Energy
Business 27/04/2022

Green light from Brussels for Spain and Portugal to limit gas prices to around €50

A mechanism will be established to decouple its cost from that of electricity for twelve months

2 min
Close-up of the Minister for Ecological Transition, Teresa Ribera, in a file image

BrusselsSpain and Portugal have reached an agreement with Brussels which will allow them to limit the price of gas to around €50/MWh, a measure that will last twelve months in order to lower the price of electricity. Just a month ago the Spanish president, Pedro Sánchez, returned from a tough leaders' summit in Brussels with a promise to push forward the measure, but it has taken intense negotiations between the European Commission and Madrid and Lisbon, who had made more ambitious proposal to limit gas to €30. But Brussels viewed it with concern because it feared it would damage the European single market for energy.

Fourth vice-president and Minister for Ecological Transition Teresa Ribera, alongside her Portuguese counterpart, José Duarte Cordeiro, met the EU's vice-president of Competition, Margrethe Vestager, this Tuesday in order to push the plan ahead in a meeting that lasted about two hours. At the end of the meeting, they announced "a political agreement" that only requires a few technical details, they assured. The two governments, therefore, have the Commission's approval to set limits, but the details will have to hashed out before the Commission officially announces the agreement. "It is a temporary instrument, with a duration of twelve months, which seeks to decouple the price of gas from that of the electricity bill," clarified Vice-President Ribera, who insisted with Duarte that the negotiations have been intense, tough and technical. The cap will start at €40 for gas and will evolve to an average cap of €50.

As Ribera has clarified, the Spanish government plans to get the measure approved by the cabinet next week's so that it can come into force at the beginning of May and so that all consumers may notice it in the coming month's bill. She also assured that during the meeting, interconnections with the rest of Europe, particularly with France, were discussed. It should be borne in mind that one of the claims these two governments make is that the Iberian Peninsula is an "energy island" with fewer energy interconnections than EU countries' average, despite being regulated by the same conditions. This recognition was the one that Sánchez and his Portuguese counterpart, António Costa, obtained from the last European summit. For this reason, Ribera has assured that they have obtained a commitment from Brussels to promote these interconnections.

Debate on the price

In fact, one of the issues that hindered the negotiations has been the price at which Spain would sell its gas or electricity to France, which has recently increased purchases from the State because its nuclear power plants work are not working at full capacity. The state had proposed that the gas price cap would only benefit domestic consumption and not exports, but in the end France will also benefit. In exchange, said Ribera, new interconnections with France will have to be built, a long-standing demand.

Negotiations have not only been complicated by the commission's reluctance, but also because the companies in the sector have made them more complicated. On April 22, the electricity market operators of the two countries sent a letter to the Secretaries of State for Energy of Spain and Portugal in which they warned that "potential market intervention not aligned with the EU will give rise to a significant regulatory risk and will call into question the credibility required during the price formation process".

stats