Government approves Iberian gas price cap to lower electricity prices

Portugal’s government on Friday approved the Iberian agreement to limit the price of gas for electricity production, which will reduce the electricity bill for families and businesses, announced the minister of the environment, Duarte Cordeiro.

“The government today approved an unprecedented measure […], a facility that has a very clear set of objectives: to limit the scale of prices, to protect those who are most exposed and thirdly to socialise the costs and benefits,” Environment and climate action minister Duarte Cordeiro told journalists today at a press conference at the end of the special Cabinet meeting, which took place on the same day as the meeting of Spanish ministers, who also approved the scheme.

“We will obtain a very significant reduction in the price of electricity, thus generating savings for families and businesses,” the minister said.

At the end of April, the governments of Portugal and Spain reached a political agreement in Brussels with the European Commission to establish a temporary measure that will set the average price of gas at €50 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 measure is expected to last for around 12 months and will set the average price of gas at around €50 per megawatt, against the current market reference price of €90, with the price starting at €40.

In the current European market configuration, gas determines the overall price of electricity when it is used, since all producers receive the same price for the same product – electricity – when it enters the grid.