The situation in the Iberian Peninsula centers on a planned safeguard: a government decree to cap the price of natural gas used to generate electricity. This measure, aimed at reducing household energy bills, is designed to take effect after final technical details are settled. Government officials indicate preparations are progressing, with cabinet decisions and regulatory steps aligning to implement the cap soon. In the meantime, the focus remains on how this price ceiling will influence electricity costs for households and businesses alike.
Earlier in the week, the European Commission signaled retrospective support for Spain and Portugal in their plan to cap gas and coal prices used for power generation at an average level of 50 euros per megawatt hour (MWh). The objective is to stabilize wholesale electricity costs and prevent sharp price swings in the market. This ceiling would keep wholesale prices within a tighter band, significantly reducing the volatility seen in recent weeks. Final EU approval is expected after authorities review the decrees issued by Iberian governments.
European Commission gives the green light to Spain and Portugal’s proposal to set a 50 euro cap on gas price
The Spanish government had hoped to request cabinet authorization to adopt the measure within the week, but several technical details require resolution before it can be launched. Once confirmed, the new pricing framework is expected to begin without delay, with early indicators already showing a downward impact on monthly electricity bills.
The move is described as part of what the EU recognizes as the Iberian exception. This doctrine acknowledges that Spain and Portugal generate a substantial portion of their electricity from renewables and are less tightly integrated with the broader European grid, enabling exceptional measures that other member states could not undertake. Brussels will continue to assess whether the Iberian plan adheres to EU rules and does not exceed the allowed limits for state intervention.
By setting an average gas price cap of 50 euros per MWh, with an initial starting point of 40 euros per MWh, the aim is to lower wholesale electricity costs and, by extension, reduce consumer bills. The government estimates that small domestic consumers and certain industrial users, many of whom purchase power on the market, stand to benefit with substantial bill reductions. A 30 percent reduction on final bills is anticipated for the affected groups, though figures vary by market segment and consumption level.
Market observers note that electricity prices have remained notably elevated, maintaining pressure on bills even as measures are prepared. Officials emphasize that while the cap targets wholesale price dynamics, the ultimate effect depends on how the system integrates with grid operations and how quickly the new mechanism can be rolled out across the network. The aim remains to keep prices anchored while the broader energy mix and transmission constraints adjust to the new framework.
The Iberian exception continues to be a focal point of discussion as renewables drive a significant share of electricity generation in Spain and Portugal. By acting together within the EU framework, both countries aim to stabilize their energy costs and offer a model that could influence policy in other member states, subject to compliance with community regulations and ongoing monitoring by Brussels.