Since 13th January, as required by Council Regulation (EU) 2022/2576, ACER publishes a daily Liquefied Natural Gas (LNG) price assessment. On 8 March, ACER will start applying an updated version (Beta 2.0) of the methodology for its LNG price assessments.

Why update the methodology and why now?

• The aim (as per the Regulation) is for ACER to produce an objective price assessment that reflects the price of LNG spot transactions.
• On some days, there were insufficient eligible LNG spot transactions to calculate the price assessment as per the established methodology (which required a minimum of 5 transactions over 5 rolling days).
• After observing the initial methodology (Beta 1.0) for a few weeks, ACER has decided to update it.
• The Regulation also requires ACER to publish a LNG benchmark by 31 March 2023. ACER intends to start applying the new LNG price methodology as of 8 March in order to verify it until the benchmark’s go-live on 31 March 2023.

What are the main changes to the LNG price assessment methodology and why is it relevant?

• A single EU LNG price will be calculated on top of the current practice of prices for 2 zones (North-West Europe and South Europe).
• ACER’s Beta 1.0 methodology used a 5-day rolling window to aggregate transactions and thus build a price that is representative of the market conditions. Beta 2.0 further shifts the weight of the calculation to the most recent transactions and is at the same time extending the calculation window to 10 days.

This will increase the robustness of the LNG price calculation.

Has ACER consulted stakeholders on its work?

ACER works closely with stakeholders to have a meaningful LNG price assessment that is genuinely representative and not arbitrary. ACER developed and now subsequently refined, with the help of an LNG Expert Group and in consultation with the European Commission, a robust beta methodology underpinning the ACER LNG price assessment.

In addition, ACER intends to further update the Guidance on reporting LNG market data, and improve its TERMINAL platform to improve the user experience. The updated reporting Guidance will mainly clarify important details to assure better data quality. 

Both updated documents will benefit from the advice of its LNG Expert Group, close engagement with market participants (e.g. via roundtables, webinars), input from other stakeholders and ACER price assessors’ experience so far.

Access the updated LNG price assessment methodology (Beta 2.0).

Learn more about the LNG price assessment.

Today, ACER publishes its assessment report on the effects of the Market Correction Mechanism (MCM) on energy markets and security of supply.

Background to the MCM

The MCM Regulation (December 2022) establishes a Market Correction Mechanism to protect citizens and the economy against excessively high gas prices. The MCM sets a bidding limit on certain financial derivatives traded at EU exchanges with the aim of limiting EU gas prices. This bidding limit is activated when specific conditions are met.

The Regulation tasks ACER and the European Securities and Markets Authority (ESMA) with assessing the market effects from the introduction of the Market Correction Mechanism (MCM) and submitting their MCM effect assessment reports to the European Commission by 1 March 2023. Both reports are intended to assist the Commission in its decision of extending the MCM to the derivatives traded at other Virtual Trading Points (‘VTPs’) in the EU and in assessing whether the key design elements of the MCM need to be reviewed.  ACER and ESMA already published preliminary reports on 23 January 2023. ESMA also published their final MCM effects assessment report today.

MCM seems not to have a discernible gas market impact to date

Neither ACER nor ESMA have identified significant impacts (positive or negative) that could be unequivocally and directly attributed to the adoption of the MCM.

However, one should not infer from this that the MCM might not have any impacts on financial and energy markets or on security of supply in the future. ACER and ESMA continue to emphasise the need to regularly monitor gas markets and gas trading activities to identify risks and to assist in detecting potential impacts of the MCM in the future.

Challenges of extending the MCM to derivatives linked to other EU Virtual Trading Points (VTPs)

• ACER finds valid arguments for extending the MCM only to VTPs where the liquidity of gas derivative trading is modest to high. ACER considers that the extension of the MCM to other VTPs would not likely lead to significant negative effects in gas markets.
• ACER finds valid arguments for using the same activation and de-activation conditions, making use exclusively of the Dutch TTF front-month price and the same dynamic price-bidding limit at the EU VTPs (where the MCM is extended to other VTPs).

No technical reasons to review the key design elements of the MCM

• ACER could not identify a need for revising the price references used for calculating the reference price.
• ACER could not identify technical reasons to change the current activation or de-activation conditions of the MCM or for changing the dynamic price-bidding limit.

ACER will continue monitoring the effects of the MCM in energy markets and on security of energy supply.

ACER Market Correction Mechanism Effects Assessment Report.

ESMA Effects Assessment of the impact of the Market Correction Mechanism on financial market.

Further information on the Market Correction Mechanism.

ACER shall adopt a recommendation for identifying good practices for the treatment of investment requests for projects of common interest (PCIs), as tasked by the (2022) Regulation on guidelines for trans-European energy infrastructure.

In light of revised Trans-European Networks for Energy (TEN-E) provisions, and building on the experience gained with latest cross-border cost allocation (CBCA) investment requests, ACER is updating its (2015) CBCA Recommendation.

As part of this process, ACER invites stakeholders to submit their views on the existing CBCA Recommendation, including:

• Scope of ACER CBCA Recommendation;
• Role of scenarios and of cost-benefit analysis in the cross-border cost allocation;
• The allocation and compensation mechanism; and
• Cross-border cost allocation for offshore projects.

The public consultation will run from 23 February until 31 March 2023.

What are the next steps? 

ACER will evaluate the received feedback and take it into consideration when drafting the document.

The updated CBCA Recommendation shall be adopted by 24 June 2023.

Access the public consultation.

ACER publishes today its report on Italy’s proposed gas transmission tariffs. ACER assessed the proposed methodology to calculate the gas transmission tariffs, including:

• The distance cost driver that is used to calculate tariffs in the Italian network;
• The discounts proposed for the exit point to Malta; and
• The proposed application of tariffs for the region of Sardinia.

What are ACER’s main findings?

Whilst acknowledging that the public consultation of the Italian National Regulatory Authority, ARERA, is very well documented and very informative, ACER recommends that ARERA improves:

• The proposed commodity-based tariffs; and
• The proposed approach to setting tariffs in the region of Sardinia.

Access the report on the Italian gas tariffs.

Access all ACER reports on national tariff consultation documents.

ACER assesses the proposed methodology to calculate tariffs, including:

• The details on the input parameters to the methodology;
• The regulatory account and the accumulated congestion revenue; and
• The methodology applicable to the L-gas network to transport gas from the Netherlands to France.

What are ACER’s main findings?

The Agency observes that improvements on the proposed transmission tariffs can be achieved based on the provisions of the EU Network Code on Gas Transmission Tariffs and provides some recommendations to the Belgian national regulatory authority CREG.

ACER recommends to CREG to:

• Shorten the duration of the tariff period. This should facilitate the forecast of the contracted capacity, and should help minimise potential under- and over-recoveries as well as the reconciliation of the regulatory accounts.
• Compare (and publish) the forecasted contracted capacity vis-à-vis the realised contracted capacity. This improvement should allow improving the accuracy of the capacity forecast, improve the cost-reflectivity of tariffs and minimises the need to reconcile revenue.
• Ensure the reconciliation of the Transmission System Operator’s (TSO), regulatory accounts, which has accumulated significant over-recoveries, including significant congestion revenue.
• Provide information on the allowed revenue methodology of the TSO, in particular, on the regulatory asset base revaluation of the TSO.
• Provide additional transparency on the cost and the capacity forecast that is used for the calculation of tariffs.

Access the report on the Belgian gas tariffs.

Access all ACER reports on national tariff consultation documents.

On 22 December 2022, the Council Regulation (EU) 2022/2578 established a gas market correction mechanism (MCM) to protect EU citizens and the economy against excessively high energy prices. It enters into force on 1 February 2023 for a period of one year and tasks ACER with the calculation and publication of the MCM reference price.

Based on the daily collected data, ACER will publish the MCM reference price no later than 23:59 CET every weekday. Find the daily MCM reference price here.

Prices on 1 February 2023 are well under the MCM activation levels.

What is the MCM reference price and how is it calculated?

The MCM reference price is the average price of several Liquefied Natural Gas (LNG) marker prices as assessed by different entities and the front-month National Balancing Point (NBP) derivative settlement price.

In order to calculate the daily MCM reference price, ACER needs the following information:

• The LNG Northwest Europe Marker price assessment;
• The LNG Mediterranean Marker price assessment;
• The LNG Northeast Asia Marker price assessment;
• The front-month NBP derivative settlement price; and
• The price of the ACER’s daily LNG price assessment report.

The values of the three LNG marker price assessments are derived from data administered by Platts Benchmark B.V. and Argus Benchmark Administration B.V. As the MCM reference price is expressed in EUR/MWh, ACER uses European Central Bank’s Euro foreign exchange rates for the currency conversion where needed.   

When is the MCM activated?

According to the Regulation, the MCM can only be activated as of 15 February 2023.

The MCM is activated if the front-month TTF derivative settlement price:

• exceeds 180 EUR/MWh for three consecutive working days, and
• is at least €35 above the MCM reference price for the same period of time.

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 EUR/MWh, the MCM bidding limit is set at 180 EUR/MWh. 

The MCM bidding limit applies 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.

Learn more about the MCM.

Today, ACER publishes its preliminary report on the effects of the Market Correction Mechanism (MCM) on energy markets and security of supply.

Background to the Market Correction Mechanism

The recently adopted MCM Regulation establishes a MCM to protect citizens and the economy against excessively high gas prices.

The MCM sets a bidding limit on certain financial derivatives traded at EU exchanges with the aim of limiting EU gas prices. This bidding limit is triggered when specific conditions are met.

The Regulation tasks ACER and the European Securities and Markets Authority (ESMA) with publishing a report (by 1 March 2023) to assess the market effects resulting from the introduction of the MCM, and a preliminary report by 23 January 2023.

ESMA also published their preliminary report today.

MCM has not had an impact on EU gas markets to date

So far, ACER has not identified significant impacts (positive or negative) that could be unequivocally and directly attributed to the adoption of the MCM Regulation itself. Its entry into force coincided with a time when prices were significantly lower compared, notably, to the second half of 2022. ACER cannot conclude that these market dynamics in the first weeks of 2023 are a direct or indirect effect of the approval of the MCM Regulation.

However, this does not preclude any impact on financial and energy markets in the future. Hence, both Agencies are proposing indicators to continue monitoring market developments and help detect potential future impacts of the MCM.

ACER welcomes feedback on the MCM indicators

In its preliminary report, ACER proposes to use eleven market indicators in its final effects report due on 1 March 2023. These indicators cover across three areas: prices, flows and trades.

ACER welcomes stakeholder feedback on these indicators, and in particular on the following questions:

• Are there any potential effects that could be triggered by the MCM, and early warning signs that should be monitored, that have not been identified in this ACER report?
• Are there any indicators that you consider relevant for assessing the effects of the MCM that have not been discussed in this ACER report?
• Are there any other points which you consider relevant to improve the ACER report on the effects assessment of the MCM that is due on 1 March?

Interested parties should send their feedback on the indicators by Monday, 6 February 2023, to MCM_effects@acer.europa.eu.

See the ACER preliminary report and the ESMA preliminary report.

Read more about the MCM.

On 30 December 2022, a new Council Regulation (EU) 2022/2576 entered into force requiring ACER to produce and publish an objective daily LNG price assessment.

As of today, 13 January 2023, ACER makes its LNG price assessment report available on a daily basis.

Today ACER published the first LNG price assessment. By 16.00 CET today, ACER has collected 9 transactions, of which 2 were eligible. According to the methodology, the LNG market data reported for the price assessment during the relevant rolling time window is not sufficient. So today it is not possible to calculate a single daily LNG price indication.

On the basis of the LNG market data reports received from registered LNG market participants, ACER’s daily price assessment reports will be published no later than 18:00 CET (weekdays only) on the TERMINAL platform.

Is this the final version of the ACER price methodology?

ACER’s LNG price assessment methodology was published today as a beta version based on European LNG Daily - Methodology for LNG price assessments Beta 1.0. Hence, initially ACER’s LNG price assessment consists of a weighted average price of daily LNG spot transacted quantities and is based on transactions concluded and reported for the purchase or sale of LNG with delivery in the European Union. By 31 March, ACER’s price assessment methodology will be refined with the support of the newly established LNG price assessment/benchmark expert group

Is ACER’s LNG Price Assessment report the same as the new LNG Benchmark?

No. In addition to the daily LNG price assessment, and no later than 31 March 2023, ACER will also publish a daily LNG benchmark. Currently in EU, the standard benchmarks are related to the Dutch Title Transfer Facility (TTF), which is used for both pipeline gas and LNG. The Council Regulation requires ACER to develop an alternative transaction-based LNG benchmark based on verifiable price assessments for LNG cargo deliveries to EU, to ensure the new LNG benchmark is reflective of real-world prices for the fuel. According to the Regulation, the new LNG benchmark, based on mandatory data reporting, shall contribute to greater market transparency and effectively, lower wholesale prices for gas without distorting competition in the EU energy markets. Stakeholders may use the LNG benchmark voluntarily.

LNG market data collection and registration of LNG market participants

LNG market participants must submit their LNG market data to ACER via TERMINAL by first registering in the Centralised European Register of Energy Market Participants (CEREMP) and identifying themselves as an ‘LNG market participant’, and second creating a user account at TERMINAL.

Detailed information on the registration process of LNG market participants in CEREMP and TERMINAL is available here.

LNG market participants shall submit daily to ACER the LNG market data as close to real-time as technologically possible.

Whilst the reporting obligation for both LNG transactions and bids and offers applies since 30 December 2022, when facing issues with the technical feasibility of reporting (given the short implementation timeline), LNG market participants should currently prioritise the reporting of transactions over the reporting of bids and offers and should report bids and offers as soon as technologically feasible.

When submitting LNG market data, market participants shall follow the dedicated reporting guidance published on the ACER website (link here). ACER considers the reporting guidance as an evolving document and will release further updates and FAQ documents as required, in consultation with the industry.

Read more about LNG Price Assessment.