Proposal for a COUNCIL REGULATION Establishing a market correction mechanism to protect citizens and the economy against excessively high prices
Date: 2022-11-22
Institutions: Directorate-General for Energy, European Commission
Subjects: EU energy policy, commodities exchange, consumer protection, economy, energy demand, natural gas, price formation, price increase, price of energy, security of supply

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   EUROPEAN COMMISSION  Strasbourg, 22.11.2022  COM(2022) 668 final 2022/0393 (NLE)  Proposal for a COUNCIL REGULATION Establishing a market correction mechanism to protect citizens and the economy against excessively high prices  
 
2022/0393 (NLE) 

Proposal for a 

COUNCIL REGULATION 

Establishing a market correction mechanism to protect citizens and the economy against 
excessively high prices 

1.  

CONTEXT OF THE PROPOSAL  

The  proposal  creates  a  temporary  and  well-targeted  regulatory  instrument  to  address  the 
phenomenon  of  extreme  price  peaks  caused  by  shortcomings  in  the  price  formation 
mechanisms  of  gas  wholesale  markets,  thereby  preventing  significant  damage  to  the  Union 
economy. 

a) Ukraine crisis leading to unprecedented price hikes and severe economic harm. 

Russia’s unjustified military aggression against Ukraine and its weaponisation of energy have 
provoked an unprecedented energy crisis, particularly affecting the Union. This has led to a 
sharp rise in energy prices, driving inflation and compromising our security of energy supply. 
Russia  has  engaged  in  intentional  disruptions  and  supply  manipulations,  affecting  European 
natural gas prices and the equilibrium of price formation in energy markets. Russia’s decision 
to  cut-off  supply  through  the  Nord  Stream  1  pipeline  and  disrupt  supplies  to  several  EU 
Member States, the sabotage of the Nord Stream 1 and 2 pipelines, and the necessity to find 
new supply sources and routes on short notice has brought this crisis to a new stage. The EU 
is committed to phasing-out completely its dependence on Russian fossil fuels, as set out in 
the Commission’s Communication of 18 May 2022 entitled ‘REPowerEU Plan’ by reducing 
demand,  accelerating  the  roll-out  of  renewables  and  replacing  Russian  gas  by  alternative 
supplies  from  trusted  partners  via  the  Energy  Platform.  The  Russian  share  of  pipeline  gas 
imports out of the total EU gas imports already decreased from 41% in September 2021 to 9% 
in September 2022.  

While markets had already reacted with a significant increase of gas prices since the start of 
the  Russian  aggression  towards  Ukraine,  natural  gas  prices  have  seen  unprecedented  price 
peaks, reaching all-time highs in the whole second half of August 2022. While prices over the 
previous  decade  were  within  a  band  between  EUR  5MWh  and  EUR  35MWh,  European 
natural  gas  prices  reached  levels  which  were  1000%  higher  than  the  average  prices  seen 
before  in  the  Union.  Dutch  TTF  Gas  Futures  (3-month/quarterly  products)  traded  on  the 
exchange  ICE  Endex1  hit  EUR  350/MWh,  the  TTF  day-ahead  gas  traded  on  EEX  hit  EUR 
316/MWh,  without  significant  changes  in  traded  volumes.  Month-ahead  prices  spiked  well 
above 200 €/MWh and reached its peak at almost 314 €/MWh on 26 August 2022. For two 
consecutive weeks the month ahead price remained above EUR 225/MWh, from 18 August to 
31 August 2022. The highest price levels were reached for one week - 5 consecutive trading 
days  -  from  22  to  26  August  2022,  when  the  prices  had  been  very  close  or  above  EUR 
265/MWh.  During  the  period  from  22  to  31  August  2022  the  difference  between  spot  TTF 

1   Price difference or ‘spread’ measured on the basis of ‘TTF spot EGSI’ from EEX minus the average of 

North-western EU and South-western EU LNG spot price assessment from Platts/S&P Global. 

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and LNG prices2 was above EUR 57/MWh. In the last three days of the week 22 to 26 August 
2022,  the  spread  between  spot  TTF  prices  and  the  LNG  reference  prices  was  above  EUR 
58/MWh.  This  was  an  unprecedented  decoupling  of  TTF  prices  from  LNG  prices,  which 
reflect  world  market  prices.  After  reaching  the  extreme  levels  in  August  2022,  prices  went 
below EUR 220/MWh in the following weeks and have not yet peaked above that level again.  

This  extreme  price  spike  over  almost  two  weeks  was  highly  damaging  for  the  European 
economy.  Gas  is  widely  used  by  many  sectors  in  the  EU  economy  from  SMEs  to  large 
industry,  in  particular  gas  intensive  industries  such  as  ceramics,  glass,  fertilisers,  pulp  and 
paper and chemicals. Very high natural gas prices at the levels seen in August of around EUR 
350 MWh have a major negative impact on the Union economy even over just a short period 
of  time;  they  have  contagion  effects  on  electricity  prices  and  increase  the  overall  inflation. 
Price  spikes  involve  tangible  damages  and  risks  for  energy  customers,  suppliers  and  for 
security  of  supply  on  gas  and  electricity  markets.  Customers  were  fully  exposed  to  the 
extreme  price  peaks  caused  by  regional  capacity  bottlenecks.  At  maximum  capacity,  no 
additional  gas  supplies  could  be  attracted  by  further  price  increases.  Russia's  aggression 
against Ukraine continues to negatively affect the entire Union economy, setting it on a path 
of lower growth and higher inflation compared to the Commission Spring Forecast3. Annual 
average inflation is projected to peak at historical highs in 2022, at 7.6% in the euro area and 
8.3% in  the EU, before  easing  in  2023 to  4.0%  and 4.6%, respectively.  The Union  forecast 
‘Summer 2022 (interim) Economic Forecast’ projects that the Union economy will grow only 
by  2.7%  in  2022  and  1.5%  in  2023.  Growth  in  the  euro  area  is  expected  at  2.6%  in  2022, 
moderating to 1.4% in 2023; in some countries, a recession is expected. 

With the current low levels of Russian natural gas flows to Europe, already reduced to 9% of 
the EU total gas pipeline imports, and the perspective that they will not rise to pre-war levels, 
the situation on gas and financial markets remains challenging in the EU. The unprecedented 
change  of  gas  supply  and  transport  routes,  combined  with  market  and  price  formation 
instruments  that  were  not  tailored  to  a  situation  of  a  supply  shock,  exposes  European 
consumers  and  business  to  a  manifest  risk  of  further  potential  episodes  of  economically 
damaging gas price spikes. Unpredictable events, like accidents or the sabotage of pipelines 
that disrupt gas supplies to Europe or increase demand dramatically may threaten security of 
supply. Market  tensions  and nervousness,  triggered by the fear of sudden scarcity situations 
are likely to persist beyond this winter and into next year, as the adaptation to supply shock 
and the establishment of new supply relationships and infrastructure is expected to take one or 
more years. 

b) Changed TTF & market context - change of relevance of price benchmarks  

System of price formation  
The  Title  Transfer  Facility,  (TTF),  is  a  ‘hub4’  or  a  ‘virtual  trading  point’  of  a  so-called 
entry/exit system, where network users can transfer gas between each other. A hub is usually 
operated by a transmission system operator or another entity designated by the Member State, 
handling nominations for the transfer of title of the gas between network users.  

2   Price difference or ‘spread’ measured on the basis of ‘TTF spot EGSI’ from EEX minus the average of 

North-western EU and South-western EU LNG spot price assessment from Platts/S&P Global. 

3   Summer 2022 Economic Forecast: Russia’s war worsens the outlook, 
(https://ec.europa.eu/commission/presscorner/detail/en/ip_22_4511).  

4   A hub is a virtual trading point of an entry/exit system, where network users can transfer gas between each 

other, most frequently operated by the transmission system operator (or another designated entity).   

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A range of products can be traded for delivery on hubs including virtual  or physical (where 
the  gas  is  required  to  be  delivered  at  a  certain  physical  point)5.  Hubs  have  an  important 
function in the stability of the natural gas system as they enable the transfer of gas between 
market players and therefore are at the core of the gas market. There are different gas hubs in 
Europe, the main ones being: the Dutch TTF (NL), the German Trading Hub Europe  (THE) , 
the French Gas exchange point - North (PEG), the Belgian Zeebrugge (Beach) and ZTP, the 
Austrian Virtual Trading Point (VTP), the Italian Punto di Scambio Virtuale (PSV), the Czech 
Virtual  Trading  Point  (VTP),  the  Spanish  Virtual  Balancing  Point  (PVB),  and  the  British 
National Balancing Point (NBP).    

Specific relevance of the TTF future price for the EU system of price formation  

Trading on hubs can occur either over-the-counter (OTC) or via exchanges, the hub being the 
place of delivery to exchange the gas between portfolios. The most liquid product referring to 
TTF is the Dutch “TTF Gas Futures” for delivery within the month, traded on the exchange 
‘ICE Endex’, while on the so-called ‘spot market’, i.e. the market for products with a duration 
of a day or less, the European Energy Exchange (‘EEX’) is the most liquid market place.  

The TTF is a virtual trading point to which both spot and futures contracts relate. TTF-related 
products (i.e. contracts with TTF as a delivery point) are available on exchanges and typically 
range from short-term products (e.g. within-day, day-ahead, week-ahead) to products with a 
delivery horizon several years ahead. Different markets can be distinguished in this context: 

Spot markets (within-day and day-ahead) are the place where TSOs physically keep balance 
in the grid, critical to ensure Security of Supply.  It is also the place for physically delivered 
transactions where market participants will balance their gas portfolios in response to changes 
in demand and supply, for instance due to weather conditions, or congestion.  Given the risks 
for Security of Supply and the balancing of daily markets, this is not the object of the current 
proposal.  

Derivatives markets, notably with contracts concerning the future delivery of gas (e.g. month-
ahead  or  longer)  are  essential  for  gas  companies  to  hedge  their  financial  risks  when 
purchasing  gas  in  volatile  markets.  The  more  stable  long-term  prices  of  derivatives  also 
provide price signals for a reliable environment for infrastructure investment. Interventions in 
derivatives and future markets might also have impacts on financial stability.   

Price Reporting Agencies (PRAs) track the activity of day-ahead markets and publish indices, 
including  TTF-related  ones,  that  are  usually  referenced  in  contracts.  TTF  month-ahead 
reference prices are the ones frequently referenced in contracts. In turn, TTF-related indices, 
relating the price of TTF spot or futures contracts, can be used in the price formulas contained 
in longer-term contracts. This is mainly linked to the fact that, over the past  years, the TTF 
has  been  perceived  as  the  most  reliable  proxy  for  gas  prices  at  EU  level,  even  beyond  the 
boundaries of the region served by the TTF hub.  

Exchanges  usually  have  so  called  ‘clearing  houses’  which  manage  counter-party  risks,  as 
trades are conducted without knowing the counterparty. 

The TTF is the most liquid gas hub in the EU and is a widely used reference for European gas 
prices,  serving  as  the  premier  trading  and  risk  management  instrument  for  gas  trading  in 
Europe. TTF indexes have been used in  the past  years in  Europe as a proxy for natural  gas 
prices  in  Europe.  This  was  due  to  the  specific  geographical  location  of  the  hub,  receiving 
natural gas from several sources, including domestically produced gas from the ‘Groningen’ 

5   ACER(2011) Framework Guidelines on Gas Balancing in Transmission Systems. 

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field, Norwegian gas, LNG, as well as significant volumes from Russia. The latter now have 
to be replaced from other Third Country Suppliers. Market players historically used TTF as a 
reference proxy price for the natural gas for the whole of Europe, and it was regarded as being 
representative  of  the  whole  market.  According  to  market  data,  the  TTF  hub  accounted  for 
around 80% of natural gas traded in the European Union and the United Kingdom combined 
in the first 8 months of 2022 (same share as in 2021 during this period). According to market 
estimates, the share of exchange-based trading on TTF rose to 70% in the first 8 months of 
2022. ICE ENDEX and ECC B.V. are the gas exchange operators for the Dutch gas market. 

Evidence of malfunctioning of price formation contributing to excessive price hikes 

Russia’s unprovoked aggression against Ukraine and the weaponisation of energy by Russia 
are having a profound structural impact on the natural gas markets in Europe, fundamentally 
changing the origin of supplies in Europe and the way gas flows inside the EU. 

Supply  disruptions  from  Russia  have  brought  the  proportion  of  Russian  pipeline  gas  out  of 
total  pipeline  imports  in  the  EU  from  40%  to  9%  during  the  course  of  this  year.  The 
infrastructure  needed  to  accommodate  the  necessary  flows  from  other  sources  is  not  yet 
available.  Several  infrastructure  bottlenecks  both  on  pipeline  gas  and  LNG  are  being 
addressed now to adapt to the new market reality in line with the REPowerEU plan.    

In the situation where there is a supply shock and new supply routes are being established, the 
fact that the gas system of North-Western Europe is characterised by important infrastructural 
limitations  both  in  terms  of  pipeline  transmission  (West-East)  and  in  terms  of  LNG 
regasification capacity became problematic for the price formation mechanism for the rest of 
Europe. Such limitations were partly responsible for the general increase of gas prices since 
the  beginning  of  the  crisis.  Infrastructure  bottlenecks  in  the  region  were  one  of  the  reasons 
that explain the increase in the divergence between the TTF-future price and LNG prices on 
the  world  market  during  the  summer.  Whilst  the  TTF  future  price  was  always  a  good  and 
reliable proxy for gas prices in many regions of Europe in the past, it has become less relevant 
and reliable  as a price benchmark in  certain  regions  - in  particular in  those countries which 
have  easier  access  to  LNG  and  other  gas  sources  than  countries  without  major  LNG  access 
and in which capacity bottlenecks prevent additional supplies.  

A  clear  indicator  for  the  malfunctioning  of  the  price  formation  mechanism  impacting  the 
whole of the European market is that, as of April 2022, the TTF future price became detached 
from other regional hubs in Europe, and from the price assessments made for LNG imports by 
professional index providers (‘price reporting agencies’). In normal circumstances, as was the 
case in the past decade where the TTF became the most used proxy for the price of natural gas 
in  Europe,  the  spread  between  TTF  and  LNG  has  been  narrower  and  even  negative.  The 
abnormal  spread  between  the  TTF  and  other  regional  hubs  seen  in  August  2022  is  a  strong 
indication  that  the  TTF  may  not  be  a  good  proxy  of  the  market  situation  outside  North-
Western Europe, leading to high prices which do not correspond to the market fundamentals 
for the whole of the EU. A new, more reliable LNG benchmark at Union level has therefore 
been created, to be developed by ACER by 1.3.2023, in Regulation [XXXX/2022]. In scarcity 
episodes in the North-Western Europe market, other regional markets outside North-Western 
Europe are unduly impacted through contract indexation to TTF.  

Infrastructure  bottlenecks  have  led  to  significant  and  unprecedented  price  differentials 
between TTF, national gas hubs and LNG prices. Until infrastructure bottlenecks are resolved 
in  North-Western  Europe,  they  will  impact  price  formation,  and  continue  having  a  massive 
and disproportionate effect in natural gas markets and the economy in Europe. Once pipeline 
flows and LNG terminals are at maximum capacity, ensuring security of supply, any further 
increases in prices above a certain spread with global gas prices, which are needed to attract 

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LNG  cargoes  to  the  continent,  do  not  attract  new  gas,  but  are  a  result  of  infrastructure 
bottlenecks.  This  situation  can  be  used  by  traders  and  energy  companies  to  drive  up  prices, 
with a harmful effect in the whole Union.  

This  has  led  to  situations  such  as  in  the  last  two  weeks  of  August  2022,  where  natural  gas 
prices reached record levels above EUR 300/MWh and the price in continental hubs, such as 
the TTF, went up to EUR 70/MWh above the LNG price (i.e. the TTF price was up to 25% 
higher than the LNG price (as indicated by the average North-West and South West Europe 
LNG Spot Index). In these situations, it can be argued the TTF index does no longer provide 
an adequate proxy for prices in Europe. 

Given the role of the TTF as a proxy in  contracts all over Europe, this has  led to  European 
customers  not  located  in  central  and  Eastern  Europe  having  to  pay  a  higher  price  although 
natural gas in global markets was significantly cheaper. In this situation, the extreme hike of 
TTF,  mainly  caused  by  internal  capacity  bottlenecks  within  central  Europe,  was  no  longer 
representative for many European customers and perceived as excessive and not mirroring the 
market equilibrium. 

The spread between TTF and other regional hubs, back in August, outlines why TTF might no 
longer be a good proxy of the market situation outside North-Western Europe (NWE) when 
markets  are  facing  infrastructure  constraints.  In  scarcity  episodes  in  NWE  market,  other 
regional  markets  outside  NWE  (experiencing  more  favourable  market  conditions)  would  be 
unduly impacted through contract indexation to TTF.  

This  situation  is  expected  to  continue  throughout  2023.  On  the  longer-term,  substantial 
investments in gas inter-connections and LNG terminals will resolve gas prices regional hubs 
divergences.  Investments  in  renewable  and  low  carbon  electricity  production  will  decouple 
permanently the impact of gas prices on electricity prices and lower the pressure on gas prices 
in situations of scarcity. In particular, new LNG infrastructure coming online later this year or 
in the first months of 2023 are expected to mitigate the current problems. This expectation of 
a  decrease  in  the  spread  between  the  TTF  and  other  EU  hubs  is  linked  to  the  envisaged 
deployment  of  LNG  infrastructure  such  as  Floating  Storage  Regasification  Units  (FSRUs), 
which should reduce the bottlenecks in North-Western EU. For this reason, only a temporary 
intervention is warranted.  

However, at least for the next year, there is an urgent need to correct the temporary impact of 
congestion  bottlenecks  in  specific  parts  of  the  EU,  due  to  the  massive  structural  change 
affecting  the  historical  balance  in  replacing  the  origin  of  40%  of  the  natural  gas  coming  to 
Europe,  in  circumstances  when  TTF  prices  may  not  represent  the  global  gas  supply  and 
demand  conditions.  Market  tools  serving  the  European  markets  were  not  tailored  and 
developed to tackle the current market situation, characterised by a massive supply shock and 
driven by the ‘weaponisation’ of energy by Russia, that results in the EU paying a premium 
for its gas. Likewise, the European electricity market design was not prepared for such a crisis 
situation  but  the  extraordinary  high  gas  prices  have  led  to  high  electricity  prices  and 
unprecedented  revenues  to  inframarginal  production  technologies.  Following  the  Council 
Regulation on an emergency intervention to address high energy prices, adopted on 6 October 
2022,  the  Commission  is  now  working  on  a  proposal  aiming  at  structurally  decoupling 
electricity prices to be tabled in the first quarter 2023. 

II. AIMS OF THIS PROPOSAL  

The instances of abnormally high TTF prices, and their reverberation on the general level of 
natural gas prices in Europe, has prompted numerous calls at political level for an for urgent 
and temporary intervention.  

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On 5 October 2022, in its resolution on ‘The EU’s response to the increase in energy prices in 
Europe’, the European Parliament called for ‘measures to be taken vis-à-vis the functioning of 
the  TTF’,  and  considered  ‘that  these  measures  might  include  applying  a  trading  halt 
mechanism in the TTF in the event of excessive price fluctuations and price collars’.  

The  informal  meeting  of  Energy  ministers  of  12  October  asked  the  Commission  to  propose 
measures to coordinate solidarity efforts, secure the energy supply, stabilise price levels and 
support households and companies facing high energy prices. 

In its October proposal, the Commission aimed at tackling situations of excessive natural gas 
prices,  by  proposing  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. 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. 

The  conclusions  of  the  European  Council  held  on  20  and  21  October  2022  called  for  the 
urgent  submission  of  concrete  decisions  on  certain  additional  measures,  including  a  ‘a 
temporary dynamic price corridor on natural gas transactions to immediately limit episodes of 
excessive gas prices’, after assessing the impact of such mechanism on existing contracts and 
taking into account the different energy mixes and national circumstances. 

The  main  objective  of  the  market  correction  mechanism  proposed  in  this  Regulation  is  to 
prevent episodes of extremely high gas prices which may partly be caused by inefficiencies in 
the price formation mechanisms. The main objective is not an intervention into prices fairly 
reflecting  demand  and  supply.  This  is  because  price  signals  are  important  for  attracting 
natural gas supplies from third countries that the EU needs in order to preserve is Security of 
Supply and economic prosperity.   

III. MAIN ELEMENTS OF THIS PROPOSAL 

The  proposed  market  correction  mechanism  builds  upon  Articles  23  and  24  of  the 
Commission  proposal  for  the  Council  Regulation  Enhancing  solidarity  through  better 
coordination  of  gas  purchases,  exchanges  of  gas  across  borders  and  reliable  price 
benchmarks of 18 October 2022 (‘October Proposal’).  
Based on the Conclusions of the European Council of 21.October 20226 and the safeguards in 
Article  23(2)  of  the  October  Proposal7,  the  Market  Correction  Mechanism  is  designed  in  a 
manner to meet two basic criteria:  

6  See recital 18 of the Conclusions of 20/21.10.22:  

“The European Council calls on the Council and the Commission to urgently submit concrete decisions on the 
following additional measures, as well as on the Commission proposals, having assessed their impact notably 
on  existing  contracts,  including  the  non-affectation  of  long-term  contracts,  and  taking  into  account  the 
different energy mixes and national circumstances: (…) 
c) a temporary dynamic price corridor on natural gas transactions to immediately limit episodes of excessive 
gas prices, taking into account the safeguards set out in Article 23(2) of the draft Council Regulation proposed 
on 18 October 2022;” 

7  Article 23(2) of the October Proposal provides that a future market correction mechanism  shall comply  with 
the  following  safeguards:  be  without  prejudice  to  over-the-counter  gas  trades;  not  jeopardise  the  Union’s 
security of gas supply; depend on progress made in implementing the gas savings target; not lead to an overall 
increase in gas consumption; be designed in such a manner that it will not prevent market-based intra-EU flows 
of gas; not affect the stability and orderly functioning of energy derivative markets; and take into account the 
gas market prices in the different organised market places across the Union. 

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(i)  

act  as  an  effective  instrument  against  episodes  of  extraordinarily  high  gas  prices; 
and 

(ii)  be  activated  only  if  prices  reach  exceptional  levels  (compared  to  LNG  prices),  in 
order to avoid significant market disturbances and disruptions of supply contracts, 
potentially resulting in severe security of supply risks.  

Past events, such as the exceptional price hike evidenced in the month of August 2022, may 
provide  guidance  to  define  price  levels  at  which  a  market  correction  mechanism  could  be 
triggered.  

The proposed mechanism consists essentially of a safety ceiling for the price of month-ahead 
TTF-derivatives  (‘TTF-price’),  which  plays  a  key  role  as  a  reference  price  in  the  European 
wholesale  gas  market.  The  ceiling  is  activated  if  the  TTF-Price  basis  reaches  a  pre-defined 
level  and  if  the  price  hike  does  not  correspond  to  a  similar  hike  at  world  market  level, 
reflected by means of daily  average price of the price of the  LNG  assessments  “Daily Spot 
Mediterranean  Marker  (MED)”  and  “Daily  Spot  Northwest  Europe  Marker  (NWE)”, 
published by S&P Global Inc., New York.  

In order to ensure an immediate effect, it is proposed that the values to trigger the activation 
of the mechanism should be fixed upfront, so as to avoid lengthy decision-making procedures 
which could significantly delay its activation and the intended price-dampening effect. Once 
the conditions for its activation are fulfilled, the market corrections mechanism should apply 
automatically.   

The  safety  ceiling  on  TTF  futures  is  carefully  designed  not  to  affect  price  formation  at  the 
other regional gas markets. This is a consequence of the price signals of these other markets 
being less affected by the current regasification and transmission bottlenecks that characterize 
the Dutch gas hub and, in consequence, the TTF. 

The objective of the instrument is to smoothen events of very excessive prices but not change 
structurally  the  level  of  prices.  The  events  in  August  2022  can  serve  as  a  benchmark  to 
determine the level of the intervention. 

Available  data  show  that  during  the  period  of  22  August  to  31  August,  the  price  difference 
between  spot  TTF  month-ahead  and  LNG  prices  was  above  EUR 57/MWh.  Front-month 
prices reached levels above EUR 300. The aim of the market correction mechanism should be 
to avoid abnormal prices at a level reached last August. 

The cap is designed to be activated only in  exceptional circumstances to address potentially 
short-lived  episodes  of  genuine  excessive  prices,  so  as  to  not  increase  natural  gas 
consumption.  Indeed,  when  prices  are  ‘excessive’,  demand  elasticity  is  expected  to  be  very 
low  and  the  short-lived  additional  increases  of  prices  avoided  by  the  cap  would  not  be 
expected  to  result  in  a  significant  reduction  of  consumption.  Finally,  the  mechanism  is  not 
meant to structurally lower the prices which is what, if passed on to final consumers, may lead 
to more gas consumption.  

The safety ceiling will only apply to one futures product (TTF month-ahead products). Even 
when  the  safety  ceiling  is  activated,  market  operators  will  still  be  able  to  procure  gas  spot, 
though longer maturity derivatives and over-the-counter which are not directly affected by the 
mechanism..The  activation  of  the  mechanism  can  therefore  not  be  expected  to  lead  to 
“rationing” of gas or security of supply problems. 

Effective safeguards are built into the market correction mechanism, such as high intervention 
ceilings,  close  monitoring  allowing  for  interruption  of  the  mechanism  in  case  it  negatively 
impacts security of supply 

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With  a  view  to  possible changes  in  the  market  situation,  and  to  be  able  to  react  to  possible 
unintended  negative  consequences  of  the  price  limit,  efficient  safeguards  are  built  into  the 
proposal to guarantee that the mechanism can be suspended at any time if it were to lead to 
serious market disturbances, or a manifest risk thereof, affecting security of supply and intra-
EU flows. The safety ceiling would be automatically deactivated if a daily review shows that 
the conditions for its activation are no longer present. Compliance with EU demand reduction 
targets should also be taken into account when assessing the effects of the mechanism. 

IV.  

CONSISTENCY WITH EXISTING POLICY PROVISIONS IN THE POLICY 
AREA 

On 23 March 2022, the European Commission presented a Communication entitled ‘Security 
of  supply  and  affordable  energy  prices:  Options  for  immediate  measures  and  preparing  for 
next winter’ (COM(2022) 138 final), where it outlined the objective of ensuring the supply of 
gas at reasonable cost for next winter and beyond. The Communication referred to capping or 
modulating  the  gas  price  through  regulatory  means  as  an  option  that  may  be  considered  to 
mitigate  a  sharp  rise  in  energy  prices.  In  October  2022,  on  the  backdrop  of  an  escalating 
crisis,  the  European  Commission  issued  a  Communication  reaffirming  the  need  to  addresss 
high  energy  prices  with  targeted  and  coordinated  measures.  In  its  Communication,  the 
Commission proposed to put in place a mechanism to limit prices via the main European gas 
exchange,  the  TTF,  to  be  triggered  when  necessary.  The  current  proposal  for  a  market 
correction  mechanism,  to  mitigate  the  impact  of  excelptionally  high  gas  prices,  is 
complementary to the measures set out by the Commission in its Communications. 

The objectives and principles of Regulation (EU) 2017/1938 of the European Parliament and 
of  the  Council  of  25  October  2017  concerning  measures  to  safeguard  the  security  of  gas 
supply  are  not  endangered  by  this  proposal.  The  proposal  ensures  that,  in  the  event  of  a 
regional or Union emergency, the market correction mechanism does not unduly restrict the 
flow of gas within the internal market endangering the Union’s security of gas supply. 

This proposal forms part of a group of measures to address the current energy crisis which the 
Council has adopted over the past months.  

In  particular,  this  proposal  is  closely  linked  to  Council  Regulation  (EU)  2022/1369  and 
consistent with its objectives. It ensures notably that the Commission can suspend the market 
correction  mechanim  if  it  negatively  affects  the  progress  made  in  implementing  the  gas 
savings target pursuant to Article 3 of Council Regulation (EU) 2022/1369, or if it leads to an 
overall  increase  in  gas  consumption,  on  the  basis  of  data  on  gas  consumption  and  demand 
reduction  received  from  Member  States  pursuant  to  Article  8  of  Council  Regulation  (EU) 
2022/1369). 

In addition, regular and effective monitoring and reporting are essential for the assessment of 
progress made by the Member States in the implementation of the voluntary and mandatory 
demand-reduction measures. In order to do so, and in addition to the monitoring and reporting 
measures  foreseen  in  Council  Regulation  (EU)  2022/1369,  at  the  latest  two  weeks  after  the 
market  correction  event,  Member  States  need  to  notify  to  the  Commission  which  measures 
they have taken to reduce gas and electricity consumption in reaction to the market correction 
event,  unless  the  Commission  has  adopted  a  suspension  decision.  The  demand  reduction 
across the Union is an expression of the principle of solidarity enshrined in the Treaty.  

In  order  to  make  sure  that  the  market  correction  event  does  not  take  away  the  incentive  to 
pursue demand reduction, the activation of the market correction event should be followed by 

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a  Commission  proposal  to  extend  the  demand  reduction  targets  foreseen  in  Council 
Regulation (EU) 2022/1369 beyond 31 March 2023.  

Member  States  should  be  free  to  choose  the  appropriate  measures  to  achieve  demand 
reduction. When identifying appropriate demand-reduction measures, Member States should 
consider making use of the measures identified by the Commission in its communication of 
20 July 2022 entitled “Save Gas for a safe Winter”.  

Furthermore,  this  proposal  is  complementary  to  the  objectives  of  introducing  intra-day 
volatility  management  mechanism  to  address  short  term  market  volatility  as  set  out  in 
Article 15 of the October Proposal,  and tasking  ACER to  produce and publish a daily  LNG 
benchmark  to  improve  representativeness  of  indexes  as  set  out  Article  18  of  the  October 
Proposal.  While  the  October  Proposal  provides  for  an  instrument  to  limit  extreme  changes 
within  a  short  time  period  (circuit  breaker)  and  is  not  sufficient  to  address  problems  as 
evidenced  in  August  2022,  the  present  proposal  complements  the  October  Proposal  in  this 
regard.  

Moreover,  the  current  proposal  is  consistent  with  the  European  Green  Deal  objectives,  in 
particular with ensuring a secure and affordable EU energy supply by providing a mechanism 
that will mitigate the effects of extremely high gas prices on EU consumers and its Member 
States, while – at the same time – being designed in such a way as to not structurally lower 
the prices which, if passed on to final consumers, may lead to more gas consumption.  

V. 

CONSISTENCY WITH OTHER UNION POLICIES 

The proposal is compatible with other Union policies, notably the rules on the internal market 
policy, including with regard to competition rules and rules concerning financial markets. In 
particular,  it  is  complementary  to  the  European  Market  Infrastrucure  Regulation  (EMIR), 
which  aims  to  reduce  systemic  risk,  increase  transparency  in  the  OTC  market  and  preserve 
financial stability, as well as to the Financial Regulation (e.g. MiFID II), which 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.  The  proposal  does  not  unduly  interfere 
with  the  principles  of  competition  law.  In  particular,  the  market  correction  mechanism  is 
designed in a way to limit the intervention to situations of excessive prices, in which the TTF 
index  no  longer  provides  an  adequate  proxy  for  prices  which  accuratly  reflect  market 
dynamics in Europe. 

IV.  

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

1.  

Legal basis 

The  legal  basis  for  this  temporary  instrument  is  Article  122(1)  of  the  Treaty  on  the 
Functioning  of  the  European  Union  (‘TFEU’).  Measures  pursuant  to  Article  122(1)  TFEU 
need to reply to an emergency or an exceptional situation leading to grave difficulties in the 
economic situation of Member States, in particular if severe difficulties arise in the supply of 
energy, which cannot be addressed by ordinary measures. Furthermore, the measures must be 
taken in a spirit of solidarity and must be strictly temporary.  

This  proposal,  as  previous  temporary  crisis  measures  adopted  by  the  Council  in  the  past 
months  ,  addresses  a  severe  economic  crisis,  resulting,  inter  alia,  from  difficulties  in  the 
supply of energy. The market correction mechanism is of temporary nature.   

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2. 

Solidarity 

Following the Russian aggression against Ukraine, gas prices have reached unforeseen levels 
with  extreme  hikes  in  particular  in  August  2022.  The  volatility  of  gas  markets,  the  unseen 
increases in  gas prices, and the exceptional hikes have impacted different Member States in 
unequal ways. However, all Member States are concerned by the indirect effects of the price 
hikes, such as increasing energy prices and inflation. 

As concerns the deficits in the price formation system, these deficits play a different role in 
different  Member  States,  with  price  increases  being  more  representative  in  some  Member 
States  (e.g.  Central  European  Member  States)  than  in  other  Member  States  (e.g.  Member 
States  at  the  periphery  or  with  other  supply  possibilities).  In  order  to  avoid  a  fragmented 
action, which could divide the integrated EU gas market,  a common action is needed in the 
spirit of solidarity. This is also crucial ensure security of supply in the Union. 

Moreover, common safeguards, which may be more needed in Member States without supply 
alternatives than in Member States with more alternatives, ensure a coordinated approach as 
an  expression  of  energy  solidarity,  which  has  recently  been  endorsed  as  a  fundamental 
principle of EU law8. 

Indeed, while the financial risks and benefits are very different for different Member States, 
the market correction mechanism constitutes a compromise in the spirit of solidarity, in which 
all Member States agree to contribute to the market correction and accept the same limits to 
the price formation, even though the level of malfunction of the price formation mechanism 
and  the  financial  impacts  of  TTF  prices  on  the  economy  are  different  in  different  Member 
States. 

The  market  correction  mechanism  would  therefore  strengthen  Union  solidarity  in  avoiding 
excessive  prices,  which  are  unsustainable  even  for  short  periods  of  time  for  many  Member 
States. The proposed measure will help ensure that gas supply undertakings from all Member 
States are able to purchase gas at reasonable prices in a spirit of solidarity. 

3. 

Subsidiarity (for non-exclusive competence)  

The  planned  measures  of  the  present  initiative  are  in  line  with  the  subsidiarity  principle. 
Because  of  the  integrated  nature  of  gas  and  financial  markets,  action  at  Union  level  is  the 
most effective way to address the problem of Union-wide price peaks.  

Market players in the EU use TTF as a reference because it is the most liquid trading hub in 
Europe, and it was regarded as being representative of the whole market. However, external 
factors have hampered market functioning and notably the function of the TTF benchmark as 
an objective parameter for gas customers across Europe. Therefore, a coordinated approach at 
EU level is necessary in order to be able to address exceptional situations in which the TTF 
cannot properly function as a suitable benchmark for market participants across the EU.  

Given the unprecedented nature of the gas supply crisis and its transboundary effects, action 
at Union level is warranted as Member States alone cannot sufficiently effectively address the 
risk of serious economic difficulties resulting from sharp rise in energy prices and significant 
supply  disruptions.  Only  an  EU  action  motivated  by  a  spirit  of  solidarity  between  Member 

8 

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Judgment  of 
ECLI:EU:C:2021:598. 

the  Court  of  Justice  of  15  July  2021,  Germany  v  Poland,  C-848/19  P, 

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States can ensure that a sharp rise in energy prices does not lead to lasting harm for citizens 
and the economy.  

By  reason  of  its  scale  and  effects,  the  aim  of  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. 

4. 

Proportionality 

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 prohibition to execute front-month TTF derivatives above the ceiling in this proposal is a 
suitable  means  to  avoid  such  excessively  high  prices  across  Europe,  including  in  other 
markets across the EU.  

Bidding  limits  are  a  common  feature  in  traded  markets  to  address  problem  with  the  price 
formation mechanisms potentially leading to harmful effects for consumers. Such mechanism 
exist, for example, in EU electricity markets (see. e.g. Art 10 of Regulation (EU) 2019/943), 
and can also be found in markets outside the Union, such in the US. For instance, the Chicago 
Mercantile Exchange (CME), where the Henry Hub futures contract is traded, has price limits 
and price banding. Price limits are the maximum price range permitted for a futures contract 
in each trading session. 

Moreover, the mechanism is not meant to intervene into the normal interplay of demand and 
supply  and  to  “cap”  ordinary  price  setting.  It  may  only  be  triggered  in  very  exceptional 
situations  where  the  prices  increase  at  the  TTF  are  unrelated  to  prices  at  other  exchanges, 
momentarily putting their suitability as a reference price into doubt.  

The market correction mechanism will only be triggered under exceptional circumstances for 
a  strictly  limited  time.  Liquidity  on  other  hubs  is  not  likely  to  be  severely  impacted.  TTF 
contracts  are  also  traded  on  these  markets  for  hedging  purposes,  however,  price  limits  can 
give  indication  to  market  participants  on  hedging  strategies,  so  they  can  hedge  against  high 
prices in the future. Continental markets not having access to LNG remained closely aligned 
with TTF, so any price cap on TTF will have a limited impact on their liquidity. 

Furthermore,  the  bidding  limit  will  be  immediately  deactivated  when  these  exceptional 
circumstances cease to persist. In addition, the market correction mechanism is accompanied 
by  a comprehensive set  of safeguards,  which allow for the suspension of the mechanism, if 
unintended  market  disturbances  occur,  negatively  affecting  security  of  supply  and  intra-EU 
flows. Finally, the measure does not unduly affect the rights of market participants to continue 
to  do  business,  because  the  trading  limit  will  not  affect  the  rights  of  market  participants  to 
conclude bilateral or over-the-counter transactions.  

Therefore,  the  intervention  does  not  go  beyond  what  is  necessary  for  attaining  the  policy 
objective  pursued  and  is  therefore  proportional.  The  market  correction  mechanism  is  a 
suitable instrument necessary and proportionate for achieving the objective of mitigating the 
impact of abnormally high gas prices. 

5. 

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 it suitable to act by way of a regulation which is 

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of  general  scope  and  directly  and  immediately  applicable.  This  would  result  in  a  swift, 
uniform and Union-wide cooperation mechanism. 

V. 

1. 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Stakeholder consultations 

Due to the urgency to prepare the proposal so that it can be adopted on time by the Council, a 
stakeholder consultation could not be carried out. 

However, a dedicated Seminar with Member States and stakeholders took place on the 7th of 
September regarding possible emergency interventions in gas markets. 

A  seminar  to  discuss  the  market  correction  mechanism  with  key  market  participants  and 
Member States took place on 7 November 2022, with a view to establish the most adequate 
way  forward.  Exchanges  also  took  place  with  Member  States  during  the  Council  working 
group  meetings  following  the  18  October  2022  Commission  proposal  for  new  measures  on 
joint gas purchasing, price limiting mechanisms and transparent infrastructure use, as well as 
on solidarity between Member States and demand management.  

This  allowed  the  identification  of  the  relevant  safeguards  to  minimise  any  potential  risks 
stemming from the mechanism. 

2. 

Fundamental rights 

The  market  correction  mechanism  is  temporary  and  it  is  activated  only  when  certain 
conditions are met. These conditions in turn reflect a situation that is harmful for the Union’s 
economy and its energy security and that therefore should be addressed. Moreover, the market 
correction  mechanism  features  solid  safeguards  that  would  prevent  any  issue  related  to 
fundamental rights from arising. It enshrines a deactivation mechanism that will end it if its 
operation  is  no  longer  justified  by  the  situation  on  the  natural  gas  market.  And  even  if  the 
conditions justifying the activation of the market correction mechanism subsist, the regulation 
provides  for  the  possibility  to  suspend  the  mechanism  upon  the  occurrence  of  unintended 
market disturbances. The Commission  is obliged to adopt such suspension  decisions in case 
unintended market disturbances occur. 

Therefore, the market correction mechanism is proportional and duly justified, in that it is not 
more impactful than necessary on fundamental rights such as the freedom to conduct business 
in light of the effect that inaction would have on the Union economy and its energy security. 

VI. 

BUDGETARY IMPLICATIONS 

The  budgetary  impact  on  the  EU  budget  associated  to  this  proposal  concerns  the  human 
resources of the European Commission’s Directorate-General (DG) for Energy.  

This  unprecedented  mechanism  entails  tasks  –  including  on  the  functioning  of  commodity 
markets and security of supply – that are not currently part of the Commission’s role. Due to 
the  level  of  responsibility  linked  to  such  task  it  is  paramount  to  ensure  an  adequate 
accompaniment  by  the  Commission  services,  allocating  a  reinforced  role  to  DG  Energy, 
namely on financial and market monitoring and assessment (6FTE). Support from ACER in 
monitoring, activating and suspending the market correction mechanism will be crucial for its 
efficient implementation. The budgetary impact on the EU budget associated to this proposal 

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therefore also concerns the human resources and other administrative expenditures of ACER 
(6 FTE). 

VII.  OTHER ELEMENTS 

Not relevant. 

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2022/0393 (NLE) 

Proposal for a 

COUNCIL REGULATION 

Establishing a market correction mechanism to protect citizens and the economy against 
excessively high prices 

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, 

Having regard to the opinion of the European Central Bank, 

Whereas: 

(1) 

(2) 

The  Russian  Federation’s  unprovoked  and  unjustified  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  markets  through  intentional  disruptions  of  gas  flows 
have led to skyrocketing energy prices in the Union. Changing supply routes, resulting 
in  congestion  in  the  European  gas  infrastructure,  the  need  to  find  alternative  gas 
supply sources and price formation systems which are not adapted to the situation of a 
supply  shock  have  contributed  to  the  situation  of  price  volatility  and  price  hikes. 
Higher natural gas prices endanger the economy of the Union through sustained high 
inflation caused by higher electricity prices, undermining consumer purchasing power, 
as well as through  raising the cost  of manufacturing, particularly in  energy-intensive 
industry, and seriously threaten security of supply.  

In  2022,  natural  gas  prices  have  been  exceptionally  volatile,  with  some  benchmarks 
reaching all-time highs in August 2022. The abnormal level of the natural gas prices 
registered in August 2022 was the result of multiple factors, including a tight supply-
demand  balance  linked  to  storage  refilling  and  reduction  of  pipeline  flows,  fears  of 
further supply disruptions and market manipulations by Russia, and a price formation 
mechanism  which  was  not  tailored  to  such  extreme  demand  and  supply  shifts  and 
which aggravated the excessive price hike. While prices over the previous decade were 
within a band between EUR 5/MWh and EUR 35/MWh, European natural gas prices 
reached  levels  which  were  1000%  higher  than  the  average  prices  seen  before  in  the 
Union. Dutch TTF Gas Futures  (3-month/quarterly products) traded on the exchange 
ICE  Endex9  traded  at  levels  slightly  below  EUR  350/MWh,  the  TTF  day-ahead  gas 

9 

ICE ENDEX is one of the main energy exchanges in Europe. For gas, it provides regulated futures and 
options trading for the Dutch Title Transfer Facility (TTF) trading hub. 

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(3) 

(4) 

(5) 

traded  on  EEX  hit  EUR  316/MWh.  Never  in  previous  times  gas  prices  had  reached 
levels such as those observed in August 2022.  

Following  the  damage  to  the  Nord  Stream  1  pipeline  likely  caused  by  an  act  of 
sabotage in September 2022, there is no perspective of gas supplies from Russia to the 
Union  to  resume  to  pre-war  levels  in  the  near  future.  European  consumers  and 
business  remain  exposed  to  a  manifest  risk  of  further  potential  episodes  of 
economically  damaging  gas  price  spikes.  Unpredictable  events,  like  accidents,  the 
sabotage of pipelines, weather storms that disrupt  gas  supplies to Europe or increase 
demand  dramatically  may  threaten  security  of  supply.  Market  tensions  and 
nervousness,  triggered  by  the  fear  of  sudden  scarcity  situations  are  likely  to  persist 
beyond  this  winter  and  into  next  year,  as  the  adaptation  to  supply  shocks  and  the 
establishment of new supply relationships and infrastructure is expected to take one or 
more years. 

The  Title  Transfer  Facility  (‘TTF’)  in  the  Netherlands  is  commonly  seen  as  the 
‘standard’ pricing proxy on European gas markets. This is because of its typically high 
liquidity,  which  is  due  to  several  factors,  including  its  geographical  location,  which 
allowed the TTF in a pre-war environment to receive natural gas from several sources, 
including  significant  volumes  from  Russia.  As  such,  it  is  widely  used  as  a  reference 
price in pricing formulas of gas supply contracts, as well as a price basis in hedging / 
derivatives  operations  across  the  Union,  including  in  hubs  not  directly  linked  to  the 
TTF. According to market data, the TTF hub accounted for around 80% of natural gas 
traded  in  the  European  Union  and  the  United  Kingdom  combined  in  the  first  eight 
months of 2022.  

However,  the  disruptive  changes  in  EU  energy  markets  since  February  2022  had  an 
influence  on  the  functioning  and  effectiveness  of  the  traditional  price  formation 
mechanisms in gas wholesale market, notably on the TTF benchmark. Whilst the TTF 
was  a  good  proxy  for  gas  prices  in  other  regions  of  Europe  in  the  past,  as  of  April 
2022 it has become detached from prices at other hubs and trading places in Europe, as 
well as from the price assessments made for LNG imports by price reporting agencies. 
This  is  largely  because  the  gas  system  of  North-Western  Europe  presents  particular 
infrastructural  limitations  both  in  terms  of  pipeline  transmission  (West-East)  and  in 
terms of LNG regasification capacity. Such limitations were partly responsible for the 
general  increase  of  gas  prices  since  the  beginning  of  the  crisis  in  Europe  following 
Russia’s  weaponisation  of  energy.  The  abnormal  spread  between  the  TTF  and  other 
regional  hubs  in  August  2022  indicates  that,  under  the  current  specific  market 
circumstances,  the  TTF  may  not  be  a  good  proxy  of  the  market  situation  outside 
North-Western  Europe,  where  markets  are  facing  infrastructure  constraints.  During 
scarcity episodes in the North-Western Europe market, other regional markets outside 
North-Western  Europe  may  experience  more  favourable  market  conditions  and  are 
therefore unduly impacted through contract indexation to TTF. Hence, whilst the TTF 
still  accomplishes  its  objective  of  balancing  supply  and  demand  in  North-Western 
Europe, action is required to limit the effect any abnormal episodes of excessive prices 
of the TTF have for other regional markets in the EU. 

(6) 

Different  measures  are  available  to  address  the  problems  with  the  current  price 
formation mechanisms. One possibility for European companies affected by the recent 
market  disruptions  and  the  deficits  of  the  price  formation  system  is  to  enter  into  a 
renegotiation of the existing TTF-based contracts. As price references linked to TTF-
futures  have  a  different  relevance  than  in  the  past  and  are  not  necessarily 
representative  for  the  gas  market  situation  outside  North-Western  Europe,  certain 

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(7) 

(8) 

(9) 

purchasers may seek to solve the current problems with price formation and the TTF 
benchmark  by  way  of  a  renegotiation  with  their  contract  partners,  either  under  the 
explicit terms of the contract or according to general principles of contract law.  

In the same vein, importing companies or Member States acting on their behalf may 
engage  with  international  partners  in  order  to  renegotiate  existing  or  agree  on  new 
supply  contracts  with  more  appropriate  pricing  formulas,  adapted  to  the  current 
situation of volatility. Coordinated purchasing via the IT tool created under Regulation 
(EU) [XXXX/2022] may provide opportunities to lower the price of energy imports, in 
turn lowering the necessity of market intervention.  

Furthermore,  financial  market  regulation  includes  already  some  safeguards  to  limit 
episodes of extreme volatility, for instance by requiring that trading venues set up so-
called  short-term  ‘circuit  breakers’,  which  limit  extreme  price  increases  for  certain 
hours  to  that  end.  The  intra-day  volatility  management  mechanism,  introduced  in 
Articles  15  to  17  of  Council  Regulation  (EU)  [XXXX/2022],  contributes  to  limiting 
extreme  volatility  of  prices  in  energy  derivatives  markets  within  one  day.  However, 
those mechanisms work only short-term, and are not intended to prevent market prices 
from reaching certain excessive levels.  

Demand  reduction  constitutes  a  further  important  element  to  tackle  the  problem  of 
extreme price peaks. Reducing demand for gas and electricity can have a dampening 
effect  on  market  prices  and  can  therefore  contribute  to  mitigating  the  problems  with 
abnormally  high  gas  prices.  This  Regulation  should,  in  line  with  the  Conclusions  of 
the European Council of 21 October 2022, therefore provide for effective mechanism 
to ensure that the potential of demand reduction is used to the fullest extent, and that 
the activation of the mechanism does not lead to increased use of gas.  

(10)  Whilst existing measures are therefore available to tackle some of the elements leading 
to the problems with price formation in gas markets, these measures do not guarantee 
an immediate and sufficiently certain remedy to the current problems.  

(11) 

It  is  therefore  necessary  to  establish  a  temporary  market  correction  mechanism  for 
natural gas transactions in the month-ahead TTF derivatives market, as an instrument 
against episodes of excessive high gas prices with immediate effect.  

(12)  The conclusions of the European Council of 21 October 2022 gave a mandate to the 
Commission  to  propose  legislation  for  a  market  correction  mechanism  which  should 
build upon Articles 23 and 24 of the Commission proposal for the Council Regulation 
enhancing  solidarity  through  better  coordination  of  gas  purchases,  exchanges  of  gas 
across  borders  and  reliable  price  benchmarks  of  18  October  2022  (‘October 
Proposal’).  

(13)  The basic criteria and safeguards set out in the conclusions of the European Council of 
21 October 2022 and in Articles 23 and 24 of the October Proposal should, on the one 
hand, be considered when designing the market  correction mechanism. They should, 
on  the  other  hand,  be  used  to  guarantee  that  a  possible  activation  of  the  market 
correction  mechanism  will  be  terminated  if  the  conditions  for  its  activation  are  no 
longer in place or if unintended market disturbances occur. 

(14)  The market correction mechanism should be designed in a manner to meet two basic 
criteria,  namely  to  act  as  an  effective  instrument  against  episodes  of  extraordinarily 
high gas prices, and to be activated only if prices reach exceptional levels compared to 
global  markets,  in  order  to  avoid  significant  market  disturbances  and  disruptions  of 
supply contracts, potentially resulting in severe security of supply risks.  

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(15)  The  intervention  through  the  market  correction  mechanism  should  be  limited  to 
addressing  the  most  important  deficits  in  price  formation.  The  TTF  month-ahead 
settlement  price  for  derivatives  is  by  far  the  most  widely  used  benchmark  in  gas 
supply  contracts  across  the  EU.  Other  benchmarks  do  not  face  the  same  problems 
resulting notably from capacity bottlenecks in central Europe. The TTF month-ahead 
reference is not only used by many traders in their derivatives, but also frequently by 
gas  supply  undertakings  in  their  supply  contracts.  It  is  therefore  appropriate  to  limit 
the intervention to the TTF month-ahead settlement price. 

(16)  The enactment of the market  correction mechanism  should send a clear signal to the 
market that the EU will not accept excessive prices which result from imperfect price 
formation. It should also provide certainty to market players as concerns reliable limits 
for  gas  trading,  and  can  bring  important  economic  savings  for  both  companies  and 
households that will not be left as exposed to episodes on excessive energy prices.  

(17)  The mechanism should introduce a safety ceiling  for the price of month-ahead TTF-
derivatives.  The  ceiling  should  be  activated  if  the  TTF-price  reaches  a  pre-defined 
level, and if the price hike does not correspond to a similar hike at regional or world 
market  level.  A  safety  ceiling  should  ensure  that  trading  orders  with  prices  above 
EUR 275 are not accepted once the mechanism is activated, the ceiling should remain 
stable  for  a  certain  time,  in  order  to  ensure  a  minimum  of  predictability  of  the 
intervention. This is to avoid the disadvantages of a ceiling with daily changes, which 
would  be  less  transparent  and  more  difficult  to  anticipate  for  market  actors,  limiting 
their  ability  to  adjust  their  expectations  for  the  future.  A  pre-defined  safety  ceiling 
allows  market  players  to  adjust  their  expectations  for  the  future  evolution  of  prices 
accordingly.  The  market  correction  mechanism  should,  however,  have  dynamic 
elements. Dynamic market developments should be taken into account through regular 
reviews  and  the  possibility  to  be  deactivate  the  bidding  limit  at  any  time.  The 
activation  should  also  take  into  account  the  spread  between  the  TTF  European  Gas 
Spot  Index  and  a  reference  price,  determined  by  the  average  price  of  LNG  price 
assessments linked to European trading hubs, which may vary over time.   

(18)  To  avoid  any  risks  that  a  bidding  limit  for  the  price  of  the  month-ahead  TTF 
derivatives risks results in illegal collusive behaviour amongst natural gas suppliers or 
traders, financial regulators, ACER and competition authorities should observe the gas 
and  energy  derivatives  markets  particularly  carefully  during  the  activation  of  the 
market correction mechanism.   

(19)  The market  correction mechanism should be temporary in nature and should only be 
activated  to  limit  episodes  of  exceptionally  high  natural  gas  prices,  which  are  also 
unrelated  to  prices  at  other  gas  exchanges.  To  this  end,  two  cumulative  conditions 
should be met for the market correction mechanism to operate.  

(20)  The  market  correction  mechanism  should  only  be  activated  when  front-month  TTF 
derivative settlement prices reach a predefined exceptionally high level. Based on past 
experiences,  such  as  the  exceptional  price  hike  evidenced  in  the  month  of  August 
2022,  should  therefore  guide  the  definition  of  the  price  levels  at  which  a  market 
correction mechanism should be triggered.  Available data show that in August 2022, 
the price difference between spot TTF month-ahead and LNG prices was above EUR 
57/MWh. Front-month prices reached levels above EUR 300. The aim of the market 
correction  mechanism  should  be  to  avoid  abnormal  prices  at  a  level  reached  last 
August.  

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(21)  Moreover,  the  market  correction  mechanism  should  only  be  activated  when  TTF 
prices  reach  levels  which  are  significantly  and  abnormally  high  compared  to  LNG 
prices. If prices on global markets increase at the same pace and level as TTF prices, 
the  activation  of  the  market  correction  mechanism  could  impede  the  purchase  of 
supplies on the global markets, which may result in security of supply risks. Therefore, 
the  market  correction  mechanism  should  only  be  triggered  in  situations  where  TTF 
prices  are  significantly  and  over  a  longer  duration  higher  than  prices  on  global 
markets. Likewise, if prices on global markets were to increase after the activation of 
the  mechanism,  and  the  difference  to  TTF  prices  were  to  reduce  or  disappear,  the 
mechanism  should  be  automatically  deactivated,  to  avoid  any  risk  for  security  of 
supply.  

(22)  LNG is an appropriate proxy for gas price developments at global level. In contrast to 
pipeline  gas,  LNG  is  traded  on  a  world-wide  market.  LNG  prices,  such  as  those  at 
Mediterranean or  North  West  exchanges,  are directly influenced by the  development 
of the global LNG market and are usually closer to the world market price level than 
pipeline-dominated  benchmarks.  LNG  prices  at  Mediterranean  or  North  West 
exchanges provide an appropriate indication whether extreme price hikes are based on 
underlying changes of demand or supply or on a malfunctioning of the price formation 
mechanism in the Union. These LNG prices also reflect better the supply and demand 
conditions in Europe than similar prices overseas, such as in Asia or the U.S (see e.g. 
the  ‘Joint  Japan  Korea  Marker’  or  the  ‘Henry  Hub  Gas  Price  Assessment’,  both 
published be S&P Global Inc., New York). That is, they reflect more appropriately the 
TTF  overprice  compared  to  LNG  delivered  into  the  European  system.  Considering 
European  LNG  prices  avoids  an  inaccurate  influence  of  specific  local  supply  and 
demand  considerations  in  prices  in  other  world  regions  (like  the  United  States  and 
Asia). However, the developments at other organised relevant organised market places 
outside  the  Union  should  be  taken  into  account  in  the  monitoring  before  and  after  a 
possible activation of the mechanism. The actual triggers for the comparison between 
TTF and  LNG prices should  be chosen based on an analysis of the historical  prices, 
and take into account the spread during the prices spike in August 2022.  

(23)  The triggers of the market correction mechanism should make sure that the mechanism 
corrects  market  deficits  and  does  not  significantly  interfere  with  demand  and  supply 
and normal price setting. Unless set at a high enough level, the ceiling could prevent 
market  participants  from  effectively  hedging  their  risks,  as  the  formation  of  reliable 
prices for products with a delivery date in the future and the functioning of derivatives 
markets  could  be  harmed.  If  the  mechanism  were  to  be  triggered  to  bring  prices 
artificially down instead of correcting market malfunctioning, it would have a serious 
negative  impact  on  market  participants,  including  energy  firms,  who  could  face 
difficulties  in  meeting  margin  calls  and  liquidity  constraints,  potentially  resulting  in 
defaults.  Some  market  actors  (in  particular  smaller  ones)  may  be  prevented  from 
hedging their positions, further exacerbating volatility in spot markets, and resulting in 
possibly higher price spikes. Given the significant trading volumes, such development 
would  constitute  a  manifest  risk  for  the  economy  which  the  design  of  the  measure 
should prevent. 

(24)  To  be  fully  compatible  with  Council  Regulation  (EU)  2022/1369  and  the  demand 
reduction targets set out in that Regulation, the Commission should be able to suspend 
the  activation  of  the  mechanism  if  it  negatively  affects  the  progress  made  in 
implementing the gas savings target pursuant to Article 3 of Council Regulation (EU) 
2022/1369, or if it leads to an overall increase in gas consumption, on the basis of data 

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(25) 

on gas consumption and demand reduction received from Member States pursuant to 
Article  8  Council  Regulation  (EU)  2022/1369.  The  dampening  effect  on  natural  gas 
prices  that  the  market  correction  mechanism  may  entail  should  not  end  up  in 
artificially  incentivising  natural  gas  consumption  in  the  EU  to  the  point  that  its 
damages the necessary efforts to  reduce natural  gas demand in line with the demand 
reduction  targets  pursuant  to  Article  3  and  5  of  Council  Regulation  (EU)  2022/1369 
and of Article 3 and 4 of Regulation 2022/1854. The Commission should ensure that 
the  activation  of  the  mechanism  does  not  slow  down  the  progress  which  Member 
States make in meeting their energy savings targets.  

In  order  to  allow  the  Commission  to  intervene  if  gas  and  electricity  consumption 
should increase in  reaction to  the market  correction event,  Member States should, in 
addition  to  the  existing  reporting  obligations  on  the  implementation  of  demand 
reduction,  report  to  the  Commission  specifically  which  measures  they  have  taken  to 
reduce gas and electricity consumption in reaction to the market correction event, with 
a view to the 15% gas demand reduction as provided for in Articles 3 and 5 of Council 
Regulation  (EU)  2022/1369  and  the  demand  reduction  targets  in  Articles  3  and  4  of 
Council Regulation (EU) 2022/1854. In order to ensure that a market correction event 
does  not  reduce  the  incentive  to  pursue  demand  reduction,  the  Commission  should 
consider  proposing  an  adaptation  of  Council  Regulation  (EU)  2022/1369  to  the  new 
situation.  

(26)  Depending  on  the  level  of  the  intervention,  the  market  correction  mechanism  may 
entail financial, contractual and of security of supply risks. The level of risk depends 
on the frequency with  which the mechanism is  activated and may therefore interfere 
with the normal market functioning. The lower the threshold for intervention, the more 
frequently the mechanism will be triggered, and therefore the more likely it is that the 
risk  will  materialise.  As  such,  the  conditions  for  the  activation  of  the  mechanism 
should therefore be set at a level linked to abnormal and extraordinarily high levels of 
the  TTF  month-ahead  price,  while  at  the  same  time  ensuring  that  it  is  an  effective 
instrument  against  episodes  of  excessive  prices  not  reflecting  international  market 
developments. A lower threshold would risk triggering the cap activation in situations 
where the price increases are of limited duration and therefore do not raise concerns to 
the  same  extent  as  the  price  rise  observed  in  August  2022.  At  the  end  of  December 
2021  and  at  the  beginning  of  March  2022,  the  TTF  month-ahead  prices  spiked  very 
high for only a couple of days and fell back almost immediately to the starting level, 
without tangible negative consequences for markets and consumers. 

(27) 

(28) 

It is important that the mechanism is designed in a manner not to alter the fundamental 
contractual  equilibrium  of  gas  supply  contracts,  but  rather  to  address  episodes  of 
abnormal market behaviour. If the triggers for the intervention are set at a level where 
they correct existing problems with price formation and do not intend to interfere with 
the  demand  and  supply  equilibrium,  the  risk  that  the  contractual  equilibrium  of 
existing  contracts  will  be  altered  through  the  mechanism  or  its  activation  can  be 
minimised.  

In order to ensure that the market correction mechanism has an immediate effect, the 
bidding limit should immediately and automatically be activated, without the need for 
a  further  decision  by  by  the  European  Agency  for  the  Cooperation  of  Energy 
Regulators (‘ACER’) or the Commission. To ensure that possible problems resulting 
from the activation are identified early on, the Commission should mandate the ECB 
and  the  European  Securities  and  Markets  Authority  (‘ESMA’)  to  issue  a  report  on 
possible negative effects from the mechanism on financial markets.  

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(29)  ACER  should  continuously  monitor  whether  the  conditions  for  the  operation  of  the 
market correction mechanism are fulfilled. ACER is the best placed authority to carry 
out  such  monitoring,  because  it  has  a  Union-wide  view  of  gas  markets  and  the 
necessary  expertise  in  the  operation  of  gas  markets,  and  is  already  mandated  to 
monitor trading activities in wholesale energy products under EU law. ACER should 
therefore  monitor  the  evolution  of  the  front-month  TTF  settlement  price  and  of  the 
TTF  European  Gas  Spot  Index,  and  compare  the  latter  with  the  reference  price, 
determined by the average price of LNG price assessments linked to European trading 
hubs,  in  order  to  verify  whether  the  conditions  that  justify  the  activation  or  de-
activation  of  the  market  correction  mechanism  are  met.  Once  the  mechanism  is 
activated, ACER should report on a daily basis to the Commission for if the trigger for 
the activation is still met.  

(30)  The  activation  of  the  market  correction  mechanism  may  engender  undesirable  and 
unforeseeable  effects  on  the  economy,  including  risks  to  security  of  supply  and  to 
financial stability. To ensure a swift reaction in  case unintended market  disturbances 
occur, efficient safeguards should be incorporated, ensuring that the mechanism can be 
suspended  at  any  time.  In  case  there  are,  based  on  the  results  of  ACER  monitoring, 
concrete  indications  that  a  market  correction  event  is  imminent,  the  Commission 
should  be  able  to  request  an  opinion  from  the  ECB,  ESMA,  ACER,  and,  where 
appropriate,  ENTSOG  and  the  Gas  Coordination  Group  on  the  impact  of  a  possible 
market  correction  event  on  security  of  supply,  intra-EU  flows  and  financial  stability 
for  the  Commission  to  be  able  to  suspend  the  activation  of  the  market  correction 
mechanism by ACER swiftly if need be. 

(31)  Beyond  a  daily  review  on  whether  the  requirements  for  the  bidding  limit  are  still  in 
place,  additional  safeguards  should  be  included  to  avoid  unintended  market 
disturbances.  

(32)  The  bidding  limit  should  not  affect  over-the-counter  (‘OTC’)  transactions,  as 
including them would raise serious monitoring issues and may lead to problems with 
security of supply.  

(33)  The market correction mechanism should be automatically deactivated if its operation 
is  no  longer  justified  by  the  situation  on  the  natural  gas  market.  Unless  market 
disturbances occur, the mechanism should only be deactivated after a certain period of 
time,  to  avoid  frequent  activation  and  de-activation.  If  ACER,  when  monitoring  the 
development of the triggers for the mechanism, establishes that the TTF European Gas 
Spot Index is no longer higher than the reference price for a sufficiently stable period, 
the  mechanism  should  automatically  be  deactivated.  The  deactivation  of  the 
mechanism  should  not  require  any  assessment  by  ACER  or  the  Commission,  but 
should happen automatically when the conditions are fulfilled.  

(34) 

It  is  of  key  importance  that  the  market  correction  mechanism  includes  an  effective 
instrument to suspend the safety ceiling immediately and at any time if it were to lead 
to serious market disturbances, affecting security of supply and intra-EU flows. 

(35)  As  it  is  important  to  thoroughly  assess  all  safeguards  to  be  taken  into  account  when 
assessing  a  possible  suspension  of  the  safety  ceiling,  the  safety  ceiling  should  be 
suspended by way of a decision of the Commission. When taking the decision, which 
should be taken without undue delay, the Commission should notably assess whether 
the  continued  application  of  the  bidding  limit  jeopardises  the  Union’s  security  of 
supply,  is  accompanied  by  a  sufficient  demand  reduction  efforts,  prevents  market-
based  intra-Union  flows  of  gas,  negatively  affects  energy  derivatives  markets, 

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accounts  for  gas  market  prices  in  the  different  organised  market  places  across  the 
Union, or may negatively affect existing gas supply contracts.   

(36)  The  market  correction  mechanism  should  not  jeopardise  the  Union’s  security  of  gas 
supply by constraining price signals that are essential to attract necessary gas supplies 
and  for  intra-EU  gas  flows.  Gas  providers  may  in  fact  potentially  withhold  supplies 
when the market correction mechanism is activated to maximise profits by selling just 
after  the  de-activation  of  the  ceilings.  In  a  situation  where  the  Commission  has 
declared  a  regional  or  Union  emergency  pursuant  to  Article  12  of  Regulation  (EU) 
2017/1938, and where non-market-based measures have to be additionally introduced 
in  particular  with  the  aim  of  safeguarding  gas  supplies  to  protected  customers,  the 
market  correction  mechanism  should  not  unduly  restrict  the  flow  of  gas  within  the 
internal market endangering the Union’s security of gas supply, and should therefore 
be suspended. 

(37)  The  market  correction  mechanism  should  not  end  up  diminishing  the  role  that  price 
signals fulfil in the EU internal gas market and prevent market-based intra-EU flows 
of gas, as it is essential that natural gas continues to flow where it is most needed.   

(38)  The market correction mechanisms should not unduly jeopardise the continued proper 
functioning  of  the  energy  derivatives  markets.  These  markets  play  a  key  role  in 
enabling  market  participants  in  hedging  their  positions  in  order  to  manage  risks,  in 
particular  with  regard  to  price  volatility.  Moreover,  price  interventions  through  the 
market  correction  mechanism  can  result  in  considerable  financial  losses  for  market 
participants in the derivatives markets. Given the size of the market for gas in the EU, 
such  losses  may  not  only  affect  the  specialised  derivatives  markets,  but  may  have 
significant  knock-on  effects  on  other  financial  markets.  Therefore,  the  Commission 
should  immediately  suspend  the  market  correction  mechanism  if  it  jeopardises  the 
orderly  functioning  of  the  derivatives  market.  In  that  regard,  it  is  important  that  the 
Commission  takes  into  account  available  expertise  from  relevant  EU  bodies.  The 
European  Securities  and  Markets  Authority  is  an  independent  authority  that 
contributes  to  safeguarding  the  stability  of  the  EU’s  financial  system,  notably  by 
promoting  stable  and  orderly  financial  markets,  such  as  the  derivative  markets.  The 
Commission should therefore take into account reports from ESMA on these aspects. 
In  addition,  the  Commission  should  take  into  account  any  advice  of  the  European 
Central  Bank  (‘ECB’)  relating  to  the  stability  of  the  financial  system  in  line  with 
Article 127(4) Treaty on the Functioning of the European Union (‘TFEU’) and Article 
25  of  Protocol  IV  to  the  TFEU.  Given  the  volatility  of  financial  markets  and  the 
potentially large impact of market interventions therein, it  is important to ensure that 
the Commission can suspend the market correction mechanism quickly. Therefore, the 
report of ESMA and the opinion of the ECB should be issued no later than 48 hours or 
within the day same in urgent cases after the Commission’s request.   

(39)  The  market  correction  mechanism  should  be  designed  to  address  only  exceptional 
increases  in  gas  prices  caused  by  deficits  in  the  price  formation  mechanism  and  as 
such not have an impact on the validity of existing gas supply contracts. However, in 
situations  in  which  the  Commission  observes  that  the  activation  of  the  market 
correction  mechanism  negatively  impacts  existing  supply  contracts,  the  Commission 
should suspend it. 

(40)  The design and the suspension possibilities of the mechanism should take into account 
that  natural  gas  traders  may  move  trade  of  natural  gas  to  regions  outside  the  Union, 
reducing  the  effectiveness  of  the  market  correction  mechanism.  This  would  be  the 

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case, for instance, if traders started engaging in over-the-counter gas trades, which is 
less  transparent,  less  subject  to  regulatory  scrutiny,  and  carrying  greater  risks  of 
defaulting  on  obligations  for  the  parties  involved.  This  would  also  be  the  case  if 
traders,  whose  hedging  may  be  limited  by  the  market  correction  mechanism,  sought 
hedges in other jurisdictions, resulting in the clearing counterpart needing to rebalance 
the  cash  underpinning  derivatives  positions  to  reflect  the  capped  settlement  price, 
triggering margin calls. 

(41)  ACER,  the  European  Central  Bank,  ESMA,  the  European  Network  of  Transmission 
System Operators for Gas (‘ENTSOG’) and the Gas Coordination Group established 
under  Regulation  (EU)  2017/1938  should  assist  the  Commission  in  monitoring  the 
market correction mechanism. 

(42)  Following  a  market  event  or  a  suspension  decision,  or  in  the  light  of  market  and 
security of supply developments, it may be appropriate to review the conditions for the 
activation of the market correction mechanism set out in Article 3(2)(a) and (b). The 
Council  may  therefore,  upon  a  proposal  from  the  Commission,  adopt  appropriate 
amendments to this Regulation in this situation.  

(43)  The  market  correction  mechanism  is  necessary  and  proportionate  for  achieving  the 
objective  of  correcting  excessively  high  gas  prices  at  TTF.  All  Member  States  are 
concerned by the indirect  effects  of the price hikes, such as increasing energy prices 
and  inflation.  As  concerns  the  deficits  in  the  price  formation  system,  these  deficits 
plays  a  different  role  in  different  Member  States,  with  price  increases  being  more 
representative in some Member States (e.g. Central European Member States) than in 
other  Member  States  (e.g.  Member  States  at  the  periphery  or  with  other  supply 
possibilities). In order to avoid a fragmented action, which could divide the integrated 
Union  gas  market,  a  common  action  is  needed  in  a  spirit  of  solidarity.  This  is  also 
crucial  to  ensure  security  of  supply  in  the  Union.  Moreover,  common  safeguards, 
which  may  be  more  needed  in  Member  States  without  supply  alternatives  than  in 
Member States with more alternatives, ensure a coordinated approach as an expression 
of energy solidarity. Indeed, while the financial risks and benefits are very different for 
different  Member  States,  the  market  correction  mechanism  constitutes  a  solidary 
compromise, in which all Member States agree to contribute to the market correction 
and accept the same limits to the price formation, even though the level of malfunction 
of  the  price  formation  mechanism  and  the  financial  impacts  of  TTF  prices  on  the 
economy are different in different Member States. The market correction mechanism 
would  therefore  strengthen  Union  solidarity  in  avoiding  excessive  prices,  which  are 
unsustainable even for short periods of time for many Member States. The proposed 
measure will help ensure that gas supply undertakings from all Member States are able 
to purchase gas at reasonable prices in a spirit of solidarity. 

(44)  The volatile and unpredictable situation on the natural gas market entering the winter 
seasons  makes  it  important  to  ensure  that  the  market  correction  mechanism  may  be 
applied  as  soon  as  possible,  if  the  conditions  justifying  its  activation  are  met.  This 
Regulation  should  therefore  enter  into  force  on  the  day  following  that  of  its 
publication in the Official Journal of the European Union;  

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HAS ADOPTED THIS REGULATION: 

CHAPTER I – SUBJECT MATTER AND DEFINITIONS 

Article 1 

Subject matter and scope 

This  Regulation  establishes  a  temporary  market  correction  mechanism  against  excessively 
high gas prices which are unrelated to prices at other exchanges in the Union. 

Article 2 

Definitions 

For the purpose of this Regulation, the following definitions apply:  

(1) 

(2) 

‘front-month  TTF  derivative’  means  a  commodity  derivative  as  defined  in  Article 
2(1),  point  (30),  of  Regulation  (EU)  No  600/2014,  traded  on  a  trading  venue,  the 
underlying  of  which  is  a  transaction  in  the  Title  Transfer  Facility  (TTF)  Virtual 
Trading  Point,  operated  by  Gasunie  Transport  Services  B.V,  and  whose  expiration 
date  is  the  nearest  among  the  derivatives  with  a  one-month  maturity  traded  on  a 
given trading venue; 

‘reference price’ means the daily average price of the price of the LNG assessments 
“Daily  Spot  Mediterranean  Marker  (MED)”,  the  “Daily  Spot  Northwest  Europe 
Marker  (NWE)”, published by S&P Global  Inc.,  New York and of the price of the 
daily price assessment carried out by ACER pursuant to Article 18 to 22 of Council 
Regulation (EU) [XXXX/2022]. 

(3) 

‘trading venue’ means any of the following: 

(a) 

(b) 

(c) 

‘regulated  market’  as  defined  in  Article  4(1),  point  (21),  of  Directive 
2014/65/EU; 

‘multilateral trading’ facility as defined in Article 4(1), point (22), of Directive 
2014/65/EU; 

‘organised trading  facility’  as defined in  Article  4(1), point (23), of  Directive 
2014/65/EU; 

CHAPTER II – MARKET CORRECTION MECHANISM 

Article 3 

Market correction mechanism 

(1) 

(2) 

To  limit  episodes  of  excessive  natural  gas  prices  which  are  unrelated  to  prices  at 
other  gas  exchanges,  a  market  correction  mechanism  for  the  front-month  TTF 
derivative settlement price can be activated as of 1 January 2023. 

The market correction mechanism shall be activated where the following conditions 
are met (‘market correction event’)  

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(a) 

(b) 

the  front-month  TTF  derivative  settlement  price  exceeds  EUR 275  for  two 
week(s) and 

the  TTF  European  Gas  Spot  Index  as  published  by  the  European  Energy 
Exchange (EEX) is EUR 58 higher than the reference price during the last 10 
trading days before the end of the period referred to in subparagraph (a).   

In case there are, based on the results of ACER monitoring pursuant to Article 4(1), 
concrete  indications  that  a  market  correction  event  pursuant  to  Article  3(2)(b)  is 
imminent, the Commission shall request an opinion from the European Central Bank 
(‘ECB’),  European  Securities  and  Markets  Authority  (‘ESMA’)  and,  where 
appropriate, from the European Network of Transmission System Operators for Gas 
(‘ENTSOG’)  and  the  Gas  Coordination  Group  established  pursuant  to  Regulation 
(EU) 2017/1938  on the impact  of a possible market  correction event  on security of 
supply,  intra-EU  flows  and  financial  stability  for  the  Commission  to  be  able  to 
suspend the activation of the market correction mechanism by ACER swiftly if need 
be.  The  opinion  shall  also  take  into  account  price  developments  in  other  relevant 
organised market places, notably in Asia or the U.S., as reflected in the ‘Joint Japan 
Korea  Marker’  or  the  ‘Henry  Hub  Gas  Price  Assessment’,  both  published  by  S&P 
Global Inc., New York.  

ACER shall, where it observes that a market correction event has occurred, based on 
the information it receives pursuant to Regulation (EU) No 1227/2011, Commission 
Implementing  Regulation  (EU)  No  1348/2014,  Articles  18  to  22  of  Council 
Regulation  (EU)  [XXXX/2022]  or  based  on  other  publicly  available  market 
information,  without  delay  publish  a  notice  in  the  Official  Journal  of  the  European 
Union  that  a  market  correction  event  has  occurred  (‘market  correction  notice’)  and 
inform the Commission, ESMA and the ECB of the market correction event. 

Orders  for  front-month  TTF  derivatives  with  prices  above  EUR 275  may  not  be 
accepted as from the day after the publication of a market correction notice (‘bidding 
limit’). 

Member  States  shall  notify  to  the  Commission  which  measures  they  have  taken  to 
prevent  an  expansion  of  gas  and  electricity  consumption  in  reaction  to  the  market 
correction event  and to  reduce  gas  and  electricity demand, with  a view to  the 15% 
gas demand reduction as provided for in Articles 3 and 5 of Council Regulation (EU) 
2022/1369  and  the  demand  reduction  targets  in  Articles  3  and  4  of  Council 
Regulation (EU) 2022/1854. The notification shall be made no later than two weeks 
after the market  correction event,  unless the Commission  has adopted a suspension 
decision pursuant to Article 5(2) in the meantime.  

The  Commission,  having  assessed  the  effect  of  the  bidding  limit  on  gas  and 
electricity consumption and progress with the demand reduction targets provided for 
in Articles 3 and 5 of Council Regulation (EU) 2022/1369 and in Articles 3 and 4 of 
Council Regulation (EU) 2022/1854, may also propose to adapt Council Regulation 
(EU) 2022/1369 to the new situation. 

In case of a market correction event, the Commission shall, without undue delay, ask 
the  ECB  for  a  report  on  the  risk  of  unintended  disturbances  for  the  stability  and 
orderly functioning of energy derivative markets 

(3) 

(4) 

(5) 

(6) 

(7) 

(8) 

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(1) 

(2) 

(1) 

(2) 

Article 4 

Monitoring and deactivation of the market correction mechanism 

ACER shall constantly monitor whether the condition referred to in Article 3(2)(b) is 
fulfilled,  based  on  the  information  it  receives  pursuant  to  Regulation  (EU)  No 
1227/2011, Commission Implementing Regulation (EU) No 1348/2014 and Articles 
18  to  22  of  Council  Regulation  (EU)  [XXXX/2022]  and  on  market  information. 
ACER shall communicate the results of its monitoring to the Commission at the end 
of every business day by no later than 18h00 CET.  

In  case  the  condition  referred  to  in  Article  3(2)(b)  is  no  longer  met  during  10 
consecutive  trading  days  before  the  end  of  the  month  after  the  market  correction 
event,  or  afterwards  (‘deactivation  event’),  ACER  shall  without  delay  publish  a 
notice in  the Official Journal  of the European Union  and notify to  the Commission 
and  ESMA  that  the  condition  referred  to  in  Article  3(2)(b)  is  no  longer  met 
(‘deactivation notice’). From the day following publication of a deactivation notice, 
the bidding limit referred to in Article 3(4) shall cease to apply.   

Article 5 

Suspension of the market correction mechanism 

ESMA, the ECB, ACER, the Gas Coordination Group and ENTSOG shall constantly 
monitor the effects of the bidding limit on markets and security of supply. 

On basis of this monitoring, the Commission shall, by decision, suspend the market 
correction  mechanism  at  any  time,  if  unintended  market  disturbances  or  manifest 
risks  of  such  disturbances  occur,  negatively  affecting  security  of  supply,  intra-EU 
flows  or  financial  stability  (‘suspension  decision’).  In  the  assessment,  the 
Commission shall notably take into account if the continued activation of the market 
correction mechanism  

(a) 

jeopardises the Union’s security of gas supply, which is notably deemed to be 
the  case  if  the  Commission  has  declared  a  regional  or  Union  emergency 
pursuant  to  Article  12  of  Regulation  (EU)  2017/1938,  or  may  lead  to  any 
rationing of gas;  

(b)  occurs during a period where the mandatory demand reduction targets pursuant 
to  Article  5  of  Council  Regulation  (EU)  2022/1369  are  not  met  at  EU  level, 
negatively  affects  the  progress  made  in  implementing  the  gas  savings  target 
pursuant  to  Article  3  of  Council  Regulation  (EU)  2022/1369,  or  leads  to  an 
overall increase in  gas consumption, on  the basis of data on gas consumption 
and  demand  reduction  received  from  Member  States  pursuant  to  Article  8  of 
Council Regulation (EU) 2022/1369; 

(c) 

(d) 

prevents  market-based  intra-EU  flows  of  gas  according  to  ACER  monitoring 
data;  

affects,  on  the  basis  of  a  report  on  the  impact  of  the  activation  of  the market 
correction  measure  by  ESMA  and  an  opinion  of  the  ECB  requested  by  the 
Commission  for  that  purpose,  the  stability  and  orderly  functioning  of  energy 
derivative markets; 

(e) 

takes  into  account  the  gas  market  prices  in  the  different  organised  market 
places across the Union, and at other relevant organised market places, such as 

EN 

25 

  EN 

(3) 

(4) 

(5) 

(6) 

in  Asia  or  the  U.S.,  as  reflected  in  the  ‘Joint  Japan  Korea  Marker’  or  the 
‘Henry Hub Gas Price Assessment’, both published by S&P Global Inc., New 
York; 

(f) 

affects  the  validity  of  existing  gas  supply  contracts,  including  long-term  gas 
supply contracts.  

A  suspension  decision  shall  be  taken  without  undue  delay  and  be  published  in  the 
Official  Journal  of  the  European  Union.  From  the  day  following  publication  of  a 
suspension  decision,  and  for  as  long  as  specified  in  the  suspension  decision,  the 
bidding limit referred to in Article 3(4) shall cease to apply.   

ACER, the ECB, ESMA, the Gas Coordination Group and ENTSOG shall assist the 
Commission in the tasks pursuant to Articles 3, 4 and 5. The report of ESMA and the 
opinion  of  the  ECB  pursuant  to  paragraph  (2)(d)  shall  be  issued  no  later  than  48 
hours or within the same day in urgent cases upon a request from the Commission.  

The market correction mechanism shall apply only for as long as this Regulation is in 
force. 

Following  a  market  correction  event  or  a  suspension  decision,  or  in  the  light  of 
market and security of supply developments, the Council, upon a proposal from the 
Commission,  may  decide  to  review  the  conditions  for  the  activation  of  the  market 
correction  mechanism  set  out  in  Article 3(2)(a)  and  (b).  Before  submitting  such  a 
proposal, the Commission should consult ECB, ESMA, ACER, the Gas Coordination 
Group, ENTSOG and other relevant stakeholders. 

CHAPTER III - FINAL PROVISIONS 

Article 6 

Entry into force and review 

This  Regulation  shall  enter  into  force  on  the  day  following  that  of  its  publication  in  the 
Official Journal of the European Union. It shall apply for a period of one year from its entry 
into  force.  By  1.11.2023  at  the  latest,  the  Commission  shall  carry  out  a  review  of  this 
Regulation in view of the general situation of the gas supply to the Union, and present a report 
on  the  main  findings  of  that  review  to  the  Council.  The  Commission  may,  based  on  that 
report, propose to prolong the validity of this Regulation. 

This Regulation shall be binding in its entirety and directly applicable in the Member States in 
accordance with the Treaties. 

Done at Strasbourg, 

For the Council 
The President 

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LEGISLATIVE FINANCIAL STATEMENT 

1. 

FRAMEWORK OF THE PROPOSAL/INITIATIVE 

1.1.  Title of the proposal/initiative 

1.2.  Policy area(s) concerned 

1.3.  The proposal/initiative relates to: 

1.4.  Objective(s) 

1.4.1. General objective(s) 

1.4.2. Specific objective(s) 

1.4.3. Expected result(s) and impact 

1.4.4. Indicators of performance 

1.5.  Grounds for the proposal/initiative 

1.5.1. Requirement(s)  to  be  met  in  the  short  or  long  term  including  a  detailed 
timeline for roll-out of the implementation of the initiative 

1.5.2. Added  value  of  Union  involvement  (it  may  result  from  different  factors,  e.g. 
coordination gains, legal certainty, greater effectiveness or complementarities). For 
the purposes of this point 'added value of Union involvement' is the value resulting 
from  Union  intervention  which  is  additional  to  the  value  that  would  have  been 
otherwise created by Member States alone. 

1.5.3. Lessons learned from similar experiences in the past 

1.5.4. Compatibility  with  the  Multiannual  Financial  Framework  and  possible 
synergies with other appropriate instruments 

1.5.5. Assessment  of  the  different  available  financing  options,  including  scope  for 
redeployment 

1.6.  Duration and financial impact of the proposal/initiative 

1.7.  Management mode(s) planned 

2.  MANAGEMENT MEASURES 

2.1.  Monitoring and reporting rules 

2.2.  Management and control system(s) 

2.2.1. Justification  of 
mechanism(s), the payment modalities and the control strategy proposed 

the  management  mode(s), 

funding 

the 

implementation 

2.2.2. Information  concerning the risks identified and the internal control  system(s) 
set up to mitigate them 

2.2.3. Estimation  and  justification  of  the  cost-effectiveness  of  the  controls  (ratio  of 
"control  costs  ÷  value  of  the  related  funds  managed"),  and  assessment  of  the 
expected levels of risk of error (at payment & at closure) 

2.3.  Measures to prevent fraud and irregularities 

3. 

ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE 

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3.1.  Heading(s)  of  the  multiannual  financial  framework  and  expenditure 
budget line(s) affected 

3.2.  Estimated financial impact of the proposal on appropriations 

3.2.1. Summary of estimated impact on operational appropriations 

3.2.2. Estimated output funded with operational appropriations 

3.2.3. Summary of estimated impact on administrative appropriations 

3.2.4. Compatibility with the current multiannual financial framework 

3.2.5. Third-party contributions 

3.3.  Estimated impact on revenue 

EN 

28 

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LEGISLATIVE FINANCIAL STATEMENT 

1. 

1.1. 

FRAMEWORK OF THE PROPOSAL/INITIATIVE  

Proposal for a Council Regulation establishing a market correction mechanism 
to protect citizens and the economy against excessively high prices  

1.2. 

Policy area(s) concerned  

Policy area: Energy 

Activity: Establishment of a Market Correction Mechanism 

1.3. 

The proposal/initiative relates to:  

x a new action  

 a new action following a pilot project/preparatory action10  

 the extension of an existing action  

 a merger or redirection of one or more actions towards another/a new action  

1.4. 

Objective(s) 

1.4.1.  General objective(s) 

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  establishing  a  maximum  dynamic  price  at  which 
natural  gas  transactions  can  take  place  in  the  TTF  month-ahead  markets  under 
specific conditions. This limit will be triggered if specific market  events occur, and 
will require permanent monitoring, not only on a monthly basis to ascertain whether 
the  correction  mechanism  should  be  maintained  but  also  a  more  sistematic 
monitoring to ensure that no undue impact on different aspects, ranging from security 
of supply to unintended market disturbances, negatively affecting security of supply 
and  intra-EU  flows,  in  which  event  the  correction  mechanism  needs  to  be 
immediately suspended. 

1.4.2. 

Specific objective 

To establish a market correction mechanism to prevent excessive TTF-month ahead 
levels not reflecting LNG prices. 

10 

As referred to in Article 58(2)(a) or (b) of the Financial Regulation. 

EN 

29 

  EN 

                                                 
1.4.3.  Expected result(s) and impact 

Specify the effects which the proposal/initiative should have on the beneficiaries/groups targeted. 

The proposal will contribute to the optimal functioning of the most liquid derivatives 
market in the EU, avoiding overpricing of the NWE infrastructure bottlenecks and its 
undue impact on gas prices across the EU.  

1.4.4. 

Indicators of performance 

Specify the indicators for monitoring progress and achievements. 

Creation of  a team  of experts responsible  for monitoring market  developments  that 
will lead to the triggering of the market correction mechanism. 

1.5. 

Grounds for the proposal/initiative  

1.5.1.  Requirement(s) to be met in the short or long term including a detailed timeline for 

roll-out of the implementation of the initiative 

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. 

1.5.2.  Added  value  of  Union  involvement  (it  may  result  from  different  factors,  e.g. 
coordination gains, legal certainty, greater effectiveness or complementarities). For 
the purposes of this point 'added value of Union involvement' is the value resulting 
from  Union  intervention  which  is  additional  to  the  value  that  would  have  been 
otherwise created by Member States alone. 

This  proposal  should  help  the  contention  of  the  TTF  futures  levels,  addressing  and 
minimising  price  spikes  such  as  the  ones  that  took  place  in  August  2022,  while 
maintaining the EU’s attractiveness for LNG cargoes. 

1.5.3.  Lessons learned from similar experiences in the past 

The  Market  Correction  Mechanism  would  be  an  unprecedented  intervention  to  the 
European  liberalised  and  integrated  gas  market  and/or  the  financial  markets  for 
commodities.  Due  to  the  unknown  impacts,  a  strong  set  of  conditions  and  safety 
triggers has been included, as well as strong monitoring requirements  

1.5.4.  Compatibility  with  the  Multiannual  Financial  Framework  and  possible  synergies 

with other appropriate instruments 

No operational appropriations needed. 

1.5.5.  Assessment  of  the  different  available  financing  options,  including  scope  for 

redeployment 

No need for a different approach has been contemplated at this stage.  

Additional human resources with high level expertise are needed in the Commission 
(DG ENER) for these new tasks. However, under the current MFF, the Commission 
must  operate  in  a  context  of  stable  staffing,  and  thus  redeployment  within  the  DG 
and across Commission services will need to be contemplated as far as possible. A 
separate  Legislative  Financial  Statement  foresees  additional  staff  for  the  European 
Agency for the Cooperation of Energy Regulators (ACER). 

EN 

30 

  EN 

1.6. 

Duration and financial impact of the proposal/initiative 

X limited duration  

–  X 

in effect from 2023 as long as the energy crisis remains   

–    Financial  impact  from  YYYY  to  YYYY  for  commitment  appropriations  and 

from YYYY to YYYY for payment appropriations.  

 unlimited duration 

–  Implementation with a start-up period from YYYY to YYYY, 

–  followed by full-scale operation. 

1.7.  Management mode(s) planned11  

X Direct management by the Commission 

–  X by its departments, including by its staff in the Union delegations;  

–    by the executive agencies  

 Shared management with the Member States  

 Indirect management by entrusting budget implementation tasks to: 

–   third countries or the bodies they have designated; 

–   international organisations and their agencies (to be specified); 

–   the EIB and the European Investment Fund; 

–   bodies referred to in Articles 70 and 71 of the Financial Regulation; 

–   public law bodies; 

–   bodies governed by private law with a public service mission to the extent that 

they are provided with adequate financial guarantees; 

–   bodies governed by the private law of a Member State that are entrusted with 
the  implementation  of  a  public-private  partnership  and  that  are  provided  with 
adequate financial guarantees; 

–    persons  entrusted  with  the  implementation  of  specific  actions  in  the  CFSP 

pursuant to Title V of the TEU, and identified in the relevant basic act. 

– 

If more than one management mode is indicated, please provide details in the ‘Comments’ section. 

Comments  

Monitoring to be undertaken by the Commission services, supported by the European Agency 
(ACER). 
for 

Cooperation 

Regulators 

Energy 

the 

of 

11 

Details of management modes and references to the Financial Regulation may be found on the 
BudgWeb site: 
https://myintracomm.ec.europa.eu/budgweb/EN/man/budgmanag/Pages/budgmanag.aspx  

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2. 

MANAGEMENT MEASURES  

2.1.  Monitoring and reporting rules  

Specify frequency and conditions. 

The  tasks  directly  implemented  by  DG  ENER  will  follow  the  annual  cycle  of 
planning and monitoring, as implemented in the Commission, including reporting the 
results through the Annual Activity Report of DG ENER and of ACER. 

Furthermore,  the  performance  of  the  mechanism  will  be  monitored  in  accordance 
with Article 4 of the proposal.  

The proposal also includes, under Article 5c, specific reporting requirements.  

2.2.  Management and control system(s)  

2.2.1. 

Justification of the management mode(s), the funding implementation mechanism(s), 
the payment modalities and the control strategy proposed 

The Commission,  with  the support of the  European Agency  for the Cooperation of 
Energy  Regulators  (ACER),will  carry  out  the  triggering  and  monitoring  of  the 
market  monitoring  mechanism,  which  cannot  be  delegated  due  to  the  level  of 
responsibility linked to such tasks.  

2.2.2. 

Information concerning the risks identified and the internal control system(s) set up 
to mitigate them 

As regards the implementation of the tasks related to the triggering and monitoring of 
the  mechanism,  the  risks  identified  are  linked  to  the  insufficient  number  of  human 
resources  and  the  level  of  expertise  needed  to  undertake  these  key  tasks  in  the 
Commission.  The  list  of  laureates  resulting  from  the  EPSO/AD/401/22  energy 
specialist competition will help recruit the necessary experts in the Commission.  

2.2.3.  Estimation and justification of the cost-effectiveness of the controls (ratio of "control 
costs ÷ value of the related funds managed"), and assessment of the expected levels 
of risk of error (at payment & at closure)  

DG ENER reports annually, in its Annual Activity Report, on the cost of control of 
its  activities.  The  risk  profile  and  cost  of  controls  for  procurement  activities  are  in 
line with the requirements. 

The tasks assigned in relation to the setup of the mechanism by DG ENER will not 
result in additional controls or change in the ratio of control costs.  

2.3.  Measures to prevent fraud and irregularities  

Specify existing or envisaged prevention and protection measures, e.g. from the Anti-Fraud Strategy. 

DG ENER adopted a revised Anti-fraud Strategy (AFS) in 2020. DG ENER AFS is 
based on the Commission Antifraud Strategy and a specific risk assessment carried 
out  internally to  identify the areas most vulnerable to  fraud, the controls  already in 
place and the actions necessary to improve DG ENER’s capacity to prevent, detect 
and correct fraud. 

The  contractual  provisions  applicable  to  public  procurement  ensure  that  audits  and 
on-the-spot checks can be carried out by the Commission services, including OLAF, 
OLAF. 
using 

recommended 

provisions 

standard 

the 

by 

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32 

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3. 

3.1. 

ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE  

Heading(s)  of  the  multiannual  financial  framework  and  expenditure  budget 
line(s) affected  

  Existing budget lines  

In order of multiannual financial framework headings and budget lines. 

Budget line 

Heading of 
multiannual 
financial 
framework 

Number  

Type of  
expenditure 

Diff./Non-
diff.12 

Contribution  

from 
EFTA 
countries
13 

from 
candidate 
countries14 

from third 
countries 

within the 
meaning of 
Article 21(2)(b) of 
the Financial 
Regulation  

01 

02 20 04 02 

Diff. 

NO 

NO 

NO 

NO 

  New budget lines requested  

In order of multiannual financial framework headings and budget lines. 

Budget line 

Type of 
expenditure 

Contribution  

Heading of 
multiannual 
financial 
framework 

Number 

[XX.YY.YY.YY] 

Diff./Non-
diff. 

from 
EFTA 
countries 

from 
candidate 
countries 

from third 
countries 

within the 
meaning of 
Article 21(2)(b) of 
the Financial 
Regulation  

YES/NO  YES/NO  YES/NO 

YES/NO 

12 
13 
14 

Diff. = Differentiated appropriations / Non-diff. = Non-differentiated appropriations. 
EFTA: European Free Trade Association.  
Candidate countries and, where applicable, potential candidates from the Western Balkans. 

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3.2. 

Estimated financial impact of the proposal on appropriations  

3.2.1. 

Summary of estimated impact on operational appropriations  

–  X  The proposal/initiative does not require the use of operational appropriations  

–    The proposal/initiative requires the use of operational appropriations, as explained below: 

Heading of multiannual financial  
framework  

1 

Single Market, Innovation and Digital 

EUR million (to three decimal places) 

Year 
2022 

Year 
2023 

Year 
2024 

Year 
2025 

Enter as many years as 
necessary to show the duration 
of the impact (see point 1.6) 

TOTAL 

DG: ENER 

 Operational appropriations  

Budget line15 02 20 04 02 

Budget line 

Commitments 

Payments 

Commitments 

Payments 

(1a) 

(2a) 

(1b) 

(2b) 

Appropriations  of  an  administrative  nature  financed  from  the 
envelope of specific programmes16  

Budget line 

TOTAL appropriations 
for DG ENER 

Commitments 

Payments 

(3) 

=1a+1b 
+3 

=2a+2b 

+3 

15 
16 

According to the official budget nomenclature. 
Technical and/or administrative assistance and expenditure in support of the implementation of EU programmes and/or actions (former ‘BA’ lines), indirect research, direct research. 

EN 

34 

EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
 TOTAL operational appropriations  

Commitments 

Payments 

  TOTAL  appropriations  of  an  administrative  nature 
financed from the envelope for specific programmes  

(4) 

(5) 

(6) 

TOTAL appropriations  
under HEADING 1 
of the multiannual financial framework 

Commitments 

=4+ 6 

Payments 

=5+ 6 

If more than one operational heading is affected by the proposal / initiative, repeat the section above: 

  TOTAL  operational  appropriations  (all 
operational headings) 

Commitments 

Payments 

 TOTAL appropriations of an administrative nature financed 
from  the  envelope  for  specific  programmes  (all  operational 
headings) 

(4) 

(5) 

(6) 

TOTAL appropriations  
under HEADINGS 1 to 6 
of the multiannual financial 
framework 
(Reference amount) 

Commitments 

=4+ 6 

Payments 

=5+ 6 

EN 

35 

EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Heading of multiannual financial  
framework  

7 

‘Administrative expenditure’ 

This section should be filled in using the 'budget data of an administrative nature' to be firstly introduced in the Annex to the Legislative 
Financial Statement (Annex V to the internal rules), which is uploaded to DECIDE for interservice consultation purposes. 

EUR million (to three decimal places) 

DG: ENER 

 Human resources  
 Other administrative expenditure  

Year 
N 

2023 

Year 
N+1 

2024 

Year 
N+2 

2025 

Year 
N+3 

2026 

Year 

N+4 

2027  

0,942 

0,942 

0,942 

0,942 

0,942 

TOTAL DG ENER 

Appropriations  

0,942 

0,942 

0,942 

0,942 

0,942 

TOTAL 

4,710000 

4,710000 

TOTAL appropriations 
under HEADING 7 
of the multiannual financial 
framework  

(Total  commitments  = 
Total payments) 

0,942 

0,942 

0,942 

0,942 

0,942 

4,710000 

Year 
N17 

Year 
N+1 

Year 
N+2 

Year 
N+3 

Enter as many years as 
necessary to show the duration 
of the impact (see point 1.6) 

TOTAL 

EUR million (to three decimal places) 

TOTAL appropriations  

Commitments 

0,942 

0,942 

0,942 

0,942 

0,942 

4,710000 

17 

Year N is the year in which implementation of the proposal/initiative starts. Please replace "N" by the expected first year of implementation (for instance: 2021). The same  for the 
following years. 

EN 

36 

EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
under HEADINGS 1 to 7 
of the multiannual financial 
framework  

Payments 

0,942 

0,942 

0,942 

0,942 

0,942 

4,710000 

3.2.2.  Estimated output funded with operational appropriations  

Year 
N 

Year 
N+1 

Year 
N+2 

Year 
N+3 

OUTPUTS 

Commitment appropriations in EUR million (to three decimal places) 

Enter as many years as necessary to show the 
duration of the impact (see point 1.6) 

TOTAL 

o
N

Cost 

o
N

Cost 

o
N

Cost 

o
N

Cost 

o
N

Cost  N

o

Cost 

o
N

Cost 

Total 
No 

Total 
cost 

Indicate 
objectives and 
outputs  

 

Type18 

Avera
ge 
cost 

SPECIFIC OBJECTIVE No 119… 

- Output 

- Output 

- Output 

Subtotal for specific objective No 1 

SPECIFIC OBJECTIVE No 2 ... 

- Output 

Subtotal for specific objective No 2 

TOTALS 

18 
19 

Outputs are products and services to be supplied (e.g.: number of student exchanges financed, number of km of roads built, etc.). 
As described in point 1.4.2. ‘Specific objective(s)…’  

EN 

37 

EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
3.2.3. 

Summary of estimated impact on administrative appropriations  

–    The  proposal/initiative  does  not  require  the  use  of  appropriations  of  an 

administrative nature  

–  X  The proposal/initiative requires the use of appropriations of an administrative 

nature, as explained below: 

Year 
N 20 

2023 

Year 
N+1 

2024 

Year 
N+2 

2025 

Year 
N+3 

2026 

EUR million (to three decimal places) 

Year N+4 

2027 

TOTAL 

HEADING 7 
of the multiannual 
financial framework 

Human resources  

0,942 

0,942 

0,942 

0,942 

0,942 

4,710000 

Other administrative 
expenditure  

Subtotal HEADING 7 
of the multiannual 
financial framework  

Outside HEADING 721  
of the multiannual 
financial framework  

Human resources  

Other expenditure  
of an administrative 
nature 

Subtotal  
outside HEADING 7 
of the multiannual 
financial framework  

0,942 

0,942 

0,942 

0,942 

0,942 

4,710000 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

TOTAL 

0,942 

0,942 

0,942 

0,942 

0,942 

4,710000 

The  appropriations  required  for  human  resources  and  other  expenditure  of  an  administrative  nature  will  be  met  by 
appropriations from the DG that are already assigned to management of the action and/or have been redeployed within the 
DG,  together  if  necessary  with  any  additional  allocation  which  may  be  granted  to  the  managing  DG  under  the  annual 
allocation procedure and in the light of budgetary constraints. 

20 

21 

Year N is the year in which implementation of the proposal/initiative starts. Please replace "N" by the expected first 
year of implementation (for instance: 2021). The same for the following years. 
Technical  and/or  administrative  assistance  and  expenditure  in  support  of  the  implementation  of  EU programmes 
and/or actions (former ‘BA’ lines), indirect research, direct research. 

EN 

38 

  EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
3.2.3.1.  Estimated requirements of human resources  

–    The proposal/initiative does not require the use of human resources.  

–  X  The  proposal/initiative  requires  the  use  of  human  resources,  as  explained 

below: 

Estimate to be expressed in full time equivalent units 

Year 
N 
2023 

Year 
N+1 
2024 

Year 
N+2 
2025 

Year 
N+3 
2026 

Year N+4 

2027 

 Establishment plan posts (officials and temporary staff) 

20 01 02 01 (Headquarters and Commission’s Representation 
Offices) 

6 

6 

6 

6 

6 

20 01 02 03 (Delegations) 

01 01 01 01  (Indirect research) 

 01 01 01 11 (Direct research) 

Other budget lines (specify) 

 External staff (in Full Time Equivalent unit: FTE)22 

20 02 01 (AC, END, INT from the ‘global envelope’) 

20 02 03 (AC, AL, END, INT and JPD in the delegations) 

XX 01  xx yy zz  23 

- at Headquarters 

- in Delegations  

01 01 01 02 (AC, END, INT - Indirect research) 

 01 01 01 12 (AC, END, INT - Direct research) 

Other budget lines (specify) 

TOTAL 

6 

6 

6 

6 

6 

XX is the policy area or budget title concerned. 

The human resources required will be met by staff from the DG who are already assigned to management of the 
action  and/or  have  been  redeployed  within  the  DG,  together  if  necessary  with  any  additional  allocation  which 
may  be  granted  to  the  managing  DG  under  the  annual  allocation  procedure  and  in  the  light  of  budgetary 
constraints. 

Description of tasks to be carried out: 

Officials and temporary staff 

This  unprecedented  mechanism  entails  close  monitoring  tasks  –  including  on  the 
functioning of commodity markets and security of supply – that are not currently part 
of the Commission’s role. Due to the level of responsibility linked to such task  – and 
the  extremely    negative  effects  that  may  arise  from  failure  to  undertake  this  task 
properly  –  it  is  paramount  to  the  Commission’s  reputation  that  no  risks  that  may 
undermine  its  delivery  are  undertaken.  For  these  tasks,  DG  ENER  will  recruit  six 
economic  analysts  with  an  energy  background  and  use  the  list  of  laureates  resulting 
from the  EPSO/AD/401/22 energy specialist competition.   

External staff 

n.a. 

22 

23 

AC=  Contract  Staff;  AL  =  Local  Staff;  END=  Seconded  National  Expert;  INT  =  agency  staff; 
JPD= Junior Professionals in Delegations.  
Sub-ceiling for external staff covered by operational appropriations (former ‘BA’ lines). 

EN 

39 

  EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
3.2.4.  Compatibility with the current multiannual financial framework  

The proposal/initiative: 

–  X  can  be  fully  financed  through  redeployment  within  the  relevant  heading  of  the 

Multiannual Financial Framework (MFF). 

Explain what reprogramming is required, specifying the budget lines concerned and the corresponding amounts. 
Please provide an excel table in the case of major reprogramming. 

–    requires use of the unallocated margin under the relevant heading of the MFF and/or use 

of the special instruments as defined in the MFF Regulation. 

Explain  what  is  required,  specifying  the  headings  and  budget lines concerned, the  corresponding amounts, and 
the instruments proposed to be used. 

–    requires a revision of the MFF. 

Explain what is required, specifying the headings and budget lines concerned and the corresponding amounts. 

3.2.5.  Third-party contributions  

The proposal/initiative: 

–    does not provide for co-financing by third parties 

–    provides for the co-financing by third parties estimated below: 

Appropriations in EUR million (to three decimal places) 

Year 
N24 

Year 
N+1 

Year 
N+2 

Year 
N+3 

Enter as many years as necessary 
to show the duration of the 
impact (see point 1.6) 

Total 

Specify  the  co-financing 
body  

TOTAL appropriations 
co-financed  

24 

Year  N  is  the  year  in  which  implementation  of  the  proposal/initiative  starts.  Please  replace  "N"  by  the  expected 
first year of implementation (for instance: 2021). The same for the following years. 

EN 

40 

  EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
3.3. 

Estimated impact on revenue  

–  X The proposal/initiative has no financial impact on revenue. 

–    The proposal/initiative has the following financial impact: 

– 

– 

– 

 

 

on own resources  

on other revenue 

please indicate, if the revenue is assigned to expenditure lines  

Appropriations 
available for 
the current 
financial year 

Budget revenue line: 

Article …………. 

     EUR million (to three decimal places) 

Impact of the proposal/initiative25 

Year 
N 

Year 
N+1 

Year 
N+2 

Year 
N+3 

Enter as many years as necessary to show 
the duration of the impact (see point 1.6) 

For assigned revenue, specify the budget expenditure line(s) affected. 

Other remarks (e.g. method/formula used for calculating the impact on revenue or any other information). 

25 

As regards traditional own resources (customs duties, sugar levies), the amounts indicated must be net amounts, i.e. 
gross amounts after deduction of 20 % for collection costs. 

EN 

41 

  EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
LEGISLATIVE FINANCIAL STATEMENT 'AGENCIES' 

FRAMEWORK OF THE PROPOSAL/INITIATIVE 

1.1.  Title of the proposal/initiative 

1.2.  Policy area(s) concerned 

1.3.  The proposal/initiative relates to: 

1.4.  Objective(s) 

1.4.1. General objective(s) 

1.4.2. Specific objective(s) 

1.4.3. Expected result(s) and impact 

1.4.4. Indicators of performance 

1.5.  Grounds for the proposal/initiative 

1.5.1. Requirement(s) to be met in the short or long term including a detailed timeline for roll-
out of the implementation of the initiative 

1.5.2. Added  value  of  Union  involvement  (it  may  result  from  different  factors,  e.g. 
coordination  gains,  legal  certainty,  greater  effectiveness  or  complementarities).  For  the 
purposes  of  this  point  'added  value  of  Union  involvement'  is  the  value  resulting  from  Union 
intervention  which  is  additional  to  the  value  that  would  have  been  otherwise  created  by 
Member States alone. 

1.5.3. Lessons learned from similar experiences in the past 

1.5.4. Compatibility  with  the  Multiannual  Financial  Framework  and  possible  synergies  with 
other appropriate instruments 

1.5.5. Assessment  of 
redeployment 

the  different  available 

financing  options, 

including  scope 

for 

1.6.  Duration and financial impact of the proposal/initiative 

1.7.  Management mode(s) planned 

2.  MANAGEMENT MEASURES 

2.1.  Monitoring and reporting rules 

2.2.  Management and control system(s) 

2.2.1. Justification of the management mode(s), the funding implementation mechanism(s), the 
payment modalities and the control strategy proposed 

2.2.2. Information concerning the risks identified and the internal control system(s) set up to 
mitigate them 

2.2.3. Estimation  and  justification  of  the  cost-effectiveness  of  the  controls  (ratio  of  "control 
costs ÷ value of the related funds managed"), and assessment of the expected levels of risk of 
error (at payment & at closure) 

2.3.  Measures to prevent fraud and irregularities 

EN 

42 

  EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3. 

ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE 

3.1.  Heading(s) of the multiannual financial framework and expenditure budget line(s) 
affected 

3.2.  Estimated financial impact of the proposal on appropriations 

3.2.1. Summary of estimated impact on operational appropriations 

3.2.2. Estimated output funded with operational appropriations 

3.2.3. Summary of estimated impact on administrative appropriations 

3.2.4. Compatibility with the current multiannual financial framework 

3.2.5. Third-party contributions 

3.3.  Estimated impact on revenue 

EN 

43 

  EN 

 
 
 
 
 
 
 
 
 
 
 
 
LEGISLATIVE FINANCIAL STATEMENT 'AGENCIES' 

1. 

1.1. 

1.2. 

FRAMEWORK OF THE PROPOSAL/INITIATIVE  

Title of the proposal/initiative 

Proposal  for  a  Council  Regulation  establishing  a  market  correction  mechanism  to 
protect citizens and the economy against excessively high pricesPolicy area(s) concerned 

Policy area: Energy 

Activity: Establishment of a Market Correction Mechanism 

1.3. 

The proposal relates to  

 a new action  

 a new action following a pilot project/preparatory action26  

 the extension of an existing action  

 a merger of one or more actions towards another/a new action  

1.4. 

Objective(s) 

1.4.1.  General objective(s)  

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 establishing a maximum dynamic price at which natural gas transactions 
can take place in the TTF month-ahead markets under specific conditions. This limit will be 
triggered if specific market events occur, and will require permanent monitoring, not only on a 
monthly basis to ascertain whether the correction mechanism should be maintained but also a 
more sistematic monitoring to ensure that no undue impact on different aspects, ranging from 
security of supply to unintended market disturbances, negatively affecting security of supply 
and  intra-EU  flows,  in  which  event  the  correction  mechanism  needs  to  be  immediately 
suspended.   

1.4.2. 

Specific objective(s)  

Specific objective  

26 

As referred to in Article 58(2)(a) or (b) of the Financial Regulation. 

EN 

44 

  EN 

 
 
                                                 
To establish a market correction mechanism to prevent excessive TTF-month ahead levels not 
reflecting LNG prices. 

EN 

45 

  EN 

 
1.4.3.  Expected result(s) and impact 

Specify the effects which the proposal/initiative should have on the beneficiaries/groups targeted. 

The proposal will contribute to the optimal functioning of the most liquid derivatives market 
in  the EU, avoiding overpricing of the NWE infrastructure bottlenecks and its undue impact 
on gas prices across the EU. 

1.4.4. 

Indicators of performance  

Specify the indicators for monitoring progress and achievements. 

Creation of a team of experts responsible for monitoring market developments that will lead to 
the triggering of the market correction mechanism. 

1.5. 

Grounds for the proposal/initiative  

1.5.1.  Requirement(s) to be met in the short or long term including a detailed timeline for roll-out of 

the implementation of the initiative 

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. 

The proposal will require additional resources for the Agency for the Cooperation of Energy 
Regulators,  ACER,  In  particular,  the  proposal  sets  out  new  tasks  for  ACER  to  monitor  gas 
markets and assist the Commission, along the following lines: 

Triggering, and later deactivating, the market correction mechanism: given the high political 
sensitivity and significant implications of these actions, this needs to be done meticulously. In 
addition, this requires continuous monitoring, so back-up needs to be ensured. Two (2) FTEs 
are estimated for this work (1 data analyst, 1 gas expert). Importantly, in order to comply with 
the  IOSCO  PRA  principles  for  the  LNG  price  assessments/benchmark,  these  need  to  be 
different people from those performing the price assessment/benchmark. Otherwise, the latter 
work  would  not  be  performed  according  to  the  required  standards,  which  would  undermine 
market  acceptance of the price assessments/benchmarks and therefore undermine the idea of 
performing them in the first place; 

Monitoring  intra-EU  gas  flows:  this  requires  significantly  more  granular  data  on  gas  flows 
than currently monitored at ACER; new data in new tools would need to be collected. Two (2) 
FTEs are estimated for this work (1 data analyst, 1 gas expert), plus consultancy on the data 
collection and analysis tool; 

Assisting the Commission, together with the ECB and ESMA, on tasks in the various articles: 
for potential support on demand reduction, gas price formation outside the EU, and long-term 
gas supply contracts, two (2) FTEs are estimated.  

Of the 6 FTEs, 1 should be senior so that this person could coordinate and lead the work in 
this area. This peer review process for price assessments needs to be in place to make sure that 
pricing  procedures  and  methodologies  according  to  the  IOSCO  principles  are  correctly  and 
consistently applied and to ensure integrity and quality of the published prices. 

1.5.2.  Added  value  of  Union  involvement  (it  may  result  from  different  factors,  e.g.  coordination 
gains,  legal  certainty,  greater  effectiveness  or  complementarities).  For  the  purposes  of  this 

EN 

46 

  EN 

 
 
point 'added value of Union involvement' is the value resulting from Union intervention which 
is additional to the value that would have been otherwise created by Member States alone. 

This proposal should help the contention of the TTF futures levels, addressing and minimising 
price  spikes  such  as  the  ones  that  took  place  in  August  2022,  while  maintaining  the  EU’s 
attractiveness for LNG cargoes. 

1.5.3.  Lessons learned from similar experiences in the past 

The Market Correction Mechanism would be an unprecedented intervention to the European 
liberalised and integrated gas market and/or the financial markets for commodities. Due to the 
unknown impacts, a strong set of conditions and safety triggers has been included, as well as 
strong monitoring requirements.  

ACER has extensive experience with collecting and processing market date in the framework 
of Regulation (EU) No 1227/2011 and under Commission Implementing Regulation (EU) No 
1348/2014 (‘REMIT’). 

1.5.4.  Compatibility  with  the  Multiannual  Financial  Framework  and  possible  synergies  with  other 

appropriate instruments 

The  necessary  appropriations  related  to  the  requested  posts  in  ACER  will  be  financed  from 
existing DG ENER Programmes 

1.5.5.  Assessment of the different available financing options, including scope for redeployment 

Additional  human  resources  with  high  level  expertise  are  needed  in  the  Commission  (DG 
ENER) for these new tasks. However, under the current MFF, the Commission must operate 
in a context of stable staffing, and thus redeployment within the DG and across Commission 
services will need to be contemplated as far as possible.  

ACER  shall  also  be  granted  additional  tasks,  namely  on  monitoring  of  gas  markets  and  in 
assisting the Commission, for which it will need additional human resources.  

EN 

47 

  EN 

 
1.6. 

Duration and financial impact of the proposal/initiative 

 limited duration  

–   Proposal/initiative in effect from [DD/MM]2023 as long as the energy crisis remains 

–  Financial  impact  from  2023  to  2027  for  commitment  appropriations  and  payment 

appropriations. 

 unlimited duration 

–  Implementation with a start-up period from YYYY to YYYY, 

–  followed by full-scale operation. 

1.7.  Management mode(s) planned27  

 Direct management by the Commission through 

–    executive agencies  

 Shared management with the Member States  

 Indirect management by entrusting budget implementation tasks to: 

 international organisations and their agencies (to be specified); 

the EIB and the European Investment Fund; 

 bodies referred to in Articles 70 and 71; 

 public law bodies; 

 bodies governed by private law with a public service mission to the extent that they provide 
adequate financial guarantees; 

  bodies  governed  by  the  private  law  of  a  Member  State  that  are  entrusted  with  the 
implementation of a public-private partnership and that provide adequate financial guarantees; 

  persons  entrusted  with  the  implementation  of  specific  actions  in  the  CFSP  pursuant  to 
Title V of the TEU, and identified in the relevant basic act. 

Comments 

Monitoring to be undertaken by the Commission services, in some technical aspects supported 
by the European Agency for the Cooperation of Energy Regulators (ACER).  

27 

Details  of  management  modes  and  references  to  the  Financial  Regulation  may  be  found  on  the  BudgWeb  site: 
https://myintracomm.ec.europa.eu/budgweb/EN/man/budgmanag/Pages/budgmanag.aspx. 

EN 

48 

  EN 

 
 
                                                 
2. 

MANAGEMENT MEASURES  

2.1.  Monitoring and reporting rules  

Specify frequency and conditions. 

The  tasks  directly  implemented  by  DG  ENER  will  follow  the  annual  cycle  of  planning  and 
monitoring,  as  implemented  in  the  Commission,  including  reporting  the  results  through  the 
Annual Activity Report of DG ENER. 

The tasks implemented by ACER will follow the annual cycle of planning and monitoring, as 
implemented in the Agency, including reporting the results through the Consolidated Annual 
Activity Report of ACER. 

2.2.  Management and control system(s)  

2.2.1. 

Justification  of  the  management  mode(s),  the  funding  implementation  mechanism(s),  the 
payment modalities and the control strategy proposed 

The  Commission,  assisted  by  ACER,  is  responsible  for  the  triggering  and  monitoring  of  the 
market  monitoring  mechanism,  which  cannot  be  delegated  due  to  the  level  of  responsibility 
linked to such tasks. 

It is more cost-effective to allocate the new task to an existing agency which already works on 
similar tasks. DG ENER established a control strategy for managing its relations with ACER, 
part of the 2017 Internal Control Framework of the Commission. ACER revised and adopted 
its own Internal Control Framework in December 2018 

2.2.2. 

Information  concerning  the  risks  identified  and  the  internal  control  system(s)  set  up  to 
mitigate them 

As  regards  the  implementation  of  the  tasks  related  to  the  triggering  and  monitoring  of  the 
mechanism, the risks identified are linked to the insufficient number of human resources and 
the level of expertise needed to undertake these key tasks in the Commission.  

As  a  specialist  body,  ACER  is  better  positioned  to  find  additional  experts  and  achieve 
synergies with existing staff. 

2.2.3.  Estimation and justification of the cost-effectiveness of the controls (ratio of "control costs ÷ 
value of the related funds managed"), and assessment of the expected levels of risk of error (at 
payment & at closure)  

The tasks assigned in relation to the setup of the mechanism by DG ENER will not result in 
additional  controls  or  change  in  the  ratio  of  control  costs.  Similarly,  the  allocation  of 
additional  tasks  to  the  existing  mandate  of  ACER  is  not  expected  to  generate  specific 
additional controls at ACER, therefore, the ratio of control costs over value of funds managed 
will remain unaltered. 

EN 

49 

  EN 

 
 
 
 
2.3.  Measures to prevent fraud and irregularities  

Specify existing or envisaged prevention and protection measures, e.g. from the Anti-Fraud Strategy. 

ACER  applies  the  anti-fraud  principles  of  decentralised  EU  Agencies,  in  line  with  the 
Commission  approach.  In  March  2019  ACER  adopted  a  new  Anti-Fraud  Strategy,  repealing 
Decision 13/2014 of the Administrative Board of ACER. The new strategy, spanning over a 
three-year  period,  is  based  on  the  following  elements:  an  annual  risks  assessment,  the 
prevention  and  management  of  conflicts  of  interest,  internal  rules  on  whistleblowing,  the 
policy and procedure for the management of sensitive functions, as well as measures related to 
ethics and integrity.  

Both  the  ACER  Regulation  and  the  contractual  provisions  applicable  to  public  procurement 
ensure  that  audits  and  on-the-spot  checks  can  be  carried  out  by  the  Commission  services, 
including OLAF, using the standard provisions recommended by OLAF. 

3. 

3.1. 

ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE  

Heading(s)  of  the  multiannual  financial  framework  and  expenditure  budget  line(s) 
affected  

  Existing budget lines  

In order of multiannual financial framework headings and budget lines. 

Budget line 

Heading of 
multiannual 
financial 
framework 

Number  

Type of  
expenditure 

Diff./Non-
diff.28 

Contribution  

from 
EFTA 
countries
29 

from 
candidate 
countries30 

from third 
countries 

within the meaning 
of Article 21(2)(b) 
of the Financial 
Regulation  

01 

02 10 06 

Diff. 

YES 

NO 

NO 

NO 

  New budget lines requested  

In order of multiannual financial framework headings and budget lines. 

Budget line 

Type of 
expenditure 

Contribution  

Heading of 
multiannual 
financial 
framework 

Number  

[XX.YY.YY.YY] 

Diff./non-
diff. 

from 
EFTA 
countries 

from 
candidate 
countries 

from third 
countries 

within the meaning 
of Article 21(2)(b) 
of the Financial 
Regulation  

YES/NO  YES/NO  YES/NO 

YES/NO 

28 
29 
30 

Diff. = Differentiated appropriations / Non-diff. = Non-differentiated appropriations. 
EFTA: European Free Trade Association.  
Candidate countries and, where applicable, potential candidates from the Western Balkans. 

EN 

50 

  EN 

 
 
 
 
 
 
                                                 
3.2. 

Estimated impact on expenditure  

3.2.1. 

Summary of estimated impact on expenditure  

Heading of multiannual financial  
framework  

01 

Single Market, Innovation and Digital 

EUR million (to three decimal places) 

ACER (Agency for the Cooperation of 
Energy Regulators) 

Year 
202331 

Year 
2024 

Year 
2025 

Year 
2026 

2027 

TOTAL 

Title 1: 

Title 2: 

Title 3: 

TOTAL appropriations 
for ACER 

Commitments 
Payments 

Commitments 

Payments 

Commitments 

Payments 

Commitments 

Payments 

(1) 

(2) 

(1a) 

(2a) 

(3a) 

(3b) 

=1+1a 
+3a 

=2+2a 

+3b 

0,942 
0,942 

0,942 
0,942 

0,942 
0,942 

0,942 
0,942 

0,942 
0,942 

0,942 

0,942 

0,942 

0,942 

0,942 

0,942 

0,942 

0,942 

0,942 

0,942 

Heading of multiannual financial  
framework  

7 

‘Administrative expenditure’ 

4,710 
4,710 

4,710 

4,710 

Year 
N 

Year 
N+1 

Year 
N+2 

Year 
N+3 

Enter as many years as 
necessary to show the duration 

TOTAL 

EUR million (to three decimal places) 

31 

Year N is the year in which implementation of the proposal/initiative starts. Please replace "N" by the expected first year of implementation (for instance: 2021). The 
same for the following years. 

EN 

51 

EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
DG: <…….> 

 Human Resources  
 Other administrative expenditure  

TOTAL DG <…….> 

Appropriations  

TOTAL appropriations 
under HEADING 7 
of the multiannual financial 
framework  

(Total  commitments  = 
Total payments) 

TOTAL appropriations  
under HEADINGS 1 to 7 
of the multiannual financial 
framework  

Commitments 

Payments 

of the impact (see point 1.6)  

Year 
N32 

Year 
N+1 

Year 
N+2 

Year 
N+3 

Enter as many years as 
necessary to show the duration 
of the impact (see point 1.6) 

TOTAL 

EUR million (to three decimal places) 

32 

Year N is the year in which implementation of the proposal/initiative starts. Please replace "N" by the expected first year of implementation (for instance: 2021). The 
same for the following years. 

EN 

52 

EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
3.2.2.  Estimated impact on [body]'s appropriations  

–    The proposal/initiative does not require the use of operational appropriations  

–    The proposal/initiative requires the use of operational appropriations, as explained below: 

Year 
N 

Year 
N+1 

Year 
N+2 

Year 
N+3 

OUTPUTS 

Commitment appropriations in EUR million (to three decimal places) 

Enter as many years as necessary to show the 
duration of the impact (see point 1.6) 

TOTAL 

o
N

Cost 

o
N

Cost 

o
N

Cost 

o
N

Cost 

o
N

Cost  N

o

Cost 

o
N

Cost 

Total 
No 

Total 
cost 

Indicate 
objectives and 
outputs  

Type33 

Avera
ge 
cost 

SPECIFIC OBJECTIVE No 134… 

- Output 

- Output 

- Output 

Subtotal for specific objective No 1 

SPECIFIC OBJECTIVE No 2 ... 

- Output 

Subtotal for specific objective No 2 

TOTAL COST 

33 
34 

Outputs are products and services to be supplied (e.g.: number of student exchanges financed, number of km of roads built, etc.). 
As described in point 1.4.2. ‘Specific objective(s)…’ 

EN 

53 

EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
3.2.3.  Estimated impact on ACER's human resources  

3.2.3.1.  Summary  

–   The  proposal/initiative  does  not  require  the  use  of  appropriations  of  an 

administrative nature  

–    The proposal/initiative requires the use of appropriations of an administrative 

nature, as explained below: 

EUR million (to three decimal places) 

Year 
2023 35 

Year 
2024 

Year 
2025 

Year 
2026 

2027 

TOTAL 

0,942 

0,942 

0,942 

0,942 

0,942 

4,710 

Temporary agents (AD 
Grades) 

Temporary 
(AST grades) 

agents 

Contract staff 

Seconded National 
Experts 

TOTAL 

0,942 

0,942 

0,942 

0,942 

0,942 

4,710 

Staff requirements (FTE): 

Year 
2023 36 

Year 
2024 

Year 
2025 

Year 
2026 

2027 

TOTAL 

6 

6 

6 

6 

6 

Temporary agents (AD 
Grades) 

Temporary 
(AST grades) 

agents 

Contract staff 

Seconded National 
Experts 

TOTAL 

6 

6 

6 

6 

6 

35 

36 

Year  N  is  the  year  in  which  implementation  of  the  proposal/initiative  starts.  Please  replace  "N"  by  the 
expected first year of implementation (for instance: 2021). The same for the following years. 
Year  N  is  the  year  in  which  implementation  of  the  proposal/initiative  starts.  Please  replace  "N"  by  the 
expected first year of implementation (for instance: 2021). The same for the following years. 

6 

6 

EN 

54 

  EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
Please indicate the planned recruitment date and adapt the amount accordingly (if recruitment 
occurs  in  July,  only  50 %  of  the  average  cost  is  taken  into  account)  and  provide  further 
explanations.  

EN 

55 

  EN 

 
 
3.2.3.2.  Estimated requirements of human resources for the parent DG 

–    The proposal/initiative does not require the use of human resources.  

–    The  proposal/initiative  requires  the  use  of  human  resources,  as  explained 

below: 

Estimate to be expressed in full amounts (or at most to one decimal place) 

Year 
N 

Year 
N+1 

Year 
N+2 

Year 
N+3 

Enter as many years as 
necessary to show the 
duration of the impact (see 
point 1.6) 

 Establishment plan posts (officials and 

temporary staff) 

20 01 02 01 and 20 01 02 02 
(Headquarters and Commission’s 
Representation Offices) 

20 01 02 03 (Delegations) 

01 01 01 01 (Indirect research) 

10 01 05 01 (Direct research) 

 External staff (in Full Time Equivalent 

unit: FTE)37 

20 02 01 (AC, END, INT from the 
‘global envelope’) 

20 02 03 (AC, AL, END, INT and 
JPD in the Delegations) 

Budget 
line(s) 
(specify) 
38 

- at 
Headquarters39 

- in 
Delegations  

01 01 01 02 (AC, END, INT – 
Indirect research) 

10 01 05 02 (AC, END, INT – 
Direct research) 

Other budget lines (specify) 

TOTAL 

The human resources required will be met by staff from the DG who are already assigned to 
management of the action and/or have been redeployed within the DG, together if necessary 

37 

38 
39 

AC = Contract Staff; AL = Local Staff; END = Seconded National Expert; INT = agency staff; JPD = 
Junior Professionals in Delegations.  
Sub-ceiling for external staff covered by operational appropriations (former ‘BA’ lines). 
Mainly  for  the  EU  Cohesion  Policy  Funds,  the  European  Agricultural  Fund  for  Rural  Development 
(EAFRD) and the European Maritime Fisheries and Aquaculture Fund (EMFAF).   

EN 

56 

  EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
 
with any additional allocation which may be granted to the managing DG under the annual 
allocation procedure and in the light of budgetary constraints. 

Description of tasks to be carried out: 

Officials and temporary staff 

External staff 

Description  of  the  calculation  of  cost  for  FTE  units  should  be  included  in  the  Annex  V, 
section 3.  

EN 

57 

  EN 

 
 
 
 
3.2.4.  Compatibility with the current multiannual financial framework  

–    The  proposal/initiative  is  compatible  the  current  multiannual  financial 

framework. 

–    The proposal/initiative will entail reprogramming of the relevant heading in the 

multiannual financial framework. 

Explain what reprogramming is required, specifying the budget lines concerned and the corresponding 
amounts. 

–    The  proposal/initiative  requires  application  of  the  flexibility  instrument  or 

revision of the multiannual financial framework40. 

Explain what is required, specifying the headings and budget lines concerned and the corresponding 
amounts. 

3.2.5.  Third-party contributions  

–  The proposal/initiative does not provide for co-financing by third parties.  

–  The proposal/initiative provides for the co-financing estimated below: 

EUR million (to three decimal places) 

Year 
N 

Year 
N+1 

Year 
N+2 

Year 
N+3 

Enter as many years as necessary 
to show the duration of the 
impact (see point 1.6) 

Total 

Specify  the  co-financing 
body  

TOTAL 
co-financed  

appropriations 

3.3. 

Estimated impact on revenue  

–    The proposal/initiative has no financial impact on revenue. 

–    The proposal/initiative has the following financial impact: 

– 

– 

– 

 

 

on own resources  

on other revenue  

         please indicate, if the revenue is assigned to expenditure lines  

Appropriations 
available for the 
current financial 
year 

Budget revenue line: 

Article …………. 

EUR million (to three decimal places) 

Impact of the proposal/initiative41 

Year 
N 

Year 
N+1 

Year 
N+2 

Year 
N+3 

Enter as many years as necessary to show 
the duration of the impact (see point 1.6) 

For miscellaneous ‘assigned’ revenue, specify the budget expenditure line(s) affected. 

40 

41 

See  Articles  12  and  13  of  Council  Regulation  (EU,  Euratom)  No  2093/2020  of  17  December  2020 
laying down the multiannual financial framework for the years 2021 to 2027. 
As regards traditional own resources (customs duties, sugar levies), the amounts indicated must be net 
amounts, i.e. gross amounts after deduction of 20 % for collection costs. 

EN 

58 

  EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
Specify the method for calculating the impact on revenue. 

EN 

59 

  EN