The European Commission has given the go-ahead to a request from Spain and Portugal to be able to cap the price of gas on the wholesale market, in order to limit the electricity price paid by 10 million households who are on the regulated tariff. The approval has come a month and a half after the two countries presented their first proposal in Brussels; it has had to be modified since to make it compliant with EU legislation and to meet the demands of other countries. The final version was sent to the EU on Friday.
Now the Spanish Cabinet will have to approve the decree which lays down the conditions and technical details of a measure which will be much more complex than it appears: capping the price of gas on the wholesale market at 40 euros per Megawatt hour to begin with, then lifting it to 50 euros/MWh for the rest of the period, during a maximum of 12 months.
The restriction means the electricity pool could drop to around 130 or 140 euros/MWh, compared with the more than 200 euros/MWh in recent weeks. In other words, electricity bills could be reduced by around 35 per cent.
Nevertheless, government sources have not been able to confirm whether the decree will be approved on Tuesday. The Ministry of Ecological Transition “is still working to put it to the Cabinet, if not on Tuesday then as soon as possible,” they said.
In any case, consumers will not notice any positive effects from the measure until June. The electricity companies’ billing cycles will not be able to apply it at such short notice, and although the government had hoped the text would be ready by the beginning of May this turned out not to be possible.
The plan to cap electricity prices has resulted in numerous negotiations between EU member states, especially the European Council meeting at the end of March, when Spain and Portugal fought to convince them that they should be permitted to do this without distorting the EU energy market, because the interconnections of the Iberian Peninsula with the rest of the continent are minimal, at barely three per cent of the total.