Government approves gas price cap to cheapen electricity

“The most immediate effect is that the only electricity to be paid on the gas price is electricity produced by natural gas, thus avoiding the contagion effect of other technologies. Reducing the extraordinary benefits of electricity companies and improving the price of 37% of domestic and 70% of industrial consumers“Smiling Teresa Ribera, vice president and minister for Ecological Transition, explained at a brief press conference, accompanied by part of her team, including Secretary of State for Energy Sara Aaegesen.

The limit will start and grow from 40 euros per megawatt hour for six months “month to month” until it reaches an average of 48.8 euros per megawatt-hour gas. In this way, the price of electricity in the wholesale market will drop significantly to 130 Euros per megawatt hour, well below the 210 Euro per megawatt-hour it was installed in recent months.

The vice president did not speculate on the price of the bill, although he had previously mentioned a 30% discount for consumers. According to estimates based on data from OMIE and the National Markets and Competition Commission (CNMC), in the first month with the applicable limit, the average user could pay half what they paid on their March bill. most expensive price in history

The measure was approved simultaneously by the Spanish and Portuguese Executives. And once the two governments have given their approval, the mechanism will “immediately be sent” to the European Commission, which “must get a decision from the committee of commissioners to make implementation effective.” Therefore, the entry into force of this measure will take place the day after the publication of the BOE “in principle it will happen this Saturday”, as reported by Ribera, although the European Commission will have to wait for it to be official. Accept the support of the standard published by the two countries with the agreement of the College of Stewards. “official approval is possible. European Commission takes a week, ten days, two weeks‘, Ribera confirmed.

Compensation

The difference between the price of the limit (between 40 and 50 euros over the period) and the actual gas price (currently almost 80 euros) will be borne by consumers.. Largely by consumers of the regulated market (approximately 10 million) who will benefit from and undertake the price reduction in the first place. Free market users with fixed price contracts of less than one year will be included in the mechanism as they have to renew their rates.

“It’s not the first time they pay the same amount. Such a situation has usually been dealt with by the contribution of the General Government Budgets. Let’s think about the financial crisis, the real estate crisis…. Not like this time. He said that the measures adopted were aimed at reducing the extraordinary profits of energy companies, so that the adjustment benefits us all.

The electricity market is governed by a marginal system where the latest technology to meet supply and demand sets the price, therefore, when this technology is combined cycle power plants, all energy is paid at the gas price. a) Yes, Setting a limit on the price of this raw material in the electricity market prevents the effect of contagion to others.

Spain was one of the first countries to warn about the functioning of the electricity market at this time of rising electricity prices last summer, and while Brussels’ initial refusal to make any changes was outspoken, the outbreak of the Ukraine war sparked that rhetoric. his head. So, on Friday 25 March, Head of Government Pedro Sánchez left the European Council meeting with the rest of the countries ‘ok’ with what was called the ‘Iberian exception’ and a month later in April. On October 26, Spain and Portugal reached a “political agreement” with the European Commission.

“Spanish proposals continue to inspire and inspire European response in the context of high energy prices,” Ribera said. In addition, to get this approval, Spain became the first country to cut the benefits of sub-marginal power plants (renewable, nuclear and hydraulic) from heaven due to the increase in natural gas prices. European Commission’s recommendations for dealing with this energy price crisis.