The Government approves the cap on the price of gas to make electricity cheaper

The Government intervenes in the electricity market. In an extraordinary Council of Ministers, the mechanism to limit the price of gas destined to produce electricity has been approved to lower the electricity bill by 30%. Thus, the so-called “Iberian exception” authorized by the European Council on Friday, March 25, is executed, to try to stop the historic escalation of the price of electricity in recent months. Consumers will not notice its effect immediately, but the endorsement of Brussels and technical procedures that will extend its entry into operation until June are still needed.

“The only electricity that will be paid at the cost of gas is that generated by natural gas, therefore we avoid the contagion effect of the rest of the technologies. This means a reduction in the extraordinary profits of electricity and improves the price of 37% of domestic consumers and 70% of industrial consumers, “explained the vice president and minister for the Ecological Transition, Teresa Ribera, in a brief press conference accompanied by a good part of the team of her department, among them, the Secretary of State for Energy, Sara Aaegesen.

The limit will start at 40 euros per megawatt-hour for six months and will grow “month by month” by 5 euros per megawatt-hour thereafter until reaching 70 euros per megawatt-hour “so that there is a convergence to normality”. The price of electricity in the wholesale market will fall significantly to 130 euros per megawatt-hour, well below the 200 euros per megawatt-hour in which it has been installed in recent months.

According to the Government, this measure will mean a reduction of 30% of the bill for users of the regulated market and industrialists who go directly to buy electricity from the ‘pool’, although Ribera has assured that users of the free market will also notice the reduction, as they renew with their marketer because the market price reference will be lower. According to estimates by energy expert Francisco Valverde, an average user (4.4 kW of contracted power and 3,500 kWh per year) the price of the monthly bill with a price of 130 euros per megawatt-hour in the pool would remain at 68.8 euros in the month of June, compared to the 98.7 euros paid in the month of April.

The cap has been approved simultaneously by the Spanish and Portuguese Executives. Its entry into force will occur the day after the publication in the BOE that “in principle will occur this Saturday”, although we will have to wait to obtain formal support for both rules by the European Commission that could take “a week, ten days or two weeks”, according to Ribera.

In parallel, the electricity companies have 5 working days to present the contracts with their customers and there are another 7 days of adaptation of the systems. “The effective and final term will be the later of the two, those 12 days or the formal authorization of the European Commission,” explain ministerial sources. That is, until the beginning of June this measure cannot be implemented.

The difference between the limit price and the real price of gas (currently almost 80 euros) will be assumed by the marketers who will pass it on to final customers: consumers in the regulated market (about 10 million) first, while free market users with fixed price contracts of less than one year will join the mechanism as they have to renew their tariffs. “For the first time they don’t pay the same. A situation like this has usually been settled by the contribution of the General State Budgets, “said Ribera. The government defends that it will be the electricity companies that pay this mechanism by reducing their “extraordinary benefits”, but they defend that it will not affect their accounts.

Ministerial sources indicate that the balance with France will be purely exporting, compared to the current balance, because purchases from the Iberian Peninsula will increase in the face of a cheaper price, but French marketers will not have to pay the adjustment. The French marketers pay the so-called congestion rents or rights of use of the networks, according to ministerial sources, which are revenues for the electricity system but that while the gas cap lasts they will be used to reduce the compensation.

The mechanism can be suspended in exceptional market circumstances or for reasons of general interest, while its validity “in no case” may go beyond May 2023.

Source: The Newspaper