12% less than without measure
The average electricity price for regulated rate customers connected to the wholesale market on Tuesday shows a 0.97% rise from Monday, reaching as high as 272.87 euros per megawatt hour (MWh) according to provisional data from the Iberian Energy Market Operator, OMIE, compiled by the Spanish energy authority. This figure reflects the combined effect of the wholesale market auction average plus the compensation that demand pays to combined cycle power plants as part of the Iberian exemption intended to cap gas costs for electricity generation.
In the wholesale market auction, the average price, often called the pool, stood at 143.99 euros per MWh on Tuesday. The day’s peak price is expected between 21:00 and 22:00 at 170.17 euros per MWh, while the minimum for the day, 121 euros per MWh, is anticipated between 16:00 and 17:00.
The price added to the pool includes a 128.88 euro per MWh compensation to gas suppliers. This amount is what consumers benefiting from the measure, as well as those on regulated tariffs or indexed rates in the free market, contribute to the system through the mechanism.
On the broader impact, the Iberian exemption is associated with a notable reduction in the price that would otherwise prevail in the market. Without the exemption mechanism to cap gas costs for electricity generation, Spain would see an average price around 309.88 euros per MWh. That would mean approximately 37 euros more per MWh in compensation terms and would translate into higher charges for regulated tariff customers, resulting in a 12% reduction in charges for those protected by the mechanism.
The Iberian mechanism, which began operation on 15 June, sets a cap on natural gas costs used to generate electricity. The pathway established by the rule outlines a phased pricing structure over a 12-month horizon, providing relief during the winter months when energy prices tend to rise. This approach helps stabilize consumer costs by limiting the impact of gas price fluctuations on electricity generation.
Specifically, the mechanism defines a price path for natural gas used in electricity production. The initial six months see a price target near 40 euro per MWh, with a planned increase of five euro per MWh each subsequent month through the remainder of the measure. This schedule aims to balance energy security with affordability for households and businesses, ensuring a more predictable cost environment as regional energy markets adjust to supply dynamics and demand fluctuations.