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Date Published: 09/06/2022

ARCHIVED - EU greenlights deal with Spain to lower electricity prices

ARCHIVED ARTICLE

The measure will be applied in Spain on June 14 and remain in place until May next year

<span style='color:#780948'>ARCHIVED</span> - EU greenlights deal with Spain to lower electricity prices

The European Commission has finally approved the so-called Iberian exception this week, which will allow both Spain and Portugal to limit the price of gas in electricity production plants, thus drastically reducing bills for thousands of households and businesses.

There is one final step left: the price cap has to be passed by the Congress of Deputies, but the President of the Spanish Government, Pedro Sanchez, is hopeful that this will be achieved on Thursday June 9, with the measure being applied across the board early next week.

When does the price reduction come into play?

All going well, the price cap on natural gas will be applied on Tuesday June 14 and remain in force until May 31 2023.

According to the Minister for Ecological Transition, Teresa Ribera, customers will notice a reduction in their electricity bills from the invoice they receive in July, and every month thereafter.

How much will the discount be?

The Government has confirmed that the Iberian exception will mean energy savings of between 15% and 20% for families and companies across Spain, essentially lowering electricity bills by between 25 and 30 euros from the outset.

However, Ms Ribera has stressed that "the specific figures will depend on how much gas is consumed, on the renewable energy that enters the system, on many variables…"

The price will begin at the reduced rate of 40 euros per MWh and will increase gradually until it reaches a maximum of 70 euros, so that the average cost will be around 48 euros per MWh over the next 12 months.

European energy reform

Spain and Portugal have been allowed to impose this exceptional measure due to the poor interconnection of the Iberian Peninsula with the rest of Europe, a factor which has seen energy prices skyrocket in recent months.

However, there are big plans afoot to reform the energy pricing system throughout Europe. Electricity costs are still determined by the global cost of gas, which is the most expensive source of energy, a method that was designed “20 years ago” and “no longer works,” according to the president of the EC, Ursula von der Leyen.

Image: Pixaby

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