Proposal for a COUNCIL REGULATION amending Regulation (EU) 2022/2578 as regards the prolongation of its period of application
Date: 2023-11-28
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  Brussels, 28.11.2023  COM(2023) 761 final 2023/0443 (NLE)  Proposal for a COUNCIL REGULATION amending Regulation (EU) 2022/2578 as regards the prolongation of its period of application  
 
EXPLANATORY MEMORANDUM 

1. 

CONTEXT OF THE PROPOSAL 

1.1. 

Reasons for and objectives of the proposal 

Since Russia’s unprovoked and unjustified  full-scale invasion of Ukraine, supplies of gas to 
the  EU  by  Russia  have  been  disrupted  as  a  deliberate  attempt  to  use  energy  as  a  political 
weapon. Russia has been for many years the main gas supplier of the EU. Historically, the EU 
relied on Russia for more than 40% of its gas supplies.  The supply of gas has continuously 
decreased since February 2022. The pipeline flows of gas from Russia was less than 10% of 
the EU’s gas imports in the first half of 2023. 

The  supply  shock  caused  by  Russia  had  significant  impacts  on  gas  price  level  in  the  EU. 
While  prices  over  the  previous  decade  had  moved  within  a  band  of  EUR  5MWh  to  EUR 
35MWh  and  averaged  around  EUR  20/MWh,  gas  prices  spiked  above  EUR  300/MWh  in 
August 2022 at the peak of the crisis and reached levels which were 1000% higher than the 
average prices seen before in the Union. The highest price levels were reached in one week - 
5  consecutive  trading  days  -  from  22  to  26  August  2022,  when  the  prices  had  been 
consistently above EUR 250/MWh and diverged from the LNG reference price by more than 
EUR  50/MWh.  Since  the  peak  of  the  crisis,  prices  have  significantly  fallen  and  ranged 
between  EUR  40/MWh  and  EUR  50/MWh  in  early  Autumn  2023.  However,  they  remain 
more than twice as high as pre-crisis. 

Extreme price spikes are 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.  Moreover, high 
prices  have  contagion  effects  on  electricity  prices  and  contribute  to  increase  the  overall 
inflation.  

Against this background, the Council adopted on 19 December 2022 the emergency Council 
Regulation  (EU)  2022/2578  to  establish  a  gas  market  correction  mechanism  (‘MCM’)  to 
protect Union citizens and the economy against excessively high prices. 

The Regulation will cease to apply on 31 January 2024. This proposal seeks to prolong by one 
year the period of application of the provisions of Regulation (EU) 2022/2578 in view of the 
persisting risks for energy supplies, and therefore prices, in the Union.  

1.1.1.  The main elements of Regulation (EU) 2022/2578 

Council  Regulation  (EU)  2022/2578  of  22  December  2022  sets  up  a  temporary  market 
correction mechanism (‘MCM’) for orders placed for trading  derivatives linked to  the EU’s 
virtual trading points (‘VTPs’) with maturities between month-ahead and year-ahead.  

The MCM is activated when a market correction event occurs, that is, when the front-month 
TTF  derivative  settlement  price  exceeds  EUR  180/MWh  and  is  EUR  35  higher  than  the 
reference  price  (reflecting  global  LNG  price  trends)  for  three  working  days.  The  MCM  has 
not been activated so far as TTF prices have remained below the triggering thresholds since 
the entry into force of Council Regulation (EU) 2022/2578.  

Upon  the  occurrence  of  a  market  correction  event,  the  MCM  Regulation  sets  a  dynamic 
bidding limit, according to which market operators should not accept and market participants 
should  not  submit  orders  for  derivatives  with  prices  of  EUR  35/MWh  above  the  reference 

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price published by ACER on the previous day. The MCM is automatically deactivated after 
20 working days if the dynamic bidding limit is at EUR 180/MWh for three consecutive days. 

Pursuant  to  Article  6  of  the  Regulation,  the  dynamic  bidding  limit  can  be  suspended 
immediately and at any time if it leads to serious market disturbances, affecting the security of 
supply  and  intra-Union  flows  of  gas  or  the  proper  functioning  of  the  energy  derivatives 
markets.  

1.1.2.  The current situation: severe difficulties and risks for the EU’s security of gas supply 

persist  

The  Union’s  response  under  REPowerEU  and  following  initiatives,  including  the  measures 
set out in Regulation (EU) 2022/2578, prepared the EU to a degraded security of gas supplies 
situation. If not prolonged, the Regulation will cease to apply on 31 January 2024. 

However, as of the date of adoption of this proposal, severe difficulties in gas supplies to the 
Union persist. 

Due to the significant decrease in Russian pipeline gas imports over the past year, availability 
of gas supplies to the Union is considerably reduced compared to pre-crisis. With the current 
pipeline gas import levels, the Union is expected to receive approximately 20 bcm of Russian 
pipeline imports in 2023, if these unreliable imports are not disrupted altogether. This would 
be approximately 110 bcm less than in 2021. 

Global gas markets remain very tight and are expected to remain as such for some time. As 
noted by the IEA,1 global LNG supply grew only  modestly in 2022 (4%) and in 2023 (3%) 
because  of  “limited  liquefaction  capacity  additions,  outages  at  major  export  facilities  and 
declining  feed  gas  supply  at  LNG  plants  fed  by  ageing  fields”.  Significant  new  LNG 
liquefaction capacity globally (especially in the US and Qatar) is set to come online only as of 
2025 but “market balances remain precarious in the immediate future”.2 

This situation is still having negative consequences on gas prices which, despite being much 
lower  than  the  peak  experienced  in  summer  2022,  remain  higher  than  pre-crisis  with 
inevitable  repercussions  on  the  EU  citizens’  purchasing  power  and  the  competitiveness  of 
European businesses.  

Large  market  volatility  is  also  a  consequence  of  the  market  tightness  and  represents  an 
additional risk for the EU economy. Summer and Autumn 2023 saw a number of episodes of 
significant volatility when prices increased by more than 50% in few weeks. This shows that 
gas markets are still fragile and may have large reactions to any unexpected and sudden shock 
to supply and demand, as was the case following the strike in Australian LNG facilities, the 
Middle East crisis and the disruption of the Balticconnector.  

A number of risks can, if they materialise, fuel the fear of scarcity which, given the fragility 
of the market due to  its  tightness,  may trigger large reactions  with  serious repercussions on 
prices.  These  risks  include  a  rebound  in  Asian  liquefied  natural  gas  (LNG)  demand  that 

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IEA: Medium-Term Gas  Report 2023 
IEA: World Energy Outlook 2023 

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reduces  the  availability  of  gas  on  the  global  gas  market,3  extreme  weather  conditions 
potentially  affecting hydropower storage or nuclear production4 which would require higher 
recourse to gas-fired power generation, and further possible gas supply disruptions, including 
a  complete  halt  of  gas  imports  from  Russia  or  a  disruption  of  existing  critical  gas 
infrastructure.  

Armed  conflicts  of  high  intensity  are  now  hitting  several  of  the  key  EU  supply  regions,  in 
addition to Ukraine (Azerbaijan, Middle East) and this is deteriorating the threat landscape. 

Recent examples illustrate the likelihood and relevance of the risks related to the disruption of 
critical  gas  infrastructure.  In  September  2022,  the  NordStream  1  pipeline  was  damaged  by 
acts of sabotage to such a degree that it currently cannot transport any gas and will not be able 
to do so in the foreseeable future. In October 2023, the Balticconnector, an important pipeline 
connecting  Finland  to  Estonia,  was  disrupted.  As  a  result  of  the  Balticconnector  disruption, 
Finland is now no longer able to meet the N-1 criterion as part of the infrastructure standard 
defined  in  Article  5  of Regulation  (EU)  2017/1938.  The  N-1  criterion  ensures  that  Member 
States take measures so that in case of a disruption of the single largest gas infrastructure, they 
still have the technical capacity to satisfy their total demand during a peak day. As a result of 
the Balticconnector disruption, on 27 October 2023 Finland raised its crisis level pursuant to 
Article  11  of  Regulation  (EU)  2017/1938  from  “early  warning”  to  “alert”,  which  is  the  last 
crisis  level  before  an  emergency.  This  new  infrastructure  incident  illustrates  the  likelihood 
and relevance of the risks related to new disruptions of critical gas infrastructure. 

It should be also noted that the significant reduction in demand for natural gas (-18% between 
August  2022  and  August  2023)  is  contributing  to  preserve  the  gas  balance  in  the  EU.  This 
reduction  is  a  result  of  economic  factors  (e.g.  high  prices)  and  administrative  measures 
adopted by Member States pursuant to Regulation 2022/1369 and its prolongation Regulation 
(EU) 2023/706 on coordinated gas demand reduction. A possible increase in demand, due to a 
rebound  in  the  gas  use  in  the  residential,  commercial  and  industrial  sectors5  or  in  case  the 
administrative measures aimed at reducing demand were not prolonged further, represents an 
additional  risk  that,  given  the  current  tight  market  conditions,  could  undermine  the  EU’s 
security of gas supply. 

In a number of subsequent reports of December 2022, February, July and October 2023, the 
International Energy Agency (IEA) has consistently been highlighting the  lingering risks for 
the  EU  security  of  gas  supply  and  warning  against  complacency  in  the  light  of  the 
improvement of the situation compared to the peak of the crisis in summer 2022. According 
to  the  report  of  October  2023,  “global  gas  supply  is  set  to  remain  tight  in  2023”  and 
“[b]elow-average LNG liquefaction  capacity additions  are expected to  prolong tight  supply 
conditions  into  2024”.  In  its  February  report,  the  IEA  noted  that  “the  global  balance  is 
subject to an unusually wide range of uncertainties and exogenous risk factors. This includes 
the possibility of complete cessation of Russian piped gas deliveries to the European Union, 
as  well  as  a  recovery  of  China’s  LNG  imports  in  line  with  the  country’s  long-term  LNG 

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IEA noted that “Global gas demand is expected to return to moderate growth in 2024, primarily driven 
by Asia Pacific and the Middle East” and that the Asian-Pacific demand is expected “to expand by 20% 
by 2026 compared with 2022”, see Medium-Term Gas Report 2023. 
Domestic  shortfalls  in  hydro  and  nuclear  power,  due  to  climatic  conditions  and  other  availability 
factors, exacerbated the stress on gas market pushing prices further up in summer 2022. The production 
gap in hydro and nuclear generation in 2022 was approximately 60 TWh and 120 TWh, respectively, 
compared with 2021. 

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contracts  and  a  potential  lower  availability  of  LNG  supply”.    It  developed  stress  scenarios 
with  a  halt  to  Russian  gas  supplies,  LNG  supplies  remaining  tight  and  weather-related 
demand increases, which could result in a potential supply-demand gap of 40 bcm in the EU. 
In its report of July 2023, the IEA highlighted that “risks and uncertainties remain ahead of 
the  2023/24  Northern  Hemisphere  winter”  and  “full  storage  sites  are  no  guarantee  against 
winter volatility and the risk of renewed market tensions”.5 

In addition, the European Network of Transmission System Operators (ENTSOG) published 
its  yearly  Winter  Supply  Outlook  with  a  summer  overview,  in  line  with  Article  8  of 
Regulation (EC) 715/2009. ENTSOG concluded that although the general security of supply 
situation in the EU has significantly improved, additional measures may be needed in case of 
a full Russian supply disruption. In addition, careful management of the storages throughout 
the winter of 2023-2024 is needed, as a 46% filling level is likely needed at the beginning of 
the injection season to achieve the 90% storage target set out by Regulation (EU) 2022/1032.3 

The Union’s response under REPowerEU and following initiatives, including the measure set 
out in Regulation (EU) 2022/2578, contributed to improve the situation.  Should the relevant 
Union measures cease to apply, this would risk altering the stabilised but fragile situation the 
Union has achieved and could deteriorate the EU resilience to unfavourable events. 

In light of these persisting severe difficulties and risks for the EU’s security of gas supply and 
gas prices, and not  to  alter the  current  fragile balance,  it is  necessary  and urgent  to  prolong 
Regulation (EU) 2022/2578. Hence, this Proposal seeks to prolong by one year the period of 
application of Regulation 2022/2578. 

1.1.3.  Reasons for prolonging the Regulation’s provisions in the current situation 

The different provisions of Regulation (EU) 2022/2578, which the current proposal seeks to 
prolong,  are  necessary  to  address  the  above-mentioned  severe  difficulties  and  risks  for  the 
EU’s security of gas supply and gas prices. 

In  March  2023,  ACER and  ESMA carried  out  an  assessment  of  the  MCM  impact  since  its 
coming into force and concluded that the MCM has not been activated and no negative effects 
on  energy  (and  financially-related)  markets  had  arisen  until  that  point  in  time.  The 
Commission extended the analysis to assess the market developments in more recent months, 
and founded that the MCM has never been activated and identified no negative effects since 
the MCM Regulation entered into force.  

The  MCM  prevents  prices  to  reach  excessively  high  levels,  compared  to  the  international 
prices, on gas derivative markets, and therefore it limits the negative impact of high prices on 
the EU citizens’ purchasing power and the competitiveness of European businesses. 

• 

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 

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IEA, “Global Security Review 2023”. In early November 2023, the EU gas inventories reached a record 
high at above 99% capacity. 

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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.  Regulation  2022/2578  implements  the 
proposal 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  the  market  corrcetion  mechanism  and  by  this  proposal  to 
prolong  its  validity.  Regulation  2022/2578  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.  

Regulation  (EU)  2022/2578,  and  this  proposal  for  prolongation,  forms  part  of  a  group  of 
measures  to  address  the  current  energy  crisis  which  the  Council  has  adopted  over  the  past 
months.  In  particular,  Regulation  2022/2578  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).  

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.   

Furthermore,  Regulation  (EU) 2022/2578  is  complementary to  the objectives of introducing 
the intra-day volatility management mechanism to address short term market volatility as set 
out in Chapter III – Section 1 of Regulation 2022/2576. The intra-day volatility mechanism is 
an instrument to limit extreme changes within a day and is not sufficient to address problems 
of excessively high prices as those occurred in summer 2022.   

Moreover,  Regulation  2022/2578  and  the  current  proposal  are  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.  

• 

Consistency with other Union policies 

Regulation  2022/2578  and  this  proposal  for  prolongation  is  compatible  with  other  Union 
policies, notably the rules on the internal market policy, including with regard to competition 
rules. Regulation 2022/2578 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 

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to  situations  of  excessive  prices,  in  which  the  TTF  index  no  longer  provides  an  adequate 
proxy for prices which accurately reflect market dynamics in Europe.  

2. 

• 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

The legal  basis for this instrument is  Article 122(1) of the Treaty  on the Functioning  of the 
European  Union  (‘TFEU’).  The  conditions  for  the  application  of  this  provision  require  that 
the  measure  is  “appropriate  to  the  economic  situation”,  which  is  in  particular  the  case  if 
“severe difficulties in the supply of certain products” exist. The measures must also be taken 
in  a  “spirit  of  solidarity”,  and,  according  to  the  case  law,  they  must  be  temporary  and 
proportionate. 

The current persisting shortage of gas supplies, together with the price volatility caused by the 
fragile balance in global gas markets, constitutes a severe difficulty in the supply of an energy 
product  pursuant  to  Article  122  TFEU.  As  highlighted  above  in  paragraph  1  (“Reasons  for 
and objectives of the proposal”), severe difficulties and risks for the EU security of gas supply 
persist.  

Should the measures set out in Regulation 2022/2578 cease to apply, Member States would no 
longer  have  a  tool  to  directly  address  episodes  of  excessively  high  prices  caused  by  such 
difficulties and risks.  

As explained in paragraph 1 (“Reasons for and objectives of the proposal”), the provisions of 
the  Regulation  are  necessary  and  proportionate  to  address  the  severe  difficulties  and  the 
potential risks for prices that could arise because of the current fragile balance in the EU gas 
system. 

In  order  to  avoid  a  fragmented  action,  which  could  divide  the  integrated  EU  gas  market,  a 
common  action  is  needed  in  a  spirit  of  solidarity.  Moreover,  the  MCM  strengthens  the 
Union’s solidarity by avoiding excessively high gas prices, which are unsustainable even for 
short  periods  of  time  for  many  Member  States.  The  MCM  can  help  ensure  that  gas  supply 
undertakings from all Member States are able to purchase gas at reasonable prices in a spirit 
of solidarity.  

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.  

It is therefore justified to base the proposed instrument on Article 122(1) TFEU. 

• 

Subsidiarity (for non-exclusive competence)  

The  provisions  of  the  Regulation  and  the  proposed  prolongation  are  fully  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.   

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• 

Proportionality 

The  provisions  of  the  Regulation  and  their  proposed  prolongation  comply  with  the 
proportionality  principle.  The  measure  is  proportional  to  the  dimension  and  nature  of  the 
problems defined and the achievement of the set objectives. 

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 
exists,  for  example,  in  EU  electricity  markets  (see  e.g.  Article  10  of  Regulation  (EU) 
2019/943), and can also be found in markets outside the Union, such as in the US.  

Moreover, the mechanism is not meant to intervene into the normal interplay of demand and 
supply  or  to  “cap”  ordinary  price  setting.  It  may  only  be  triggered  under  very  exceptional 
circumstances  when  the  price  increases  at  the  TTF  are  unrelated  to  the  evolution  of 
international  prices,  momentarily  putting  its  suitability  as  a  reference  price  into  doubt.  The 
market  correction  mechanism  will  only  be  triggered  under  exceptional  circumstances  for  a 
strictly limited time.  

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, as well as the orderly functioning of derivatives markets. 

Therefore,  the  market  correction  mechanism  does  not  go  beyond  what  is  necessary  for 
attaining  the  policy  objective  pursued  and  is  proportionate  of  achieving  the  objective  of 
mitigating  the  impact  of  abnormally  high  gas  prices.  The  prolongation  by  one  year  is 
necessary  due  to  the  persistent  nature  of  the  severe  difficulties  for  energy  supply  and  the 
resulting risks for prices and security of supply which are expected to continue at least during 
the whole of 2024, as more structural changes of the market conditions are only expected in 
the course of 2025.  

• 

Choice of the instrument 

Taking into account the dimension of the energy crisis and the scale of its social, economic 
and financial impact, the provisions that the current proposal seeks to prolong are contained in 
a  Regulation,  which  is  of  general  scope  and  directly  and  immediately  applicable.  The 
prolongation of the period of application of these provisions  should, therefore, also be done 
through the adoption of a Regulation. 

3. 

• 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Stakeholder consultations 

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

However, the Commission services assessed whether any negative effects had arisen since the 
MCM entry into force.  

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In  line  with  the  requirements  of  Article  8  of  Regulation  2022/2578,  in  their  ‘Effects 
Assessment’ reports published on 1 March 2023, ACER (6) and ESMA (7) analysed a number 
of  indicators  to  assess  the  MCM  impact  since  its  coming  into  force.  These  indicators  cover 
several  areas  from  security  of  supply  and  intra-EU  flow  to  financial  markets  and  stability. 
ACER and ESMA concluded that  the MCM  had  not  been  activated  and  no negative  effects 
had arisen until the publication of their report.  

Building  on  the  indicators  set  out  by  ACER  and  ESMA  in  their  March  reports,  the 
Commission extended the analysis to assess the market developments in more recent months. 
The  MCM  has  never  been  activated  and  no  negative  effects  have  been  identified  since  the 
MCM entered into force..  

The outcome of the Commission’s assessment was presented to Member States’ representants 
at the Council Energy Working Party on 5 October 2023. 

• 

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. 

4. 

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  the  monitoring  of  the  functioning  of 
commodity markets and their impact on security of supply – that are not usually 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 (6 FTE). 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,  therefore,  also  concerns  the  human  resources  and  other  administrative 
expenditures of ACER (6 FTE). 

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https://acer.europa.eu/Publications/ACER_FinalReport_MCM.pdf 
https://www.esma.europa.eu/sites/default/files/library/ESMA70-446-
794_MCM_Effects_Assessement_Report.pdf 

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This proposal does not require any budgetary resources additional to those already allocated 
in  the  context  of  the  adoption  of  Regulation  (EU)  2022/2578  (and  set  out  in  the  financial 
statement accompanying Regulation (EU) 2022/2578).  

5. 

• 

OTHER ELEMENTS 

Detailed explanation of the specific provisions of the proposal 

The changes proposed are targeted and limited in scope to prolong by one year the period of 
application of the provisions of Regulation 2022/2578. 

In  Article  12,  the  period  of  application  of  the  Regulation  is  proposed  to  be  changed  and 
extended until 31 January 2025.  

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2023/0443 (NLE) 

Proposal for a 

COUNCIL REGULATION 

amending Regulation (EU) 2022/2578 as regards the prolongation of its period of 
application 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 122(1) thereof, 

Having regard to the proposal from the European Commission, 

Whereas:    

(1) 

(2) 

(3) 

(4) 

Council  Regulation  (EU)  2022/25781  sets  up  a  temporary  market  correction 
mechanism  (‘MCM’)  for  orders  placed  for  trading  derivatives  linked  to  the  Union’s 
virtual trading points (‘VTPs’) with maturities between month-ahead and year-ahead. 
The  MCM  therefore  applies  to  any  commodity  derivative,  traded  on  a  regulated 
market, the underlying of which is a transaction in gas in any VTP in the Union.  

The MCM is to be activated where a market correction event occurs, that is, when the 
front-month  Title  Transfer  Facility  (‘TTF’)  derivative  settlement  price,  as  published 
by ICE Endex B.V., exceeds EUR 180/MWh and is EUR 35 higher than the reference 
price  for  three  working  days.  Upon  the  occurrence  of  a  market  correction  event, 
Regulation (EU) 2022/2578 sets a dynamic bidding limit, according to which market 
operators  should  not  accept  and  market  participants  should  not  submit  orders  for 
derivatives  with  prices  of  EUR  35/MWh  above  the  reference  price  published  by  the 
Agency for the Cooperation of Energy Regulators (ACER)2 on the previous day.  

In  their  effects  assessment  reports  published  on  1  March  2023  in  accordance  with 
Article  8  of  Regulation  (EU)  2022/2578,  ACER   and  the  European  Securities  and 
Markets Authority (ESMA) 3 analysed a number of indicators to assess the impact of 
the MCM since the entry into force of that Regulation. ACER and ESMA concluded 
that the MCM had not been activated and no negative effects on security of supply and 
intra-Union flow to financial markets and stability had arisen until the publication of 
their respective report.  

Building on the indicators analysed by ACER and ESMA in their reports of 1 March 
2023,  the  Commission  extended  the  analysis  to  assess  the  market  developments  in 
more recent  months. No negative effects  have been identified since  Regulation  (EU) 
2022/2578 entered into force and the MCM has never been activated.  

1 
Council Regulation (EU) 2022/2578 of 22 December 2022 establishing a market correction mechanism 
to protect  Union citizens and the economy against excessively high prices (OJ L 335, 29.12.2022, p. 45, ELI: 
http://data.europa.eu/eli/reg/2022/2578/oj). 
2 
3 

https://acer.europa.eu/Publications/ACER_FinalReport_MCM.pdf 
https://www.esma.europa.eu/sites/default/files/library/ESMA70-446-
794_MCM_Effects_Assessement_Report.pdf 

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(5) 

However,  severe  difficulties  persist  for  the  Union’s  security  of  energy  supply.  The 
global situation on the gas market remains very tight. Gas prices are still considerably 
higher  than  pre-crisis  with  inevitable  consequences  on  Union  citizens’  purchasing 
power and the competitiveness of Union businesses.     

(6)  Market  volatility  is  also  a  consequence  of  the  market  tightness  resulting  from 
geopolitical  risks,  and  represents  an  additional  risk  for  the  Union  economy.  The 
episodes  of  pronounced  price  volatility  observed  in  summer  and  early  autumn  2023, 
when prices increased by more than 50% in a few weeks, show that markets are still 
fragile and remain vulnerable to even relatively small shocks on demand and supply, 
as  evidenced  by  price  movements  following  recent  events  such  as  the  strike  in 
Australian 
the 
Balticconnector.  The  ongoing  crisis  in  the  Middle  East  constitutes  an  additional 
significant geopolitical risk with potential impact on prices and gas supply.    

liquefied  natural  gas  (LNG)  facilities,  or 

the  disruption  of 

(7) 

(8) 

Global  gas  markets  are  currently  very  tight  and  are  expected  to  remain  tight  for  a 
certain time. Global LNG supply grew only modestly in the past two years because of 
limited liquefaction capacity additions, outages at major export facilities and declining 
feedgas  supply  at  LNG  plants.  Significant  new  LNG  liquefaction  capacity  is  set  to 
come online only in the course of 2025. Hence, market balances remain precarious in 
the immediate future. 

Furthermore, due to the significant decrease in Russian pipeline gas imports over the 
past year, availability of gas supplies to the Union is considerably reduced compared 
to the pre-crisis situation. With the current level of gas imports, the Union is expected 
to receive approximately 20 bcm of Russian pipeline gas in 2023, approximately 110 
bcm less than in 2021. Therefore, a serious risk remains that gas shortages will occur 
in  the Union in the short  term. In view of the current  tight  market  conditions, prices 
may  spike  again  on  the  back  of  unpredictable  events  and  sudden  shocks  such  as  a 
rebound in Asian LNG demand that could reduce  the availability of gas on the global 
gas  market;  extreme  weather  conditions  potentially  affecting  hydropower  storage  or 
nuclear production which would require higher recourse to gas-fired power generation; 
and further possible gas supply disruptions, including a complete halt of gas imports 
from  Russia,  and  further  disruptions  of  critical  infrastructures,  after  the  acts  of 
sabotage against the NordStream 1 pipeline in September 2022 and the disruption of 
the Balticconnector pipeline in October 2023. 

(9) 

Persistent  severe difficulties  expose  the entire Union  to  risks of  energy shortage  and 
high  energy  prices.  The  level  of  gas  prices  could  impact  negatively  the  Union’s 
economic situation, industrial competitiveness and citizens’ purchasing power. 

(10)  Under  these  conditions,  notably  in  a  situation  of  several  geopolitical  risks  with 
potential impact  on gas prices, the fear of scarcity may trigger large reactions which 
can have serious repercussions on prices.  Given the current tight supply and demand 
balance, even moderate disruption to the supply of gas could have a dramatic impact 
on the gas prices and could cause serious and lasting harm to the economy and to the 
citizens of the Union.  

(11)  At  the  peak  of  the  crisis,  the  Union  adopted  a  strong  and  coordinated  response  to 
protect its citizens and its economy against excessive prices and to make sure that gas 
flows to  all consumers in need across borders, also  in  situations  of gas scarcity.  The 

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Union’s  response  under  the  REPowerEU  Plan4  and  subsequent  initiatives,  including 
the  measures  set  out  in  Regulation  (EU)  2022/2578,  contributed  to  improve  the 
situation. Should those measures cease to apply, this would risk altering the stabilised 
but  fragile  situation  the  Union  has  achieved  and  would  deteriorate  the  resilience  to 
possible future events and sudden shocks, such as those mentioned above. 

(12)  Since  the  Union  is  a  single  market  and  the  TTF  is  commonly  seen  as  the  ‘standard’ 
pricing proxy on Union gas markets, high gas prices for the derivatives linked to TTF 
would  have  severe  consequences  in  all  Member  States,  although  possibly  to  degrees 
depending  on  the  Member  State.  Derivatives  linked  to  all  other  VTPs  in  the  Union 
should also remain included in the prolongation of Regulation (EU) 2022/2578 so as 
to avoid possible shifts of trade to derivatives linked to other VTPs which may lead to 
distortions  on  the  Union  energy  or  financial  markets.  The  MCM  strengthens  the 
Union’s  solidarity  by  avoiding  excessively  high  gas  prices,  which  are  unsustainable 
even  for  short  periods  of  time  for  many  Member  States.  The  MCM  can  help  ensure 
that  gas  supply  undertakings  from  all  Member  States  are  able  to  purchase  gas  at 
reasonable prices in a spirit of solidarity.  

(13)  The  prolongation  of  the  period  of  application  of  Regulation  (EU)  2022/2578 
constitutes  an  emergency  measure  in  response  to  persistent  severe  difficulties  in  the 
supply of energy which entail a risk of imminent crisis and require that the measure set 
out in that Regulation, which contributes to keep prices in check, continues to apply 

(14)  Taking into account the fact that Regulation (EU) 2022/2578 will cease to apply on 31 
January  2024,  the  prolongation  of  its  period  of  application  constitutes  an  emergency 
measure  in  a  spirit  of  solidarity  between  Member  States,  which  aims  to  respond  to 
persistent severe difficulties in the supply of energy. Such difficulties also entail a risk 
of  imminent  crisis  and  excessively  high  prices  especially  if  events  such  as  the  ones 
described above were to materialise. 

(15)  A  prolongation  of  the  period  of  application  of  Regulation  (EU)  2022/2578  is  also 
consistent  with  the  REPowerEU  Plan,  which  aims  to  protect  Union  citizens  and 
economy against excessive prices and energy supply shortages.  

(16)  This  Regulation  should  enter  into  force  on  1  February  2024  in  order  to  ensure  a 
continuous protection against excessively high prices throughout the 2023/2024 winter 
season.  

(17)  The extended provisions should be temporary and should remain in force until the end 
of January 2025. The prolongation by one year is necessary and proportionate due to 
the persistent nature of the severe difficulties and the additional risks described above, 
and the uncertainty of the current situation. 

(18)  Since the objective of this Regulation cannot be sufficiently achieved by the Member 
States,  but  can  rather  be  better  achieved  at  Union  level,  the  Union  may  adopt 
measures, in accordance with the principle of subsidiarity as set out in Article 5 of the 
Treaty on European Union. In accordance with the principle of proportionality, as set 
out  in  that Article, this Regulation  does not  go beyond what  is  necessary in  order to 
achieve that objective. 

(19)  Regulation (EU) 2022/2578 should therefore be amended accordingly, 

4 

Communication from the Commission to the European Parliament, the European Council, the Council, 
the European Economic and Social Committee and the Committee of the Regions, REPowerEU Plan, 
COM(2022) 230 final, 18.5.2022. 

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HAS ADOPTED THIS REGULATION: 

 Article 1 

Amendment to Regulation (EU) 2022/2578 

In  Article  12(1)  of  Regulation  (EU)  2022/2578,  the  second  sentence  is  replaced  by  the 

following:  

‘It shall apply until 31 January 2025.’. 

Article 2 

Entry into force and application 

This Regulation shall enter into force on 1 February 2024.  

This Regulation shall be binding in its entirety and directly applicable in all Member States. 

Done at Brussels, 

For the Council 
The President 

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