Electricity prices: Madrid wants to extend the "Iberian exception" until the end of 2024

Europe 1 with AFP 1:57 p.m., January 9, 2023

The Spanish government indicated on Monday that it would ask Brussels for an extension until the end of 2024 of the cap on electricity prices, introduced as part of the "Iberian exception", hoping by then for a structural reform. European rules.

"We want to continue to benefit from this exceptional measure applied in Spain and Portugal and which, in principle, is only valid until May," said Spanish Minister for Ecological Transition Teresa Ribera, during an interview. granted to the television channel Antena 3.

Wait for the new rules

"We are therefore going to request that the application of this Iberian solution be extended until the European rules are modified", added Ms. Ribera, saying that she hoped that this exceptional regime would remain in force "at least until the end of the year 2024".

“We know” indeed that the implementation of new market rules in Europe “can take a long time”, she justified. 

In a context of soaring prices linked to the war in Ukraine, Madrid and Lisbon obtained the approval of Brussels in June to drop out of the European tariff system, due to their lack of interconnections with the rest of the European Union which penalizes their consumers.

This derogatory regime, which makes it possible in practice to cap the price of gas used in the production of electricity, has enabled prices to fall sharply in Spain and Portugal in recent months.

But it should in theory end on May 31, 2023.

A system accused of boosting prices

The price of electricity is set on the European markets by the principle of "marginal cost", which involves taking as a reference the price of the last production capacity used to balance the network, i.e. currently that gas power plants.

Accusing this system of boosting prices, several countries want to reform it, like Spain, but also France and Italy. 

But the discussions have been delayed in recent months, other states, such as Austria and the Netherlands, preferring to rely on free competition or a strengthening of network interconnections on the continent to bring down prices.

This reform is necessary to "reduce the volatility of electricity prices" and "guarantee the development of renewable energies", underlined Ms Ribera, specifying that Madrid would make "new proposals" to the Commission to "modernize" the rules Europeans.