Spain and Portugal agree with Brussels their plan to lower the electricity bill

The European Commission approves limiting the price of gas to 50 euros per megawatt hour, a measure that will reduce by half the receipt of households that have a regulated tariff

And finally, green light. On the horn regarding the deadline that the Spanish Government had given, the European Commission has given its approval on Tuesday to the Spanish and Portuguese proposal to limit the price of gas and coal that feed the electricity generation plants and thus reduce both the electricity bill for 40% of Spanish consumers – those who have a regulated tariff – and inflation. It does, of course, with two changes: the gas cap will not be 30 euros, but 50 in the average of the year of validity of the measure, and the peninsular price of electricity will be the same as they apply for exchanges with the rest of the EU, via France.

“There is a political agreement,” announced in Brussels the third vice president of the Government and Minister for the Ecological Transition, Teresa Ribera, in a joint press conference with her Portuguese counterpart, Duarte Cordeiro, after meeting with the EU head of Competition, Margrethe Vestager. In the same vein, but with more caution, the Community Executive recognizes the “political agreement in principle” for Spain and Portugal to adopt “proportionate and temporary measures to face the [altos] levels of electricity prices”. The EU spokespersons then add: “Contacts will now continue at full speed at the technical level.”

The Madrid and Lisbon agreement with Brussels is based on two basic lines. The first would be the one that allows limiting the price of gas and coal for power plants to 40 euros per megawatt hour (MWh) in the first weeks, 10 euros more than initially proposed by the peninsular governments. Then, the Community Executive forces this cap to rise progressively, until reaching 50 euros in the average of the 12 months in which this emergency mechanism will be active, which aims to reduce the pressure of prices on households and companies. Natural gas today costs 80 euros in the Mibgas, the Iberian market.

The second part of the pact is one of the most different between Madrid and Lisbon and the European Commission, and in which the capitals have ended up ceding: there will not be a double price – one for consumers on the Peninsula and another for those from outside, especially the French – as had been suggested in the first text sent to Brussels for the consideration of its technicians. It will be the same for everyone, so the latter will also benefit from the subsidized energy produced in Spain and Portugal. “The Commission has indicated that it asked for flexibility so as not to introduce additional limitations at the border, but obviously the French consumer will have to pay the same as the Iberian consumer in this adjustment,” Ribera admitted.

“The European Commission has conveyed to us the request to be flexible regarding how we maintain interconnections, electricity exports from the Iberian Peninsula to France, but has committed to be a much more active actor to monitor the full compliance with an interconnection target that was set for 10% in 2020 and 15% in 2030, but that is still at 2.8%”, has described the head of Ecological Transition. Today, the interconnections of electricity and gas through the Pyrenees are very limited, but sources of the Spanish Executive underline that Brussels has “committed” to “work actively” to increase them.

The most striking point and in which there has been more media debate in recent months is the one that will allow to cap the price of the fuel that feeds the combined cycle and cogeneration plants. The result of this mechanism, taking as a reference the 50 euros on average that will be paid throughout its period of validity, yields an average daily price of the MWh of light of about 130 or 140 euros, according to three independent experts consulted by this newspaper. That figure is not only less than half of the 283 euros on average in March, but also significantly lower than the 180 cap on the wholesale market that the Government of Pedro Sánchez considered taking to the European Council in March and that finally did not raise due to the reluctance expressed by the countries of the north of the Union, always refractory to measurements of that cut.

In a market of marginalist design such as the Spanish one, the brutal rise accumulated in recent months by gas – which quintuples its price – has contaminated the prices faced by consumers in a large number of hours: the most expensive technology (in many cases, gas) is the one that marks not only the own remuneration, but also that of the rest. And that is exactly what we want to tackle with this new framework. The compensation to the owners of the thermal power plants will come out of the system itself, as Ribera has reiterated on several occasions, which has promised that it will not entail any burden on the General State Budgets or expand the tariff deficit.

The development of what was agreed in March

The President of the Spanish Government, Pedro Sánchez, and the Portuguese Prime Minister, António Costa, achieved at the end of March the political approval of the European Council for a mechanism that allowed them, hiding behind these low interconnections with the rest of the continent and in their high share of renewables, to stand out from the rest of the Member States with a specific and temporary regulation to cheapen receipts that have been through the roof for months. But that first framework agreement had yet to be grounded in concrete measures. That first concretion of the pact, fundamental, is the one that has arrived now and that will allow to decouple the price of electricity from the gas.

“The meeting was very constructive,” say community sources, who do not ignore that in the coming days the fringes of the agreement must be closed. Those details and formalities will have to be ready before the Council of Ministers next Tuesday endorses what was agreed with Brussels, according to Vice President Ribera. If that deadline is met, the long-awaited lowering of the bill for customers of the regulated market (4 out of 10) should already arrive in the May invoice.

Source: The Country