Spain and Portugal cap gas prices to reduce household electricity bills

Capping the price of gas at 40 euros per megawatt, then gradually at 50 euros per megawatt, is the lever that the Spanish government wanted to put an end to the terrible social anger that is gradually spreading to all of society (Image illustration) AP - Frank Augstein

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On March 24 and 25, during a European summit, Spain and Portugal had stated the need to cap the price of gas, in order to cope with the vagaries of international energy prices.

It's official today, Madrid and Lisbon have approved the limitation of the price of gas to reduce the electricity bill. 

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With our correspondent in Madrid

,

François Musseau

The government of Pedro Sanchez hopes that this will reassure the population and allow predictability in the face of the situation in the world.

Capping the price of gas at 40 euros per megawatt, then gradually at 50 euros per megawatt, is the lever that the Spanish government wanted to put an end to the terrible social anger that had started with that of freight transporters and which gradually spread to the whole society.

To calm down, to reassure the population 

", insisted the head of government Pedro Sanchez.

In practice, this price cap directly affects

the price of electricity

, because it is precisely the gas that produces electricity.

On average, according to official calculations, the cost should drop by 40% in the near future.

This is considerable, and more precisely 30% for this large proportion of Spanish individuals and Spanish companies, which are subject to regulated tariffs subject to the vagaries of the sector.

El Gobierno ha aprobado en #CMin el mecanismo, acordado con la @EU_Commission, para limitar el precio del gas y rebajar la invoice de la electricity en la Península Ibérica.



🔸El precio medio del gas será de 48.8 euros el Megavatio/hora, empezando por 40 euros MWh



👇🏼 pic.twitter.com/2C3xcDbYr9

— La Moncloa (@desdelamoncloa) May 13, 2022

A measure that directly benefits individuals

In the eyes of the Minister for Ecological Transition, Teresa Ribera, this is an unprecedented measure, because, for the first time, it directly benefits individuals and households affected by the rise in energy prices, and is done at the detriment of large electrical groups.

It remains to obtain the approval of the European Commission so, hopes Madrid, that the measure will be in force from June.

Spain and Portugal drop out of the European system

Spain and Portugal had reached an agreement with the European Commission at the end of April in Brussels to lower the price of electricity in the Iberian Peninsula, under a derogatory regime allowing them to dissociate it from that of gas.

The cost of energy has risen sharply in recent months in Spain and Portugal due to European electricity market rules, which force producers to sell their energy at the price of the most expensive technology -c' that is to say currently that of gas-fired power stations.

Madrid and Lisbon were battling against this system, deemed unsuited to the energy reality of the Iberian Peninsula. 

This mechanism has a duration of 12 months and will initially cap the price of gas used in the production of electricity at 40 euros per megawatt-hour, with an average target of 50 euros over the next 12 months.

Natural gas prices on the wholesale market are currently around 90 euros per megawatt-hour.

To read: Spain: inflation at its highest level for thirty-seven years

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