The European Commission gave formal approval this Tuesday to extended measures known as the Iberian exception, a policy initially reported by Spain and Portugal this April. Its goal is to lower wholesale prices in the Iberian electricity market. The extension runs until December 31, 2023, and acknowledges that the economies of both nations are still experiencing significant volatility. A mechanism could be reactivated if gas prices rise again to safeguard consumers on the Iberian Peninsula. With the changes approved, Spain and Portugal can continue offering affordable electricity for residents in the region, noted the competition commissioner, Margrethe Vestager.
Measurements already in place remain provisional and aim to balance the need to curb energy costs tied to Russia’s invasion of Ukraine with the EU’s commitment to a single, intact internal market. The extended and adjusted monthly price ceilings are designed to ease the transition away from the measure while protecting vulnerable consumers in the moment, according to a Danish official and other EU observers. The changes align with EU state aid rules, ensuring compliance as authorities monitor market impacts.
Brussels initially authorized the mechanism to cap the price of gas used in electricity generation in June 2022, a step that effectively lowered wholesale prices. The first ceiling, set at 40 euros per megawatt hour (MWh) for the initial six months, rose by 5 euros monthly, and expired on May 31. Madrid and Lisbon argued that the policy helped save roughly 5 billion euros between June and January 2023. The aim was to extend the mechanism through 2024, but the temporary nature of public assistance tied to the Ukraine crisis led to a year-end expiration. In April, both capitals informed Brussels of a seven-month extension request through the end of 2023. The trajectory proposed a ceiling of 56.1 euros in April, rising gradually to 65 euros by December.
Officials also announced that the price cap path would be adjusted to facilitate a smooth, predictable phasing out. The Commission confirmed that buyers in the wholesale electricity market would be exempt from paying the adjustment fee for their volume contracted to supply from June 1 to December 31, 2023.
End consumers not registered as wholesale buyers and who have signed a financial guarantee agreement would be exempt from adjustment fees for electricity purchases between May 1 and December 31, 2023 for those facing electricity price risks before March 7, 2023. The European Commission will decide by the end of 2023 whether the mechanism will be activated, with the goal of ensuring that the maximum price remains below gas market levels.
limited intermediate links
The Commission’s assessment endorses the temporary crisis and transition framework and related price interventions due to the Iberian Peninsula’s unique wholesale electricity market conditions. Brussels has faced concern over limited interconnection capacity in the Iberian Peninsula, the substantial exposure of consumers to wholesale prices, and the strong influence of gas on electricity pricing in both Spain and Portugal.
Vestager’s team describes the measure as sufficient, necessary, and proportionate, maintaining its temporary status and restricting it to the minimum needed to address the severe disruption facing the Spanish and Portuguese economies. It acts as a hedge against price spikes in the Iberian electricity market amid the current volatile geopolitical situation. Brussels remains at the forefront of the Iberian exception, even as market dynamics evolve. The protection mechanism aims to shield vulnerable consumers and stabilize the market in case gas prices rise.
The Community Manager will continue to minimize distortions in competition and avoid potential negative effects on the functioning of spot and futures electricity markets. In line with internal energy market rules, the amended measure does not impose cross-border restrictions on electricity trade or discriminate between Iberian and non-Iberian consumers. The overarching goal remains to support market stability while preserving fair access for all participants across the European energy landscape.