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Sunday, May 29, 2022
HomeLatest NewsGovernment approves gas price cap to lower electricity bills for next year

Government approves gas price cap to lower electricity bills for next year

The government approved this Friday at an extraordinary Council of Ministers the Iberian Energy Plan to cap gas prices and mitigate the effects of the economic crisis that is affecting households and companies. After tense negotiations with Brussels, Spain managed to conclude a plan with Portugal to limit the price of gas fuel on the markets to 48 euros per MWh. However, in these first months, the limitation will start from 40 EUR MWh. This regulation will be in effect for one year, at least until the end of next winter.

The plan affects the gas that is used to generate electricity in combined cycle power plants, not the conventional gas that heats boilers, which was already shut down by the government in 2021. Thus, these power plants will produce at a limit close to 50 euros per megawatt, while they were currently doing so at an average of more than 70 euros. This ensures that the wholesale electricity market moves from trading above the current 200 euros to an average of 130 euros MWh, which will directly benefit those customers who have a regulated PVPC tariff, which is about 11 million customers. Government calculations show a 30 percent decline in household and business accounts.

Teresa Ribera, Third Vice President and Minister for Ecological Transition, confirmed after the Council of Ministers meeting that this gas price cap will not be borne by either the citizens or the state, but will be paid with a reduction in the so-called lost profits. from the sky of large electric companies operating in the state. “For the first time, they won’t pay the same amount. At another time, a similar situation would have been settled with a large contribution to the general state budget,” he said, referring to the way he tried to overcome the 2008 financial crisis. “For the first time in this government commitment to protecting residential and industrial customers, the exclusive benefits of electric utilities will be reduced in a way that benefits all of us.”

The short-term electricity market reform will be applied the day after its publication in Official State Gazette (BOE)which is expected this Saturday. However, Ribera said that some provisions and technical issues need to be finally approved by the European Commission, which could happen “in the coming days or weeks.”

This measure reinforces the energy exclusivity of the Iberian Peninsula, an area with little to no connection to Europe and with a high share of renewable energy sources. Portugal and Spain have demanded that Brussels approve this temporary plan, given that they are hurt by gas prices rising due to the war in Ukraine, despite low dependence on Russia. The problems in the negotiations arose not so much because of the price cap, but because of the Commission’s interest in moving towards a single energy market on the old continent.

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