Date Published: 13/05/2022
ARCHIVED - Electricity prices in Spain set to plummet as natural gas limit comes into force
A price cap of 40 euros/MWh has been set on gas used to generate electricity in Spain
After a slight delay, the government in Spain has approved a cap on the price of gas on Friday May 13. Thus, for the next six months, natural gas costs will be limited at 40 euros per MWh and from then on will gradually increase within the year to reach an average of 48.8 euros overall.
Aside from the usual taxes, this will mean that electricity will also be limited to an average of 130 euros/MWh over the next 12 months, which will result in substantial savings for consumers, who have seen their bills skyrocket.
This ‘Iberian Exception’ agreed between the European Commission, Spain and Portugal will only allow the government to apply the discount until May 31 2023.
According to the Minister of Ecological Transition, Teresa Ribera, this “historic” measure means that “a very important objective is achieved, putting a cap on the price of gas and thereby lowering the electricity bill for everyone, family, households, SMEs, self-employed and, very importantly, for industry.”
Executive sources add that limiting the price of gas and its decoupling from that of other energies opens the way for the EU to reform its energy market, but the European Commission has placed a "condition" on the Spanish government, which will have to reform the regulated rate, PVPC, so that it sets a price not in the daily market but in the contact term with suppliers.
It will take around twelve days for the reduction to come into effect, and the first to notice the savings will be customers who have contracts in the regulated market – around 40% of households, all vulnerable consumers and 80% of businesses. Those who are tied into contacts with electricity suppliers will gradually benefit as their agreements come up for renewal.
“Consumers do not have to do anything to benefit, fixed one-year contracts will incorporate this price as they renew,” Ms Ribera explained, adding that at the end of the year, "all consumers, households and companies, who had a long-term contract will benefit."
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