Understanding the Changes in Gas Prices: Impact of Geopolitical Tensions and New Calculation Method in Belgium

2023-10-02 14:04:00

A year following the crazy rise in gas prices and the insane increase in household deposits, the situation has returned to a certain normality. On September 29, 2022, the megawatt hour was €180 on the markets. This Thursday, we went back down to €39. A reduction which is obviously felt on the bill, even if we remain at prices approximately twice as high as before the crisis. In addition, geopolitical tensions linked to the war in Ukraine are still very present and can cause the market to yo-yo.

But there is still good news to note: since October 1, the prices of gas contracts might decrease. The markets remain what they are and can always have unpleasant surprises in store for us, but the Belgian market will change its calculation method to set the price of contracts. Until now, the calculation of prices for gas and electricity was carried out on the basis of two indices, the ZTP and the TTF.

14% lower prices on the ZTP market

From now on, the single market is taken into account on the ZTP. “From October 1, 2023, it will become easier. In fact, at that time there will be a single index for the Belgian reference price: the ZTP. Thanks to the good connections of the Belgian network to all sources for the North-West European market, the ZTP index was on average 14% lower than the Dutch TTF index last year. The simplification into a single ZTP index is due to the fact that Fluxys Belgium will merge the two existing gas trading services “ZTP notional” and “ZTP physical”, explained Creg this summer.

A choice which should not revolutionize energy prices for consumers but which should offer more transparency. Because, today, suppliers can choose one index or the other to establish the price of a contract. “To take into account the new dynamics on the wholesale market, and in order to simplify and increase liquidity, Fluxys Belgium proposed at the beginning of the year, in accordance with a stated desire of Creg, to move to a simpler system where all trading volumes in the Belux market area are grouped into a single point: the ZTP. The market welcomed this proposal. Creg approved the merger of the two trading services in June 2023 and welcomes the increase in transparency for the end consumer in their choice of a natural gas product,” Creg further announces.

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