EU solidarity by helping ensure the fairer distribution of gas. Aggregation of demand and joint purchasing could also reduce the risk for individual gas undertakings in some Member States of overpaying for gas contracted on tight short term markets. It could also help smaller EU undertakings, including in landlocked countries that do not have the necessary experience in contracting LNG, to be able to pool their demand to contract LNG cargoes (which may be too large for individual undertakings to handle all at once), and also help them to structure LNG supply according to their particular needs. Joint purchasing could support particularly those undertakings that were previously purchasing gas only or mainly from Russian suppliers. Joint purchasing could grant a preferential treatment or support to supply of renewable gases such as biomethane and hydrogen, and to gas which would otherwise be vented or flared. Undertakings concluding contracts pursuant to this Regulation should be encouraged to use the UN Oil and Gas Methane Partnership 2.0 Standard to measure, report and verify methane emissions along the supply chain to the European Union. Finally, joint purchasing in the future could strengthen the potential for renewable energy supplies in helping to ensure access to future imports of hydrogen from non-EU sources. (b)Efficient operation of pipelines and LNG terminals The proposed regulation also addresses ways for the most efficient operation of pipelines and LNG terminals. Diversification of supply sources away from Russian are changing the gas flow patterns in the EU. Therefore, the routes from LNG terminals to consumption centres may become more relevant than the currently predominant East-West direction of pipeline flows. However, such changes in gas flows may lead to congestion (contractual and physical) of the existing pipelines and the EU LNG terminals. The existing congestion management measures for pipelines foresee “use-it-or-lose-it” procedures, which take at least six months before they show effect. Moreover, an administratively burdensome procedure to be performed by the National Regulatory Authority in the relevant Member States is necessary. This proposal grants the gas system operators tools to react rapidly to changes in gas flows and possible contractual congestion. In particular, the new rules could accelerate marketing of unused long-term capacities in case of short-term congestion. Moreover, it is of the utmost importance to optimise the LNG absorption capacity of the EU LNG terminals and the usage of storage facilities. A transparency platform and the development of an organised market of secondary capacities are necessary, similar to those existing for the transport of gas via pipelines. The Commission proposal to revise the Gas Regulation of the Hydrogen and Gas Market Decarbonisation Package already contains provisions to this effect in Article 10 and Article 31. The current proposal frontloads these provisions as part of the crisis response now, in order to help avoid situations in the future where new sources of gas are procured, but LNG terminals or gas storage facilities are used inefficiently without the necessary transparency. (2) Security of supply (a)Demand reduction An integral part of the EU security of supply response in the current challenging context is to pro-actively reduce the gas demand, to prepare for any potential supply disruptions while avoiding depleting the storage facilities. If necessary, the Commission will propose to trigger the Union alert pursuant to the Demand Reduction Regulation (Regulation (EU) 2022/1369). In order to best anticipate and prepare for the winter 2023-24 and to fill underground storages up to 90%, as was agreed upon in Regulation (EU) 2022/1032, all demand of gas that can be reduced now will be of benefit. Therefore, efforts to reduce gas demand should be pursued beyond March 2023, in order to fill underground storages up to 90%, as was agreed upon in Regulation (EU) 2022/1032. The Commission will closely monitor demand reduction measures and stands ready to trigger the EU Alert or even revise the gas demand reduction targets if voluntary demand reduction measures prove insufficient to ensure sufficient gas supplies over the winter. Meanwhile, Member States should actively take all possible measures in line with the Gas Demand Regulation to reduce gas demand and in line with the European gas Demand Reduction Plan ‘Save Gas for a Safe Winter’, adopted in July 2022. Such measures include public awareness campaigns, demand-reduction measures in the buildings operated by public authorities and the commercial and outdoor spaces. To reinforce preparedness to possible emergencies in the winter, the proposal introduces the new provisions below related to security of supply. Given the importance that all consumer groups contribute to saving gas within their ability, this proposal includes provisions that allow Member States to exceptionally take measures to reduce the ‘non-essential consumption’ of protected customers provided it does not reduce the protection of their essential consumption. These measures will under no circumstances affect the vulnerable consumers who have no margin to reduce their consumption and will not lead to the disconnection of any protected customers. Member States could redefine who are protected consumers, as long as vulnerable households continue to be protected in all circumstances. (b)Extension of solidarity protection obligation to critical gas fired power plants Under the current regulatory framework, in Member States where critical gas-fired power plants play a key role for security of electricity supply, they would have to be curtailed first, to the possible detriment of the security of electricity supply of other Member States, before Member States are allowed to request solidarity measures under Regulation (EU) 2017/1938. To prevent such negative spill-over effects into electricity generation, it is proposed that Member States may trigger a solidarity request, under certain conditions, if gas-fired power plants, that are needed to ensure the electricity system’s adequacy, are at risk of not being supplied with critical gas volumes. For the same reason, Member States providing solidarity will be entitled to ensure that the operation of their critical gas-fired power plants is not endangered when providing solidarity to another Member State. (c)Default rules for bilateral solidarity Specific measures in this proposal introduce a default mechanism between the Member States to ensure they help each other to supply the “solidarity protected customers” (households and district heating and essential social services under certain conditions) and critical gas fired power plants, in an emergency leading to very severe shortage of gas. The current security of supply rules have introduced the principle of such solidarity but its actual use in a crisis requires detailed technical and financial arrangements which were supposed to be agreed bilaterally between Member States. However, only six out of more 40 required arrangements have been agreed so far. The proposed Regulation, therefore, spells out the rules and procedures that will automatically apply between Member States which have not agreed on bilateral solidarity arrangements. It builds on the Commission’s Recommendation (EU) 2018/177 and the standard template proposed by the Commission in Annex 2 of the COM (2021) 804 proposal, with the necessary updates to reflect the fact that the market and security of supply situation has considerably deteriorated since then. This default solidarity mechanism applicable in the absence of other bilateral arrangements includes the following: ·The solidarity compensation to be paid by the Member State requesting solidarity to the Member State providing solidarity will be based on the average market price of gas of the last 30 days month preceding the request for assistance by the requesting Member State of the most relevant exchange. This averaging reflects the likely extreme volatility of prices in a situation of emergency.

·Possible costs resulting from judicial or arbitration proceedings after the curtailment of industry will not be included in the solidarity compensation to be paid between Member States. If such costs are incurred, they would therefore have to be borne by the providing Member State pursuant to its own national rules. The reason is that the cost of compensation to industry resulting from curtailment is partially covered by the price of gas and, should a part remain from litigation, this part is highly uncertain and can largely exceed the costs of the gas. The uncertainty about indirect compensation costs therefore has proved to be a major obstacle to solidarity agreements. However, Member States will still be able to agree on different compensation conditions. ·The procedure to request and provide solidarity should, to the extent possible, prioritise voluntary market-based measures while operationalising the fact that solidarity may have to include measures such as release of strategic stocks or curtailment as last resort in a crisis. The proposal makes it clear that upon receipt of a solidarity request, the connected Member States must respond within 12 hours and provide the solidarity measures agreed within 3 days. The current solidarity obligation applies between the Member States that are directly connected or via a third country. This proposal will also apply this obligation to Member States with LNG facilities which even if not directly connected could provide solidarity to a Member State in an emergency if endowed with the infrastructure necessary to receive this LNG. (d)Allocation of capacity in a Union or regional emergency Finally, the proposal points to the possibility of Union or regional emergency with major gas disruptions and supply shortages. In such a cases, the Union should be prepared to rapidly apply, solidarity mechanisms in a regionally coordinated manner to mitigate the emergency situation. Under these extraordinary circumstances, the Council should be able to decide on an efficient allocation of the gas capacities available to those Member States affected by a regional or Union emergency based on a proposal from the Commission. In such case, and in the absence of a bilateral solidarity agreement, the price for gas supplied under solidarity should be defined as the average market price of the last 30 days month preceding the request for assistance by the requesting Member State of the most relevant exchange (see also below, 3a). (3)Action on the level of gas prices (a)Price formula in the default solidarity agreements As mentioned above, solidarity should be based on a fair compensation, both for the requesting as well as for the providing Member States. The gas price has become much more volatile since 2021, which makes the spot market price in crisis situations less appropriate as a basis for fair compensation. Therefore, this Regulation proposes to use the average market price of the last month preceding the request for assistance by the requesting Member State of the most relevant exchange to provide certainty to the different parties. With the average market price of the last month, the compensation is still based on the ‘market price’, as stipulated in the 2018 Recommendation. However, the monthly average market price is more independent from a volatile environment and likely very high spot prices during crisis situations, and as such, limits any perverse incentives. The providing Member States still receive a fair compensation as the gas flows come from long term contracts and storages, all being purchased at less than the expected crisis spot prices. (b)Development of a new complementary benchmark for LNG The EU’s LNG market is still emerging, and hub indexed pricing remains highly influenced by pipeline supplies and therefore by the Russian manipulation of natural gas supplies to the EU, as well as by existing infrastructure bottlenecks. The pricing of LNG imports within the EU is deemed to be unduly influenced by these constraints and questions remain as to the representativeness of the current indexes. At the same time, perceptions of malfunctioning in the financial markets for energy undermine public trust. There is a need to provide for stable and predictable pricing for LNG imports, which are indispensable to replace the supply shortfalls caused by the likely halt of Russian gas imports. This proposal tasks the European Agency for the Cooperation of Energy Regulators (‘ACER’) to create within a short time frame an objective price assessment tool, and over time a benchmark, of the EU’s LNG imports by collecting real-time information on all daily transactions. This new benchmark will rely on same day reporting of LNG imports - comprising LNG bids, offers and transactions that specify delivery or are delivered in the EU – by any person who engages in such an activity, regardless of its place of incorporation or domicile. This will provide more comprehensive information to buyers and increase price transparency. The proposed Regulation grants ACER the necessary powers to collect the transaction data needed for the establishment of the LNG benchmark, building on and reinforcing the tasks and powers ACER already has under Regulation (EU) No 1227/2011 of the European Parliament and of the Council of 25 October 2011 on wholesale energy market integrity and transparency and Commission Implementing Regulation (EU) No 1348/2014 of 17 December 2014 on data reporting implementing Article 8(2) and Article 8(6) of Regulation (EU) No 1227/2011 of the European Parliament and of the Council on wholesale energy market integrity and transparency (hereinafter together referred to as ‘REMIT’). (c)Gas Market Correction Mechanism The Title Transfer Facility (TTF) is a virtual pricing location in the Netherlands, which due to its high liquidity often serves as a price reference for the European gas market, impacting contracts and hedging operations across the EU. However, the TTF is primarily a physical pipeline index for gas injection in the Dutch network, serving mainly as the hub for North-western Europe. Currently, the TTF is trading at a premium to most EU trading hubs, which for the most part reflect the shortage in supplies from Russian and the region’s infrastructure bottlenecks. The fact that the TTF is used as a price reference and basis for hedging of gas contracts across the different EU hubs shows its relevance in setting the natural gas price in the EU. As a last resort measure, this emergency proposal aims at tackling situations of excessive natural gas prices, by empowering the Commission to propose a Council measure to establish a maximum dynamic price at which natural gas transactions can take place in the TTF spot markets under specific conditions. Other Union gas trading hubs shall be linked to the corrected TTF spot price via a dynamic price corridor. In order to ensure no negative effects, the measure should allow for over-the-counter gas trades, not affect EU’s security of gas supply and intra-EU flows, not lead to an increase in gas consumption and not affect the stability and orderly functioning of energy derivative markets. (4)Action to reduce price volatility (a)Intra-day price volatility management mechanism: Financial Regulation (MiFID II) already requires a set of mechanisms to be set up by regulated markets to contain significant volatility in financial markets and to prevent erroneous trading patterns. However, it appears that the number of times they have been triggered by trading venues remains low, which is mainly due to the fact that the mechanisms in place are intended to prevent erroneous orders and not rapid price swings reflecting market uncertainty. Large volatility spikes on gas and electricity markets are making it difficult for energy firms to continue participating in those markets and meet their hedging needs while ensuring security of energy supply for the end-consumers. Therefore, this proposal lays down a requirement for trading venues to establish a new temporary intra-day volatility management mechanism aimed at limiting large price movements in electricity and gas derivatives contracts within the same trading day. Moreover, so as to focus on the most liquid contracts, and to avoid unintended disruptions on markets for less liquid derivatives, the intra-day volatility management mechanism should focus on front-month energy derivatives. In order to provide trading venues with the necessary time to set up the mechanism, trading venues are expected to implement preliminary tools that can broadly achieve the same objective as the intra-day volatility management mechanism.

This new mechanism should supplement any static or dynamic circuit breakers that trading venues have put in place and should apply in addition to them. To ensure uniform conditions for the implementation of the new volatility management mechanism, the Commission should be able to specify certain technical elements of its calibration in an implementing act. Additionally, to ensure that the new mechanism is well adapted to specific features of affected derivatives contracts, trading venues should be free to apply contract-specific volatility limits while respecting the requirements set down by law. The European Securities and Markets Authority will be tasked, based on reports regularly submitted by national competent authorities, to coordinate the application of this mechanism throughout the Union, and to document divergences in the way this mechanism is implemented. (b)Non-legislative action accompanying this proposal The actions proposed in this Regulation are complemented by other actions to be undertaken by ESMA and ACER with a view to strengthen the energy markets and their transparency. ESMA and ACER are enhancing their cooperation with a view to strengthen their capabilities on monitoring and detection of possible market manipulation and abuse. ESMA and national competent authorities are also strengthening their respective market monitoring and surveillance activities on the energy derivatives market. Energy companies are finding it increasingly difficult to effectively hedge their commercial risks on centrally cleared EU energy markets. Increasing margin requirements and the difficulties faced by certain energy companies to secure sufficient liquidity to meet margin requirements may push them to reduce hedging activities, and consequently expose them to further risks. To alleviate this stress, the Commission has adopted a delegated act, which would allow the use of uncollateralised bank guarantees and public guarantees, under specific conditions, as eligible collateral for meeting margin calls. This delegated act is in line with ESMA’s proposal of 14 October. ESMA has also clarified that commercial papers and EU bonds are included in the list of eligible collateral to non-cash collaterals. Consistency with existing policy provisions in the policy area The proposed initiative sets out temporary, proportionate and extraordinary measures. It complements existing relevant EU initiatives and legislation, which ensures that citizens can benefit from secure gas supplies and that customers are protected against major supply disruptions. It flows logically from existing initiatives, such as the “REPowerEU plan” and the proposal for a Hydrogen and Gas Market Decarbonisation Package. In addition, the recently adopted Gas Storage Regulation (EU) 2022/1032 introduced storage obligations in response to the Russian invasion of Ukraine. Regulation 2022/1032 prescribes in Article 6a obligations to fill in gas storages in accordance to pre-set trajectories and targets. The proposed initiative is complementary to the EU legislation on internal market and security of supply. Following the Russian invasion of Ukraine, the EU has set out the REPowerEU Plan with the aim to end the EU's dependency on Russian fossil fuels, as soon as possible and at the latest by 2027. To achieve this, the REPowerEU Plan sets out the EU Energy Platform established by the Commission and the Member States for the common purchase of gas, LNG and hydrogen. It announced that the Commission would be developing a joint purchasing mechanism. In these respects, the proposed initiative is fully consistent with the goals set out in REPowerEU. The proposal reinforces and complements the Gas Security of Supply Regulation (EU) 2017/1938. The latter already includes an obligation to provide solidarity, as well as the notion of solidarity protected customers, which includes households and under certain circumstances essential social services and district heating. The proposal extends this solidarity obligation to safeguard the supply of critical volumes for gas fired power plants and operationalises it through a default mechanism in case of absence of bilaterally agreed solidarity arrangements. The proposal also fully reflects the goal of the Demand Reduction Regulation (EU) 2022/1369 to pro-actively reduce gas demand to mitigate potential supply disruptions due to Russia’s invasion of Ukraine. Demand reduction remains a key pillar of our security of supply response and the proposal strentghens this pillar by allowing Member States to undertake savings from non-essential consumption, while still protecting vulnerable and other protected customers. The Commission proposal for a Regulation on the internal markets for renewable and natural gases and for hydrogen adopted under the Hydrogen and Gas Market Decarbonisation Package includes measures to enhance the transparency and access to LNG terminals and gas storage facilities. The current proposal includes the same provisions with shorter deadlines for their implementation, so it is fully consistent with the Gas Regulation. Moreover it is also consistent with the requirements of the recently adopted Gas Storage Regulation (EU) 2022/1032 introducing storage obligations in response to the Russian invasion of Ukraine. Regulation (EC) No 715/2009 of the European Parliament and of the Council of 13 July 2009 on conditions for access to the natural gas transmission networks and repealing Regulation (EC) No 1775/2005 contains, in its Annex 1, point 2.2.5, provisions regarding a long term “use-it-or-lose-it” mechanism. These provisions have been adopted to prevent blocking of transport capacities by market participants in times when they cannot or do not plan to utilise them. Due to the crisis situation, the current proposal reduces administrative burden and anticipates the application of these provisions. In particular, the current proposal reduces the time which elapses when the capacity is not used from six months to one month. The proposal is therefore consistent with the rules of internal market to prevent inefficient use of gas networks. The provisions to enable ACER to publish an LNG benchmark build on and complement ACER’s existing tasks under the REMIT legal framework. In addition to the emergency intervention on the electricity market to tackle high prices, the Commission will improve the design of the electricity market for the longer term. The main objective of this reform of the electricity market design will be to bring the benefits of affordable non-fossil technologies to consumers, while preserving the benefits of a common, market-based electricity system. The aim of this reform is to make sure that no energy carrier can cause market disruption like natural gas currently does, while taking into account the profound transformations needed for a decarbonised and largely electrified continent. The Commission has committed to present the main elements of the reform by end 2022. This will serve as a basis to consult ministers and other stakeholders on a set of ideas brought forward by the Commission. This process is currently expected to lead to a Commission proposal 2023. Consistency with other Union policies European Green Deal The proposal, aiming at fundamentally reinforcing security of supply and tackling high and volatile energy prices, is also consistent with the longer term objective of the Green Deal insofar as the demand reduction efforts will accelerate energy efficiency measures and structural changes.

Internal Market Policy The proposal is compatible with the rules on the internal market for energy, including EU competition rules. Functioning cross-border energy markets are key to ensure security of supply in a situation of supply shortages. Competition Policy As concerns the rules on demand aggregation and joint purchasing, establishing ways of purchasing gas jointly in a more coordinated way is also in line with the decarbonisation path indicated in the Green Deal and the RepowerEU. The Energy Platfom includes also renewable hydrogen in its scope. The provisions to enable ACER to establish an LNG benchmark contribute to market transparency and, indirectly, to lower wholesale prices for gas and are therefore consistent with EU competition policy. The rules on demand aggregation and joint purchasing can be applied in a manner compatible with EU competition rules, which allow joint purchasing between competing undertakings under certain conditions and which are applied in the light of prevailing market circumstances. To reduce the risk of competition concerns, the service provider shall not be part of a vertically integrated undertaking active in the production or supply or consumption of natural gas within the Union or the Energy Community Contracting Parties. In case of a severe supply disruption or supply shortage, joint purchasing among natural gas undertakings operating at the wholesale level is likely to be compatible with the EU competition rules where such crisis cooperation is (i) necessary for the purposes of addressing a severe supply disruption or shortage; (ii) temporary in nature; and (iii) proportionate to the objective pursued. In general, joint purchasing is less likely to give rise to competition concerns where the participating undertakings do not have market power in the purchasing and selling markets. This being said, under the current exceptional market conditions, European gas undertakings and undertakings consuming gas are confronted with severe supply constraints which give very substantial negotiating power to parties on the supply side. A buying consortium for the purposes of increasing the negotiating power of gas purchasers should be accessible to any willing market participant on non-discriminatory terms, assembling participants active on a large variety of unrelated product and geographic markets, such that the representation of any given set of competitors, even if significant in terms of market shares on a given downstream or related market, will be limited relative to total participation. The buying consortium should be set up in a way that does not lead to any risk of competition distortion in the downstream or related markets in which participants may compete. Participation by firms availing of the service provider in the demand aggregation mechanism of the service provider will be taken into account as a positive factor when balancing the possible risks and benefits of gas purchasing cooperation schemes under Union competition law, to the extent that such participation contributes to achieving greater efficiencies, thereby contributing significantly to counter-balancing any competition risks under the overall balancing test. It will be particularly important to ensure that the transparency that is necessary for demand aggregation to function, as between individual participating undertakings and the service provider, the Commission and national competent authorities does not translate into wider transparency on volumes, delivery schedules or realised prices for individual participating undertakings, or indeed at the level of a given sector or sub-sector which could represent a downstream or related market on which competition should continue to play out. While the Commission’s Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal co-operation agreements, state that combined market shares below 15% in the purchasing and selling market(s) are indicative of a lack of market power, a combined market share above that threshold in one or both markets does not automatically indicate that the joint purchasing arrangement is likely to give rise to restrictive effects on competition. A joint purchasing arrangement which does not fall within that safe harbour requires an assessment of its effects on the market, involving factors such as possible countervailing power of strong suppliers and the necessary governance and information-exchange arrangements to ensure continued competition on downstream markets, against the background of the current exceptional market circumstances. The Commission stands ready to accompany companies in the design of such a consortium and to rapidly issue a decision, pursuant to Article 10 of Regulation 1/2003, on inapplicability of Articles 101 and/or 102 TFEU, if relevant safeguards are incorporated and respected. The Commission also stands ready to provide informal guidance to the extent that the participating undertakings in any other consortia face uncertainty with regard to the assessment of one or more elements of the joint purchasing arrangement under EU competition rules. Participants of the joint purchasing of gas might need financial guarantees if any of the undertakings is not ultimately able to pay for the final amount contracted. Member States or other stakeholders may provide financial support, including guarantees, to natural gas undertakings or undertakings consuming gas. The legal proposal mentions this possibility of financial aid to undertakings participating in joint purchasing. The proposal stresses that such support needs to be in accordance with State aid rules, where applicable. Establishing ways of purchasing gas jointly in a more coordinated way, is also in line with the decarbonisation path indicated in the Green Deal and the RepowerEU. The Energy Platfom includes also renewable hydrogen in its scope. The provisions to enable ACER to establish an LNG benchmark contribute to market transparency and, indirectly, to lower wholesale prices for gas and are therefore consistent with EU competition policy. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY Legal basis The legal basis for this instrument is Article 122(1) of the Treaty on the Functioning of the European Union (‘TFEU’). This Article can only be applied for issues of severe difficulties and has to be applied in the spirit of solidarity. The current shortage of gas supplies from the Russian Federation constitutes a severe difficulty in the supply of an energy product within the meaning of Article 122. EU leaders and Commission have identified the urgent need for additional measures for more coordinated action, on a temporary basis, in order to be better prepared for possible further gas disruptions in the coming two winters.

The current security of gas supply regulatory framework, notably the Gas Security of Supply Regulation (EU) 2017/1938, was designed to deal with short-term supply disruptions and not with a prolonged cut from our main supplier. Therefore, additional temporary emergency tools for security of gas supply are needed, among others to prevent undue cross-border restrictions and preventing that a prolonged gas supply disruption has major spill-over effects harming the electricity system’s adequacy. Likewise, the notion of protected customers was designed for short periods of shortages, while in case of a prolonged disruption, Member States should be able to let protected customers also contribute to reducing demand via a reduction of non-essential consumption. The solidarity provisions set out in the Gas Security of Supply Regulation (EU) 2017/1938 should be accompanied by bilaterally agreed solidarity arrangements, spelling out the legal, technical and financial details for solidarity. This solidarity obligation is not operational, due to a lack of agreements, justifying a need to complement the existing provisions by including a default solidarity mechanism in case of absence of bilaterally agreed arrangements. The measures under the instrument allow undertakings in all Member States to prepare for possible further supply shortages in a coordinated manner and use the gas infrastructure in a more efficient way. It is expected that most of the European gas storages could be depleted during the winter period. In the absence of supplies from the Russian Federation, Member States could face difficulties in filling storages up to the necessary levels. This situation calls for the coordination in the purchasing of gas and the establishment of a joint purchasing process that could allow joint purchasing in practice. Joint purchasing helps to ensure more equal access for undertakings across Member States to new or additional gas sources in urgent situations where solidarity is required. It could, in the spirit of solidarity, reduce the detrimental effect of outbidding, driving prices up and also help smaller undertakings benefit from more advantageous purchasing conditions resulting from aggregated demand. Using joint purchasing could help the Member States to lessen the challenges in filling gas storages stemming from declining gas deliveries from the Russian Federation. For instance, it could help to coordinate gas purchases while maintaining prices at sustainable levels. It could also allow, through the ad-hoc Steering Board, for coordination of joint filling and storage management in view of the next filling season. Joint purchasing could therefore strengthen EU solidarity in purchasing and distribution of gas. In the spirit of solidarity, joint purchasing could support particularly those undertakings, that were purchasing gas only or mainly from Russian suppliers. The urgency situation fully justifies the use of Article 122 TFEU in order to establish an entity as soon as possible by contracting the necessary services from existing entities. The success of joint purchasing of gas will depend on the availability of capacities in LNG terminals and pipelines. This is even more important in current circumstances, where congestion of pipelines and terminals cause bottlenecks in the supply of gas, including for the filling of storages. Applying rules of transparency and selling of unused capacity of LNG terminals and unused capacities of pipelines allows to maximise the available capacity of gas infrastructure. Open, more efficient and non-discriminatory use of infrastructure increases cross-border and internal flows of gas and is a necessary condition to enable LNG reaches consumers across the EU. The rules which are currently in place are not sufficient to ensure it. It is necessary that rules enabling the capacities of LNG terminals and pipelines are put in place and applied as soon as possible. The LNG price assessment should be published daily starting no later than two weeks after the entry into force of this Regulation making sure that an objective price reference is available for market participants as of the 2022/23 winter seasons. This price assessment should be complemented by the publication of an LNG benchmark by 1 March 2023 at the latest. Although the establishment of such a tool on a permanent basis should at a later stage be included in a more comprehensive revision of the REMIT legal framework, the on-going crisis situation requires urgent action already now to address the immediate situation of severe difficulties in the supply and accurate pricing of LNG deliveries to the Union on a temporary basis until such revision of the REMIT legal framework can be adopted. In this sense, the proposal on the LNG benchmark should also be seen as provisional in order to act as a “bridge” to more permanent arrangements to be proposed under the ordinary legislative procedure. It is therefore justified to base the proposed instrument on Article 122(1) TFEU. Subsidiarity (for non-exclusive competence) The planned measures of the present initiative are fully in line with the subsidiarity principle. Because of the scale and the significant effect of further cuts in gas supply on the part of the Russian Federation, there is a need for EU level action. A coordinated approach through joint purchasing with regional and broader scope and more efficient use of LNG terminals, gas storages and pipelines is necessary to minimise the risk of potential major disruptions during this and next winter and where Member States and their undertakings will need to seek replacement for the Russian supplies. This can be regulated efficiently at EU level instead of national level. A coordinated approach at EU level is also necessary on security of supply measures, including demand reduction measures. Such a coordination is crucial to ensure that Member States have the possibility to respond in an efficient and timely manner to solidarity requests. While Member States will continue to have the possibiltiy to enter into bilateral solidarity arrangements, default rules will be in place until such arrangements are concluded, allowing for all EU Member States to benefit from solidarity. This will ultimately ensure that the provision of bilateral solidarity is not hindered by the lack of administrative and financial arrangements between the Member States, while also allowing Member States to complement the default rules with negotiated conditions. Given the unprecedented nature of the gas supply crisis and its cross-border effects, as well as the level of integration of the EU internal energy market, action at Union level is warranted as Member States alone cannot effectively address the risk of serious economic difficulties resulting from price hikes or significant supply disruptions in a coordinated manner. This proposal sets the final result to be achieved, in the form of extending solidarity protection and setting default solidarity rules, while giving Member States autonomy in choosing the most effective means to meet such obligations and to agree solidarity measures bilaterally. The provisions related to demand reduction do not exceed what is necessary to safeguard security of supply by leaving to authorities in Member States to decide the savings from the non‑essential consumption by protected customers, provided it does not affect vulnerable customers,. It is worth to stress that the current proposal foresees that private undertakings will remain parties to the contracts for gas supply established under the joint purchasing. Neither the Union nor the Commission will enter in gas supply contracts as a party. By reason of its scale and effects, the measure can be better achieved at Union level, hence the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. The establishment of an EU-wide benchmark for LNG transactions is also not possible at Member State level but can be better achieved at Union level. The previous experience with the TTF benchmark, which is linked to a trading hub in a single Member State, shows that a system of decentralised benchmarks may provide market participants with incomplete information and lead to higher prices. Proportionality The initiative complies with the proportionality principle. The policy intervention is proportional to the dimension and nature of the problems defined and the achievement of the set objectives. In view of the unprecedented geopolitical situation and the significant threat for citizens and the EU economy, there is a clear need for coordinated action. The measures set out in the proposal do not go beyond what is necessary to achieve their objectives and are proportionate to those objectives. In particular, they build to the extent possible on existing approaches, such as the existing arrangements of the internal gas market.

More specifically, the current proposal foresees that demand aggregation and joint purchasing of gas take place on a voluntary basis, with only a limited exception as regards mandatory participation in demand aggregation for the purpose of filling gas storage facilities. Private undertakings will remain parties to the contracts for gas supply established under the joint purchasing. Natural gas arriving through the entry points from the Russian Federation is excluded from participating in the mechanism as its inclusion would contradict the objective of the proposed Regulation which seeks to ensure sources alternative to Russian supplies. Moreover, undertakings controlled by the Russian Government or any Russian natural or legal person; or undertakings controlled by any other natural or legal person, listed in the sanctions of the Union established on the basis of Article 215 TFEU, are excluded from participating in joint purchasing as well as in participating in the service provider operating joint purchasing The measures Member States will be able to take to reduce non-essential consumption of protected customers should be necessary and proportional, applying particularly in situations of a declared crisis pursuant to Article 11(1) and Article 12 of Regulation (EU) 2017/1938 or of a Union alert pursuant to Regulation (EU) 2022/1369. Despite the application of non-essential consumption reduction measures, protected customers will continue to benefit from protection against disconnection. Furthermore, such measures may not limit the protection required for the vulnerable customers, whose current consumption should be considered as essential. The extension of solidarity to critical gas-fired power plants imposes restrictions on market operators that are necessary to ensure security of gas supply during a situation of reduced gas supply and increased demand during the winter season. They build on existing measures laid down in respectively Regulations (EU) 2022/1369 and (EU) 2017/1938, aiming at making those measures more effective under the current circumstances. The obligation on market operators to provide ACER with information on LNG transactions is necessary and proportionate to achieve the objective of enabling ACER to establish an LNG benchmark; it is aligned with market operators’ existing obligations under REMIT and ACER will keep sensitive business information confidential. The measure to limit intra-day price volatility lays down requirements for trading venues and traders that are necessary in order to allow energy companies to continue participating in gas and electricity markets and meet their hedging needs, thus ensuring security of energy supply for final consumers. Choice of the instrument Taking into account the dimension of the energy crisis and the scale of its social, economic and financial impact, the Commission deems suitable to act by way of a regulation which is of general scope and directly and immediately applicable. This would result in a swift, uniform and Union-wide cooperation mechanism. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS Stakeholder consultations Due to the politically sensitive nature of the proposal and urgency to prepare the proposal so that it can be adopted on time by the Council, a stakeholder consultation could not be carried out. Fundamental rights No negative impact has been identified on fundamental rights. The measures under this initiative will not affect the rights of customers who are categorised as protected under Regulation (EU) 2017/1938, including all household customers. Measures to reduce consumption shall only target non-essential uses and will not lead to disconnection of household customers or to reduced protection to customers who are most vulnerable. Exclusion from joint purchasing of undertakings from states which are subject to sanctions imposed by the EU will be limited to apply as long as such sanctions are in place. The initiative will enable to reduce the risks associated with gas shortage that would otherwise have major implications on the economy and society. The obligation on market operators to provide ACER with information on LNG transactions is necessary and proportionate to achieve the objective of enabling ACER to establish an LNG benchmark; it is aligned with market operators’ existing obligations under REMIT and ACER will keep sensitive business information confidential. BUDGETARY IMPLICATIONS The budgetary implications are limited to the need to finance, through service contracts or other initiatives managed directly by the Commission, the setup of the mechanism by the service provider that will be operating demand aggregation for joint purchasing. Neither the Commission, nor the service provider operating joint purchasing, however, will purchase gas on behalf of the participating undertakings. These undertakings will enter in purchasing contracts with suppliers chosen through the purchasing mechanism. See the financial statement for more details. The budgetary impact on the EU budget associated to this proposal also concerns the human resources and other administrative expenditures of the European Commission’s Directorate-General (DG) for Energy, as well as of ACER. The proposal sets out an enhanced Gas Security of Supply architecture, with new obligations for Member States and, correspondingly, a reinforced role for DG Energy in a wide range of areas – namely: ·Overall management and implementation of the Regulation (3 FTE), ·Preparation and implementation of a proposal for a Council measure which provides for a mechanism to allocate gas capacities to supply Member States for which a regional or Union emergency has been declared; management and implementation of the proposal, including the involvement of the crisis management group (2 FTE).

·Work to design competition law compliant implementation of gas purchasing consortium, requiring exchanges with industry (2 FTEs) ·Assessment of Member States requests for allowances regarding higher critical gas volumes (1 FTE). ·Follow-up to solidarity requests; facilitation of the implementation of solidarity agreements (1 FTE) ·Administrative assistance (1 FTE) ·The proposal also sets out new tasks for ACER to collect LNG transaction data for the purpose of establishing an LNG benchmark (5 FTE). OTHER ELEMENTS Not relevant. 2022/0339 (NLE) Proposal for a COUNCIL REGULATION Enhancing solidarity through better coordination of gas purchases, exchanges of gas across borders and reliable price benchmarks THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty on the Functioning of the European Union, and in particular Article 122(1) thereof, Having regard to the proposal from the European Commission, Whereas: (1)The Russian Federation’s military aggression against Ukraine and the unprecedented reduction of natural gas supplies from the Russian Federation to Member States threaten the security of supply of the Union and its Member States. At the same time, the weaponisation of gas supply and the Russian Federation’s manipulation of the markets through intentional disruptions of gas flows have led to skyrocketing energy prices in the Union, endangering not only the economy in the Union, but also seriously undermining security of supply. (2)This requires a strong and coordinated response from the Union, to protect its citizens and its economy against excessive and manipulated market prices and to make sure that gas flows to all consumers in need across borders, also in situations of gas scarcity. To lower the dependency on supplies of natural gas from the Russian Federation and to bring excessive prices down, a better coordination of gas purchases from external suppliers is crucial. (3)Article 122(1) of the Treaty on the Functioning of the European Union enables the Council to decide on a proposal from the Commission and in a spirit of solidarity between Member States, upon the measures appropriate in the economic situation, in particular if severe difficulties arise in the supply of certain products, notably in the area of energy. The high risk of a complete halt of Russian gas supplies and the extreme energy price increase undermining the Union’s economy constitute such severe difficulties. (4)The Commission announced in its REPowerEU Communication the setting up of an EU Energy Platform together with the Member States for the common purchase of gas, Liquified Natural Gas (LNG) and hydrogen. This announcement was endorsed by the European Council of 30 and 31 of May 2022. As part of the REPowerEU Plan, the Commission also presented the strategy for an EU external energy engagement, which explains how the EU supports a global, clean and just energy transition to ensure sustainable, secure and affordable energy, including by diversifying the EU’s energy supply, in particular by negotiating political commitments with existing or new gas suppliers to increase gas deliveries to Europe. (5)The EU Energy Platform can play a pivotal role in seeking mutually beneficial partnerships that contribute to security of supply and lead to lower import prices of gas purchased from third countries, making full use of the Union’s collective weight. Enhanced international outreach to gas suppliers (both pipeline and LNG) as well as the green hydrogen suppliers of the future is essential to this purpose. In particular a much stronger coordination with and among Member States via-à-vis third countries via the EU Energy Platform would ensure the Union’s collective weight is more effective.

(6)In so far as a situation of severe difficulties in ensuring security of supply persists, joint purchasing should help to ensure more equal access for undertakings across Member States and in the Energy Community Contracting Parties to new or additional gas sources and help to ensure lower prices than might otherwise have pertained for those purchasing the gas through the service provider to the benefit of final consumers. (7)Joint purchasing could result in granting a more beneficial treatment or support to the supply of renewable gases such as biomethane and hydrogen, insofar as they can safely be injected into the gas system, and to the supply of gas which would otherwise be vented or flared. In the absence of a formal legal requirement in any relevant jurisdiction, undertakings concluding contracts pursuant to this Regulation are encouraged to use the UN Oil and Gas Methane Partnership 2.0 Standard to measure, report and verify methane emissions along the supply chain to the European Union. (8)Joint purchasing under this Regulation consists of a two-step process. As a first step, natural gas undertakings or undertakings consuming gas established within the Union or the Energy Community Contracting Parties would aggregate their gas demand through a service provider, contracted by the Commission. This would allow gas suppliers to make offers on the basis of large aggregated volumes, instead of many smaller offers of purchasers approaching them individually. In a second step, natural gas undertakings or undertakings consuming gas established within the Union or the Energy Community Contracting Parties may conclude gas purchase contracts, individually or in a coordinated manner with others, with natural gas suppliers or producers that have matched the aggregated demand. (9)As a situation of severe difficulties in ensuring security of supply persists, joint purchasing should help to ensure more equal access for undertakings across Member States to new or additional gas sources and help to ensure lower prices than might otherwise have pertained for those purchasing the gas through the service provider to the benefit of final consumers. A first reference to the possibility of a very limited form of joint purchasing of gas for balancing purposes is already included in the Commission’s proposal for a Regulation on the internal markets for renewable and natural gases and for hydrogen. However, the proposal dates from a time before the Russian Federation’s military aggression against Ukraine; furthermore, no detailed concept was included in the proposal, which only concerned the very specific needs of transmission system operators for balancing energy. As an immediate and much more comprehensive solution to the problem of missing structures for coordinated gas purchasing is needed, it is appropriate to propose a temporary fast-track solution. (10)Joint purchasing could, therefore, strengthen Union solidarity in purchasing and distributing gas. In the spirit of solidarity, joint purchasing should support particularly those undertakings that were previously purchasing gas only or mainly from Russian suppliers by helping them to obtain supplies from alternative natural gas suppliers or providers in advantageous conditions, as a result of the tendering of the aggregated demand. (11)The tendering of the aggregated demand for gas by the service provider should help to fill-in gas storages in the current emergency situation, should most of the European gas storages be depleted after the upcoming winter. Moreover, it should help to purchase gas in a more coordinated manner in the spirit of solidarity. (12)The current proposal is based on Article 122 TFEU with a view to the urgent need to establish joint purchasing swiftly and on a temporary basis. This would allow the rapid establishment of a service provider, which would enable the aggregation of demand. The service provider contracted by the Commission would have only some basic functionalities and the process it organises only has mandatory elements regarding participation in aggregating demand but would not yet include a mandatory coordination of the contractual conditions or an obligation to submit binding offers to purchase gas through it. (13)There should be no requirement on natural gas undertakings or undertakings consuming gas to buy gas through the service provider, by concluding gas supply contracts or memoranda of understanding with the gas suppliers or producers which have matched the aggregated demand. However, natural gas undertakings or undertakings consuming gas are strongly encouraged to explore forms of cooperation which are compatible with competition law, and to make use of the service provider to fully reap the full benefits of the joint purchasing. A mechanism could, therefore, be developed between the service provider and participating undertakings, setting out main conditions under which participating undertakings enter into a commitment to buy the gas matching aggregated demand. (14)It is important for the Commission and Member States to have a clear picture of intended and concluded gas supply contracts across the Union, in order to assess whether the objectives of security of supply and energy solidarity are met. Therefore, undertakings should inform the Commission of large planned gas purchases above 5 TWh. Therefore the Commission should issue recommendations to relevant Member States, warning against any negative impacts of planned purchases on functioning of joint purchasing, on security of supply, the internal market or energy solidarity. (15)Member States should assist the Commission in assessing whether the relevant gas purchases enhance security of supply in the Union and are compatible with the principle of energy solidarity. Therefore, an ad hoc Steering Board composed of representatives of the Member States and the Commission should be established to help coordinate. (16)The process of aggregating demand for the purpose of joint purchasing should be carried out by a suitable service provider. Therefore, the Commission should contract a service provider through a public procurement process, which can develop an appropriate IT tool and organise the process of aggregation of demand. Fees could be collected from participants of the joint purchasing to cover operating costs. (17)The aggregation of demand and the purchasing of natural gas are complex processes, which need to take into account various elements, which are not limited to prices, but also to volumes, delivery points and other parameters. Therefore, the selected service provider should have the necessary level of experience in managing and aggregating purchases of natural gas or associated services at an EU level. Also, the aggregation of demand and the purchasing of natural gas is a crucial element in ensuring security of gas supply to the Union. (18)Joint purchasing may take different forms. It can take place through tenders or auctions organised by the service provider that aggregates demand of natural gas undertakings and undertakings consuming gas, in order to match it with offers from natural gas suppliers or producers, through the use of a Joint Purchasing IT Tool. (19)One of the objectives of aggregation of demand and joint purchasing is to reduce the risk of unnecessary price increases driven by companies bidding for the same tranche of gas. Ensuring that the full benefits of joint purchasing passes through to final consumers ultimately depends on the decisions of undertakings themselves. Large companies should be restrained even if they can sell on the gas at higher prices. Undertakings benefiting from lower prices for the purchase of gas from joint purchasing should pass these benefits to consumers. The pass-through of lower prices would be an important indicator for the success of joint purchasing, as it is crucial for consumers. (20)Any action undertaken under the proposed Regulation shall comply with restrictive measures of the Union established on the basis of Article 215 TFEU. In particular, undertakings controlled by the Russian Government or any Russian natural or legal person, or undertakings targeted by Union restrictive measures (sanctions) of the Union established on the basis of Article 215 TFEU, or owned or controlled by any other natural or legal person, entity or body subject to such restrictive measures should be excluded from participating in joint purchasing as well as from organizing the process of joint purchasing. Those restrictive measures were adopted with a view to achieving the Union’s common foreign and security policy objectives, in particular that of preserving peace, preventing conflicts and strengthening international and Union security, in accordance with the principles of the United Nations Charter. This is without prejudice to future sanctions adopted against Russia or other countries. (21)Natural gas originating in the Russian Federation that enters the Member States or Energy Community Contracting Parties through the entry points from the Russian Federation should not be purchased in joint purchasing. This is consistent with the objective of the proposed Regulation, that is, ensuring alternative sources to Russian supplies. (22)Participants of the joint purchasing of gas may need financial guarantees, if any of the undertakings would not be able to pay for the final amount contracted. Member States or other stakeholders might provide financial support, including guarantees, to participants in joint purchasing. Providing financial aid should take place in accordance with State aid rules, including the Temporary Crisis Framework, where applicable. (23)Filling gas storages is vital to ensure security of supply in the Union. Due to the drop in supplies of natural gas from the Russian Federation, Member States may face challenges in filling the storage facilities to ensure security of gas supply for winter 2023/2024 as prescribed by Regulation (EU) 2022/1032. Using the demand aggregation possibility of the service provider could help the Member States to lessen these challenges; it could, within the limits of competition law, notably support coordinated filling and storage management in view of the next filling season, avoiding the excessive price peaks caused, inter alia, by uncoordinated storage filling. (24)In order to ensure that joint purchasing may contribute to filling gas storages in line with the intermediary targets set out in Regulation (EU) 2022/1032, Member States should take appropriate measures to ensure that natural gas undertakings under their jurisdiction use the process organised by the service provider as one possible means to meet the filling targets. (25)Regulation (EU) 2022/1032 requires that Member States fill their storages up to 90% by November 2023. This target is higher than the target for November 2022 (80%). Joint purchasing could help the Member States to meet this new target. In doing so the Member States should require domestic undertakings to use the service provider to aggregate demand with sufficiently high volumes of gas in order to decrease the risk that storages cannot be filled. Member States should require that volumes equivalent to at least 15% (around 13.5 bcm for the EU as a whole) of their storage filling target volume for next year were included by their companies in the demand aggregation process. Member States without underground storage in their territory should participate in the demand aggregation process with volumes equivalent to their burden-sharing obligations.

(26)In order to effectively use the joint purchasing and to conclude gas agreements with suppliers offering gas to the service provider, undertakings may coordinate conditions of the purchase, such as volumes, gas price, delivery points and time, within the limits of Union law. Natural gas undertakings participating in a gas purchasing consortium should, however, ensure that the information directly or indirectly exchanged is limited to what is strictly necessary to achieve the objective pursued, in line with Article 101 TFEU. In addition, the transparency and governance provisions in this Regulation will ensure that contracts of the buying consortium do not endanger security of supply or jeopardise energy solidarity, in particular where Member States are directly or indirectly involved in the purchase process. (27)Whilst more than one gas purchasing consortium may be formed, the most effective option would be to form a single gas purchasing consortium encompassing as many companies as possible to aggregate demand through the Service provider and designed in a way that is compatible with EU competition law. Additionally, joining forces into a single gas purchasing consortium will bring strengthened Union negotiation power into the market and enable advantageous conditions that would hardly be achieved by smaller Union undertakings or in case of acting in a more fragmented manner. (28)The set-up and implementation of gas purchasing consortia under this Regulation shall be done in compliance with the Union competition rules, as applicable in light of the current exceptional market circumstances. The Commission has indicated that it stands ready to accompany companies in the design of such a gas purchasing consortium and to issue a decision, pursuant to Article 10 of Regulation 1/2003, on inapplicability of Articles 101 and 102 TFEU if relevant safeguards are incorporated and respected. The Commission has also stated its readiness to provide informal guidance to the extent that the participating undertakings in any other consortia face uncertainty with regard to the assessment of one or more elements of their joint purchasing arrangement under the EU competition rules. (30)In accordance with the principle of proportionality, the measures with respect to demand aggregation and joint purchasing do not go beyond what is necessary to achieve their objective, as they will be implemented on a voluntary basis, with only a limited exception as regards mandatory participation in demand aggregation for the purpose of filling gas storage facilities, and private undertakings will remain parties to the contracts for gas supply established under the joint purchasing. (31)In order to optimise the LNG absorption capacity of the EU LNG terminals and the usage of storage facilities, enhanced transparency arrangements and an organised market facilitating secondary trade in gas storage capacities and capacities of LNG facilities are necessary, similar to those existing for transport of gas via pipelines. This is particularly important in the times of emergency and changes in the gas flows from pipeline gas from the Russian Federation to LNG. The Commission proposal to revise the Gas Regulation of the Hydrogen and Gas Market Decarbonisation Package contains provisions to this effect in Article 10 and Article 31. Frontloading these provisions as part of the crisis response is crucial to use the LNG terminals and gas storage facilities with the necessary transparency and more efficiently. (32)In relation to long term bookings of gas transportation capacities, the existing congestion management rules provide for “use-it-or-lose-it” procedures. These procedures, however, are slow (they take at least six months before they show effect) and require heavy administrative procedures of National Regulatory Authorities. Therefore these rules should be strengthened and simplified in order to grant the gas system operators tools to react rapidly to changes in gas flows and to address possible congestions. In particular, the new rules could accelerate marketing of unused long-term capacities which would otherwise remain unutilised, rendering the use of pipelines more efficient. (33)The transmission system operators should analyse the available information on the usage of the transmission network by the network users and should determine whether there is underutilization of the contracted firm capacity. Such underutilisation could be defined as the situation where a network user used or offered on the market less than on average 80% of the booked firm capacity in the last 30 days. In case of underutilisation, the transmission system operator should publish the available capacity for the next monthly auction and subsequently auction it. (34)The unprovoked and unjustified invasion of Ukraine by the Russian Federation has led to major uncertainties and disruptions in the European natural gas markets. As a result, these markets have for the past months translated the uncertainty on the supply, and the resulting market expectation into extremely high and volatile natural gas prices. This has in turn put additional pressure on market participants and undermined the smooth functioning of the Union energy markets. (35)Directive 2014/65/EU of the European Parliament and of the Council sets out rules to ensure the proper functioning of trading venues, on which energy-related commodities derivatives are also traded. That Directive provides that Member States are to require a regulated market to have in place mechanisms to guarantee fair and orderly functioning financial markets. However, such mechanisms are not intended to set a limit on the intraday evolution of prices and have failed to prevent the episodes of exceptional volatility observed in the gas and electricity derivatives markets. (36)Given the difficulties faced by market participants in the trading venues on which energy-related commodity derivatives are traded, and the urgency to ensure that energy derivatives markets keep fulfilling their role in providing for the hedging needs of the real economy, it is appropriate to require trading venues on which energy-related commodity derivatives are traded to set up temporary intra-day volatility management mechanisms to apprehend excessive price movements more efficiently. In order to ensure that the mechanism applies to the most liquid contracts, and to avoid unintended disruptions on markets for less liquid derivatives, the intra-day volatility management mechanism should only apply to front month energy-related derivatives. (37)Trading venues offering front-month energy-related commodity derivatives often admit for participation various energy firms from all Member States. Such energy firms rely heavily on derivatives traded on such trading venues to ensure crucial supplies of gas and electricity across the Union. Excessive price movements occurring on commodity trading venues therefore affect the operation of energy firms across the whole Union, ultimately also adversely affecting end-consumers. Therefore, in a spirit of solidarity between Member States, coordination of the implementation and application of the intra-day volatility management mechanism should be undertaken, to ensure that operators essential for the security of energy supply in all Member States benefit from safeguards against large price movements that are detrimental to the continued operation of their business, which would also be detrimental to the end-consumers. (38)The intra-day volatility management mechanism should ensure that excessive movements in prices within a trading day are prevented. The mechanism should be based on the observed market price at regular intervals. Given the wide diversity of instruments in energy derivatives markets and the peculiarities of the trading venues associated with such instruments, the intra-day volatility management mechanisms should be adapted to the specificities of those instruments and markets. Therefore, price boundaries should be set up by trading venues taking into account the specificities of each front-month energy-related commodity derivative, the liquidity profile of the market for such derivative and its volatility profile. (39)The intra-day volatility management mechanism should complement any static or dynamic circuit breakers that trading venues have already put in place in accordance with Directive 2014/65/EU before the entry into force of this Regulation. (40)In order to ensure transparency about the functioning of the intra-day volatility management mechanism that they implement, the trading venues should make public a description of its general features. However, to safeguard fair and orderly trading, the trading venues should not be required to publish all the technical parameters of the mechanism they put in place. (41)In order to ensure uniform conditions for the implementation of the intra-day volatility management mechanism, and to ensure the smooth operation of trading venues that offer trading in front-month energy-related commodity derivatives, implementing powers should be conferred on the Commission to specify the conditions of implementation of the intra-day volatility management mechanism, including to specify the frequency at which the price boundaries are renewed, or the measures to be taken if trading moves outside those price boundaries. The Commission should be able to take into account the specificities of each energy-related commodity derivative, the liquidity profile of the market for such derivative and its volatility profile. (42)In order to give enough time to trading venues to robustly implement the intra-day volatility management mechanism as specified in this Regulation, trading venues should be given until 31 January 2023 to set up the intra-day volatility management mechanism. In order to ensure that trading venues are capable of dealing with excessive price movements quickly even before that mechanism is set up, they should have in place a preliminary mechanism that can broadly achieve the same objective as the intra-day volatility management mechanism. (43)The obligations and restrictions imposed on trading venues and traders by this measure do not go beyond what is necessary in order to allow energy companies to continue participating in gas and electricity markets and meet their hedging needs, thereby contributing to security of energy supply for final consumers. (44)In order to ensure an efficient application of the intra-day volatility management mechanism, competent authorities should supervise its implementation by trading venues, and report regularly to the European Securities and Markets Agency (ESMA) on such implementation. In order to ensure a consistent implementation of the intra-day volatility management mechanism, competent authorities should also ensure that divergences in the implementation of the mechanism by trading venues are duly justified. (45)To address potential divergences in the application of the intra-day volatility management mechanism between the Member States, and on the basis of the reports submitted by Competent authorities, ESMA should coordinate the action of the competent authorities of the Member States, and document any divergences observed in the way the intra-day volatility management mechanism in implemented by trading venues across jurisdictions in the Union. (46)Given the unprecedented reduction of natural gas supply from the Russian Federation and the persisting risk of further sudden supply disruptions, the Union faces the urgent need to diversify its gas supplies. However, the LNG market for Europe is still emerging and it is difficult to assess the accuracy of prices that prevail in this marketplace. In order to obtain an accurate, objective and reliable assessment of the price for LNG deliveries into the Union, the European Agency for the Cooperation of Energy Regulators (‘ACER’) should collect all the LNG market data that are necessary to establish a daily LNG price assessment.

(47)This price assessment should be undertaken based on all transactions pertaining to LNG deliveries into the Union. ACER should be empowered to collect this market data from all participants active in LNG deliveries into the Union. All such participants should be obliged to report all of their LNG market data to ACER as close to real time as technologically possible either after conclusion of a transaction or the posting of a bid or offer to enter into a transaction. The ACER price assessment should comprise the most complete dataset including transactions prices and, as of 1 March 2023, bids and offer prices for LNG deliveries to the Union. The daily publication of this objective price assessment, and of the spread established in comparison to other reference prices on the market in the form of an LNG benchmark, paves the way for its voluntary uptake by market participants as reference price in their contracts and transactions. Once established, the LNG price assessment and the LNG benchmark could also become a reference rate for derivatives contracts used for hedging the price of LNG or the difference in price between the LNG price and other gas prices. In view of the urgency of the measure, the first publication of the LNG price assessment should take place no later than two weeks after the entry into force of this Regulation. (48)The current empowerments vested on ACER by Regulation (EU) No 1227/2011 of the European Parliament and of the Council and Commission Implementing Regulation (EU) No 1348/2014 implementing Article 8(2) and Article 8(6) of Regulation (EU) No 1227/2011 (hereinafter together referred to as ‘REMIT’) do not suffice to create a complete and comprehensive dataset of all LNG deliveries into the Union. However, such a comprehensive and complete dataset for daily price assessment is necessary for the Union to manage, in a spirit of solidarity, its procurement policies for international LNG imports, in particular during the on-going crisis situation. Relevant data and information on LNG contracts are also necessary to ensure monitoring of price developments as well as perform data quality control and quality assurance. This ad hoc instrument should allow ACER to collect all market data that is required to establish a comprehensive and representative assessment of the price of LNG deliveries to the Union. (49)Although the establishment of a daily LNG price assessment and LNG benchmark on a permanent basis should at a later stage be included in a more comprehensive revision of the REMIT legal framework, the on-going crisis situation requires urgent action already now to address the immediate situation of severe difficulties in the supply and accurate pricing of LNG deliveries to the Union on a temporary basis until such revision of the REMIT legal framework can be adopted in accordance with the ordinary legislative procedure. (50)In order to immediately increase price transparency and planning security in the LNG import market, it should be specified that the relevant dataset should comprise both information on the price and quantity of completed LNG transactions, prices and quantities of bids and offers pertaining to LNG deliveries into the Union, as well as the price formula in the long-term contract from which the price is derived, if relevant. (51)All market participants subject to a reporting obligation should be defined as those engaged in either the purchase or sale of LNG cargoes destined for delivery into the Union. These LNG market participants should be subject to the obligations and prohibitions applying to market participants according to REMIT. (52)ACER, in cooperation with the Commission, should have a broad mandate to specify the quality and the substance of the market data it collects to establish a daily price assessment for LNG deliveries into the Union. It should also enjoy broad discretion in the choice of its preferred transmission protocol. In order to achieve the highest possible quality in the market data to be reported, ACER should be empowered to specify all the parameters of the market data that should be reported to it. Such parameters should include, without being limited to, the reference units in which price data is reported, the reference units in which quantity data is reported, the forward tenors of transaction or pre-transaction bid and offer data, as well as the transmission protocols to be used to convey the required data to ACER. (53)ACER should also set out the methodology it employs to provide a daily LNG price assessment and LNG benchmark, as well as the process for a regular review of this methodology. (54)The price assessment published under this Regulation should provide more transparency to Member States and other market participants on the prevailing price of LNG imports to Europe. More price transparency should in turn allow Member States and private entities domiciled in the Union to act in a more informed and coordinated manner when purchasing LNG on global markets and in particular, when using the Service provider. More coordination in purchasing LNG should enable Member States to prevent outbidding each other or bidding prices that are not in line with the prevailing market price. Therefore, price assessments and benchmark spreads published under this Regulation are crucial in bringing about more solidarity between Member States in procuring limited LNG supplies. (55)The obligation on market operators to provide ACER with information on LNG transactions is necessary and proportionate to achieve the objective of enabling ACER to establish an LNG benchmark, in particular as it is aligned with market operators’ existing obligations under REMIT and ACER will keep sensitive business information confidential. (56)The Title Transfer Facility (TTF) is a virtual pricing location in the Netherlands, which due to its high liquidity often serves as a pricing proxy for the European gas market, impacting contracts and hedging operations across the EU. Under specific conditions, after the other measures on gas prices have been implemented, a targeted emergency intervention in the TTF spot prices, may be needed. Upon a Commission proposal, the Council should adopt a decision measure to establish a dynamic market correction mechanism for natural gas transactions in the spot TTF market. The maximum price to be established must ensure the Union’s security of supply and intra-EU flows of natural gas, and take into account the impact of gas prices on electricity prices. In order not to affect intra-EU flows which should continue to allow for natural gas to go where it is most needed, other Union gas trading hubs may be linked to the corrected TTF spot price via a dynamic price corridor. When deciding on proposals to introduce a market correction mechanism for gas trading hubs in the Union, alternative options, such as regulatory interventions into price setting mechanism used in gas purchase contracts, should be considered. (57)The Union is an attractive market for international gas supplies and seen as a reliable partner in energy trading. Before implementing any market intervention affecting imports, action should focus on engagement with international partners and on negotiated approaches to limit possible risks. (58)Facing the possibility of major gas disruptions and supply shortages, the Union should be prepared to rapidly apply different solidarity mechanisms in order to mitigate emergency situations. Under these extraordinary circumstances, the Council should be able to decide on an efficient gas allocation mechanism, including rules on pricing, available to Member States in case of regional or Union emergency, based on a proposal from the Commission. (59)Regulation (EU) 2017/1938 already provides the possibility for Member States, during an emergency, to prioritise the gas supply to certain critical gas-fired power plants, given their importance to ensuring the electricity security of supply and avoiding grid imbalances. The critical gas-fired power plants and associated gas volumes may have an important impact on the gas volumes available for solidarity in an emergency. In that context, Member States should be, temporarily, able to request emergency solidarity measures when they are not able to secure those critical gas volumes necessary to ensure the continuation of electricity production in critical gas-fired power plants. For the same reason, Member States providing solidarity should also be entitled to ensure that the operation of their critical gas-fired power plants is not endangered when providing solidarity to another Member State. (60)Only the gas volumes needed for the power plants identified by Member States as critical for the European adequacy of the power system should be allowed to be requested when the solidarity mechanism is activated. A maximum limit of the critical gas volumes needed in each Member State to preserve security of supply should be established. The methodology used in the ENTSO-E Winter Outlook provides a basis for setting such limits. In exceptional and duly justified cases, Member States should have the possibility to exceed the maximum limit set out in this Regulation. (61)The restrictions imposed on market operators by this measure are necessary to ensure security of gas supply during a situation of reduced gas supply and increased demand during the winter season. They build on existing measures laid down in respectively Regulations (EU) 2022/1369 and (EU) 2017/1938, aiming at making those measures more effective under the current circumstances. (62)Certain customers, including households and customers providing essential social services, are particularly sensitive to the negative effects of gas supply disruptions. For this reason, Regulation (EU) 2017/1938 introduced a solidarity mechanism between Member States to mitigate the effects of a severe emergency within the Union and ensure that gas can flow to solidarity-protected customers. However, in certain cases, the use of gas also by protected customers could be considered as non-essential; the reduction of this type of use which clearly goes beyond what is needed would not undermine the objectives set out in Regulation (EU) 2017/1938, in particular as the missing gas consumed for non-essential purposes could lead to severe harm in other private or commercial sectors. Member States should therefore have the possibility to achieve gas savings also by reducing the non-essential consumption of protected customers under specific circumstances. However, any reduction measures taken by the Member States should strictly be limited non-essential consumption and by no means reduce the basic use of protected customers nor limit their ability to heat their homes adequately. (63)Member States and their competent authorities should be free to determine the applicable reduction measures and the activities corresponding to non-essential consumption, such as outdoor heating, the heating of residential swimming pools and other complementary residential facilities. By having the possibility to limit non-essential consumption Member States should be able to strengthen the safeguards and ensure that gas is being supplied to other essential sectors, services and industries, enabling them to continue their operation during a crisis. (64)Any measure to reduce non-essential consumption of protected customers should be necessary and proportional, applying particularly in situations of a declared crisis pursuant to Article 11(1) and Article 12 of Regulation (EU) 2017/1938 or of a Union alert pursuant to Regulation (EU) 2022/1369. Despite the application of non-essential consumption reduction measures, protected customers should continue to benefit from protection against disconnection. Member States should also ensure that such measures do not limit the protection required for the vulnerable customers whose current consumption should be considered as essential. (65)In case of emergency, Member States, as well as the Union, should ensure that gas flows within the internal market. This means that measures taken at a national level should not give rise to security of supply issues in another Member State while access to cross-border infrastructure should remain safe and technically possible at any time. The current legislative framework does not provide for a process which can effectively solve conflicts between two Member States on measures negatively affecting cross-border flows. As the EU gas and electricity grids are interconnected, this could not only lead to serious security of supply problems, but also weaken the Union’s unity vis-à-vis third countries. The Commission should therefore be given the power to evaluate the national measures taken and to arbitrate, where necessary, within a reasonable time frame. To this end, the Commission should be able to request their modification in case it observes threats to the security of gas supply of other Member States or the Union. Given the exceptional nature of the current energy crisis, complying with the Commission’s decision should take place without delays that can potentially hinder the Union’s gas supply. Therefore, for the period of application of this Regulation, reconciliation procedures should be suspended for the sake of securing the functioning of the internal market. (66)The principle of energy solidarity is a general principle under Union law and applies to all Member States, and not only to neighbouring Member States. Furthermore, the efficient use of the existing infrastructure, including cross-border transmission capacities and LNG facilities, is important to safeguard the security of gas supply in a spirit of solidarity. In times of gas supply disruptions at national, regional or Union level, and a significant switch from pipeline gas to LNG, Member States should not only be able to benefit from supply possibilities from neighbouring pipelines, but also from supplies from countries which dispose of an LNG facility. Some Member States should be in a position to provide solidarity to other Member States, even if they are not directly connected via a gas pipeline nor through a third country or other Member States. It is therefore appropriate to expand the obligati