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Gas prices in Europe to remain above their pre-2022 levels for longer – Fitch Ratings

Gas Materials 20 September 2022 14:46
Baku, Azerbaijan Trend News Agency
Gas prices in Europe to remain above their pre-2022 levels for longer – Fitch Ratings

Gas prices in Europe are likely to remain substantially above their pre-2022 levels for longer, or at least until the 2023/2024 winter, Trend reports with reference to Fitch Ratings.

The latest report from Fitch Ratings reveals that the European Commission’s (EC) temporary initiatives to curb consumption and the price of energy within the European Union (EU) are unlikely to affect utilities’ ratings.

“This is because while the measures will help alleviate pressure from the current high price environment, prices are likely to remain substantially above their pre-2022 levels for longer, or at least until the 2023/2024 winter. We see the price cap for clean technologies as the main source of impact for rated utilities, although the cap is initially set at a level that supports companies’ business plans and is consistent with our conservative rating cases,” reads the report.

The rating agency notes that the EC’s proposed price cap at EUR180 MWh for infra-marginal generators is flexible and can be lowered, depending on each country’s own requirements.

“While this will lead to lower revenue for utilities, the companies will still capture a price that is substantially higher than their cost of producing energy. The measure will remain in force from 1 December 2022 to 31 March 2023 and we expect that an extension is likely if price drivers persist. Similar initiatives have been implemented in the Iberian and Greek market in the last months, with the impact of flattening prices for end-consumers in those geographies.

In addition, a mandatory electricity demand reduction of 5 percent during peak hours and a general and non-binding total 10 percent reduction (compared with the electricity consumption average of the last five years) will be in place until end-March 2023. Lower consumption would also drive a reduction in the electricity price as less efficient gas-fired plants will be driven out of the merit order.”

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