Iberian gas price cap for electricity production in effect from today

  • Lusa
  • 15 June 2022

EC approved the temporary Iberian mechanism to limit the price of gas in electricity production until 2023, budgeted at 8.4 billion euros, of which 2.1 billion refer to Portugal.

The Iberian regime that will define a maximum price for natural gas used in electricity production plants takes effect in the market as of Wednesday.

In a statement published on 8 June, the ministry for the environment and climate action said that the Iberian mechanism that defines an exceptional system for setting prices in the Iberian Electricity Market (MIBEL) will take effect in the electricity market on 15 June.

“Exceptional in nature, the mechanism arises following the escalation of prices on the gas market (to historic highs), with direct consequences on electricity prices,” it said, indicating that “the measure will be in force until 31 May 2023, encompassing the period of greatest electricity consumption (autumn and winter).

Thus, “during this period a maximum average price of 48.75 euros per megawatt-hour will be set for natural gas used in thermoelectric power plants for electricity production.

According to the executive, the objectives of this mechanism are to “limit the escalation of electricity prices and protect those who are most exposed to spot market prices (SPOT), also benefiting the remaining electricity consumers as they renew their supply contracts.

“The Iberian mechanism results from the close cooperation work between the governments of Portugal and Spain, aiming to decouple the price of natural gas from the price of electricity on the MIBEL, and is a consequence of the European Commission’s recognition of Iberian specific characteristics, namely the reduced capacity of electricity interconnection with continental Europe,” the government concluded.


“The European Commission has approved, under European Union state aid rules, a Spanish and Portuguese measure worth 8.4 billion euros aimed at reducing wholesale electricity prices on the Iberian market by reducing the production costs of fossil fuel power plants,” the EU executive said in a statement.

According to Brussels, the mechanism will be in place until 31 May 2023, representing Portuguese state support of 2.1 billion euros and Spanish state support of 6.3 billion euros in payments via direct subsidies to electricity producers to thus fund part of their fossil fuel costs, as in the current configuration of the European market it is the price of gas that dictates that of electricity.