EU energy regulators set LNG reference price

The new reference price is the first element of a broader gas market correction mechanism (MCM) the EU Council adopted in late December 2022. That regulation enters into force 1 February 2023 for one year but will not be activated until 15 February 2023, according to the regulation’s terms.

The EU agency tasked with calculating and publishing the reference price for LNG is the Agency for the Cooperation of Energy Regulators (ACER). ACER will collect data daily across multiple price assessments to calculate the reference price from data admimistered by Platts Benchmark and Argus Benchmark Administration and said the daily benchmark would be published before midnight CET on weekdays.

A market correction will only be activated during the course of the MCM’s first year if the future gas price listed in the front-month TTF derivative settlement price exceeds €180/MWh (currently US$197) for three consective working days and is at least €35 above the MCM reference price over that same period.

"In the event the MCM is activated, a notice stating that a market correction event has occurred is published on the ACER website no later than 23:59 CET on the day of event. Upon the activation, orders on TTF derivatives (front-month to front-year) €35 above the MCM reference price cannot be accepted. Should the MCM reference price be lower than €145/MWh, the MCM bidding limit is set at €180/MWh," ACER said. 

The group said th eMCM bidding limit would then apply until "ACER publishes a deactivation notice 20 working days from the market correction event if the MCM reference price is below €145 EUR/MWh for three consecutive working days; or the European Commission suspends the MCM in case of significant deterioration of the gas supply situation in the EU."

On its first day, the new ACER LNG assessment’s MCM reference price was at €55.21/MWh while the benchmark Dutch TTF future price for March closed at €59.50/MWh the same day. The €4.29/MWh difference between the two reference prices is well below the €180/MWh differential needed to activate the MCM.