EC green lights temporary gas price cap in Iberia
This measure will temporarily decouple gas and electricity prices in the Iberian Peninsula, which will thus benefit from an exception, as agreed at the March European Council.
The prime minister announced on Monday that the European Commission has approved Portugal and Spain’s proposal on a temporary mechanism to set the average price of gas at 50 euros per MWh, with the legislation expected to be approved on Tuesday.
“Just this morning, the European Commission gave the ‘green light’ to the Portuguese and Spanish proposal in order to avoid contamination of the price of electricity by the rise in the price of gas and that is a far-reaching measure,” António Costa disclosed.
Speaking to Portuguese journalists on the sidelines of the closing event of the Conference on the Future of Europe, at the headquarters of the European Parliament in the French city of Strasbourg, the head of government added: “We are currently coordinating with the Spanish government how to approve the respective legislation and we will do everything so that we can do so as soon as tomorrow [Tuesday].
“Spain’s Cabinet usually meets on Tuesday, but we will hold a Cabinet meeting to approve this measure, so that it can come into force simultaneously on the Iberian Peninsula,” António Costa said.
Last Friday, an official source from the European Commission told Lusa that the institution had already received an official proposal from Portugal and Spain on a temporary mechanism to fix the average price of gas at 50 euros per MWh and had now started technical contacts for evaluation.
“The Commission has now received information from the Spanish and Portuguese authorities, which it will assess as soon as possible. Based on the information provided by Spain and Portugal, contacts will continue at a technical level,” said the official source from the Community executive, in a written reply sent to Lusa news agency.
Earlier, at the end of April, the governments of the two countries reached a political agreement in Brussels with the European Commission to establish a temporary mechanism that will allow the average price of gas to be set at 50 euros per MWh.
This measure will temporarily decouple gas and electricity prices in the Iberian Peninsula, which will thus benefit from an exception, as agreed at the March European Council.
The mechanism is expected to last for around 12 months and will set the average gas price at around 50 euros per megawatt, against the current market reference price of 90 euros, with the price starting at 40 euros.
In the current European market setup, gas determines the overall price of electricity when it is used, as all producers receive the same price for the same product – electricity – when it enters the grid.
There has been general consensus in the EU that the current marginal pricing model is the most efficient, but the acute energy crisis, exacerbated by the war in Ukraine, has prompted discussion.
