The European Commission gave the green light to the Iberian mechanism in June 2022 negotiated by Spain And Portugal to set up from above gas price HE reduce electricity bill, After the outbreak of war in Ukraine and rising gas prices. The measure began to be noticed as of Wednesday, June 15th and was expected to continue. until May 31 this year. This Tuesday, the Spanish Government plans to approve the extension of this measure until the end of the year, after getting the approval of Brussels as it moves ahead on Monday. THE NEWSPAPER OF CATALANIA, From the Iberian Press group. These are some of the keys.
How does the mechanism work?
The so-called Iberian mechanism assumes putting a cap on the gas used to generate electricity. producing plants gas electricity (combined cycles, coal and some cogenerations) compensation with the difference between this maximum price and the real gas pricebut the consumer saves overcompensation taking the rest of the technologies (renewable and nuclear) that do not include natural gas in their costs. Compensation is paid to gas utilities all electricity consumersBesides the Gas sales to France revenues are used to reduce this surcharge. Again, the total price of the wholesale market plus the ceiling will always be lower for any consumer What does no mechanism mean? in the context of high prices.
Why was it extended until the end of the year?
At the beginning of January, Ribera had already announced its intention to expand this mechanism to Brussels “until the war is over” or “at least until the end of 2024”. From then on, there was political and technical meetings between Spain, Portugal and the European Commission Competition Department who is leading Margrethe Vestager. At one of the meetings held at the end of January, Vestager told his interlocutors that the maximum extension period could be extended. until December 2023 Since Temporary framework of Ukrainian war support measures until that date. That’s why this is the deadline for now.
What are the new changes?
In addition extension mechanism end of may Until the end of December this yearincluding summer and next winter, periods of greatest pressure on prices. The current rule is that between June and December 2022 the upper limit 40 Euros per megawatt-hour (MWh), during 5 more euros every month in January Until May, when it will end at 65 euros per MWh. The Council of Ministers plans to approve a bill at its meeting on Tuesday. new way prices for reach those 65 euros by the end of this yearlike this monthly increase will be a reference Between 2 euros and 2 and a half eurosIn the words of the third vice president and Minister of Ecological Transition, Teresa Riberasame Tuesday.
How much will you save?
According to figures from the Ministry of Ecological Transition, since its launch on 15 June 2022, the so-called ‘Iberian exception’ by the Government has been Cumulative savings of 5,100 million euros for consumers. This number difference Between the amount payable to electricity generators without the Iber mechanism and the amount paid with the gas cap. well, overcompensation taken up by the rest of the power plants that do not burn gas. According to an analysis conducted by ESADE business school from June 15 to December 31, 2022, regulated rate (the so-called PVPC) saved an average of 31.8%, which corresponds to around 209 euros per household and in total means: 1,880 million € for nearly 9 million customers with that ratio. And free market users? The rest of the electricity customers should also benefit from the reducing effects of this upper limit. since they use as companies reference to price your retail offerings at wholesale price, but at this point applications of each company.
What happens if the gas price drops?
match Announcement of extension of ‘Iberian exception’ he at one time mechanism does not reach practical effects, because since mid-February gas price has been below the ceiling almost every day In March it reaches 55 euros per MWh. Third vice president and Minister of Ecological Transition, Teresa Riberarealized this morningIf natural gas is held at current prices, the mechanism will probably not come into play.but if it raises its prices again, we can keep the electricity price low. reasonable price and it is not so dependent on the evolution of the natural gas price”. Currently, gas has an approximate cost. 40 Euros per MWhTwice as usual before the war in Ukraine, but Far from 300 Euros who came this summer But the war in Ukraine is still going on and in a few weeks volatility returns to dominate energy markets. Also this morning, Naturgy’s newly elected president Francisco Reynés predicted that “it will not be an easy or quiet year” and that “volatility and uncertainty” in prices will continue. naturgy The first gas company in Spain.
Why does the European Commission have to give permission?
The European Commission must approve Under the European Union state aid rules To prevent the deterioration of the Iberian Peninsula from adversely affecting other member states. Therefore, the government had to work hand in hand with the government. European Commission Competition Department who is driving Margrethe Vestager to find it The ideal formula that will benefit Spain and Portugal without harming the rest of the Member States. And actually, that’s why Electricity sales to France also benefit from lower prices, although they do not have to pay any compensation. The first approach, quoted by the Spanish Government in the spring of last year, included a price for exports without a cap, but the European Commission rejected this extreme.
So does France also benefit from it?
That’s it. France benefits from low electricity prices in Spain. Spain achieved last year largest electricity export balance in history (19,841 million euros), almost couple Compared to other ‘good years’ in terms of sales to neighboring country such as 2008 or 2012. come back for Spain. This congestion rents is that money marketers pay for him gas exchange through electrical interconnects, in this case the tube connecting to France. Whether Spain or France is a net exporter, the resulting amount for this concept shared equally between the two countries. Normally, Spain uses this money. electrical systembut it was determined that it will be used together with the creation of the gas cap. reduce the amount of adjustmenti.e. the money consumers pay make-up gas plants.