European Union flags flutter outside the EU Commission headquarters in Brussels
European Union flags flutter outside the EU Commission headquarters in Brussels, Belgium, September 28, 2022. Reuters

The European Commission is set to propose another set of emergency measures on Tuesday to tackle high energy prices, but draft proposals suggest they will not include an immediate cap on gas prices as EU countries remain split over the idea.

The package, a draft of which was seen by Reuters, is the European Union's latest effort to address a spike in energy prices and fuel supply crunch that have gripped Europe after Russia cut gas flows since invading Ukraine.

The Commission will on Tuesday propose that the EU could, as a "last resort", set a temporary "maximum dynamic price" on gas trades at the Title Transfer Facility (TTF) Dutch gas hub, which serves as a benchmark price for European gas trading.

Other EU gas trading hubs would be linked to this price through a "dynamic price corridor", according to the draft document, which could change before it is published.

The measure must not affect EU security of gas supply, cause an increase in gas use, or disrupt the functioning of gas markets, it said.

The move to curb TTF gas prices would require a separate proposal from Brussels and require approval from EU countries.

The EU package includes other measures aimed at lessening the impact of high prices on consumers and businesses. By Jan. 31, trading venues must impose upper and lower price limits each day that front-month energy derivatives must trade within, as a way of limiting large price swings.

EU energy regulators would also be charged with developing a new liquefied natural gas price benchmark by the end of March, and Brussels will launch a "tool" for EU countries to start jointly buying gas, according to the draft.

The EU package is unlikely to placate all 27 EU countries - whose leaders will discuss the proposals at a summit on Oct. 20-21. Most EU countries have urged the Commission to urgently propose a gas price cap, but disagree on its design.

European Council President Charles Michel, who chairs EU summits, insisted that other options would still be part of the debate - including a scheme to cap the price of gas used in power generation, which France and other countries support but was not included in the Commission's draft proposals.

"I also expect us to address other short and long-term market interventions, such as an EU framework to cap the price of gas for electricity generation," Michel said in a summit invitation letter to EU leaders on Tuesday.

The Commission and countries including Germany and the Netherlands have warned that capping gas prices could backfire, if it left EU countries struggling to attract supply from global markets, or caused gas consumption to rise during a winter with scarce Russian fuel.

France, Croatia and Finland all backed gas price caps on Tuesday, while Austria firmly opposed a cap on Russian gas, in case Moscow retaliated by cutting off all supply. Austria still relies on Russia for roughly half of its gas.

"If there is a total stoppage because no gas is being sold due to a maximum price then for us it is a clear 'No'," said Karoline Edtstadler, Austria's EU affairs minister.