Brussels finally gives green light to Iberian mechanism to control gas price


The commission emphasized the temporary nature of the measure and urged Spain to “adopt reforms that increase the resilience of its electricity system in the future”.

Ursula von der Leyen
Ursula von der LeyenAP

The European Commission this Wednesday, after two and a half months of difficult negotiations, has approved a regime of “Iberian exceptionalism” that would allow Spain and Portugal to impose a cap on the price of gas to reduce electricity bills almost immediately . The European Council acknowledged last March that the peninsula would adopt measures beyond other measures, given little interconnection with the rest of the continent. Pedro Sánchez’s government then estimated that everything would be back on track in a few days or a few weeks and even assumed that the effect would be already noticeable in the May bill, but Brussels The terms sought from are more complex than expected, and the differences with Lisbon are waterier than expected.

Community experts agree that the measure is “adequate, necessary and proportionate” and that it will “work to reduce wholesale electricity prices in favor of consumers, without affecting commercial conditions contrary to common interests. On the other hand, the measure does not go beyond what is needed to deal with exceptionally high electricity prices in the Iberian Peninsula, according to the Competition Commissioner’s team.

The European Union, which insists on timing of solutions at all times, has urged both countries to “adopt reforms that increase the future resilience of their electricity systems”. The institutions put the protected measures at 8,400 million euros under the umbrella of state aid in light of the findings of “reducing the cost of inputs from power plants powered by fossil fuels” to reduce the wholesale prices of electricity in the market. That March European Council. “The temporary measure we have approved today will allow Spain and Portugal to reduce electricity prices for the benefit of consumers who have been severely affected by the increase in electricity prices as a result of the Russian invasion of Ukraine. At the same time, the integrity of the single market will be preserved. In addition, this measure allows Spain and Portugal to have a set gap of time to adopt reforms that are in line with the objectives of the Green Deal, for their electricity systems. increase future resilience, and ultimately reduce the effects of the energy crisis on end consumers,” explained Margrethe Vestager, head of competition, in a statement.

At the end of the last European summit last week, the Sanchez team estimated it would be a matter of days, but the final touches still took a week. The system has political support from heads of state and government, but the commission has never been intuitive, neither theoretically nor practically. He says that doing so poses no threat to the single market, but he says with a small mouth after almost a year of clearing all odds. The chairman of the commission, Ursula von der Leyen, has spoken today about the need for a deeper reform of the electricity market, but the Iberian Railway is not her proposal.

Last year, Spain and Portugal announced their intention to adopt a measure in line with Spain’s commission of 8,400 million, of which 6,300 million, to reduce the cost of inputs from fossil fuel-powered power plants to reduce their production costs. and, finally, the wholesale market price of electricity. The approval comes with an explicit expiration date, May 31, 2023. And this will be done through payment of direct subsidy to power producers with which to pay part of the fuel bill. “The daily payment shall be calculated as the price difference between the market price of natural gas and the ceiling price of gas fixed at an average of 48.8 EUR/MWh during the period of measurement’s validity.”

The main details were already known. During the first six months after the application of the measure, the effective price limit will be set at EUR 40 per MWh, and from the seventh month, this limit will be increased by 5 EUR monthly, bringing the price limit to 70. Euro next year in May Euris MWH.

Brussels does not allow price discrimination for the part of subsidized energy that goes through interconnections to other countries and in fact forced Spain to change its law. While Portugal insisted on excluding gas subsidies from term contracts signed before April. The mechanism would be financed through part of the so-called “congestion fares”, obtained by the manager of the Spanish transmission grid as a result of the cross-border electricity trade between Spain and Spain, and through tariffs imposed by Spain and Portugal. From. On buyers who benefit from the remedy.

Despite the reservation, Brussels has given the green light under Article 107 of the Treaty on the Working of the European Union, according to which member states can provide assistance to specific companies or sectors to address serious disturbances in the economy, some with war. Clearly in Ukraine. But above all thanks to the very specific position of the peninsula, as proposed after two months in which finally Brussels has participated in the drafting of each aspect, “is different from other forms of price intervention due to special circumstances in the market. In particular, the limited interconnection capacity of the Iberian Peninsula, consumers’ high exposure to wholesale electricity prices, as well as the high influence of gas in setting electricity prices, have caused particularly severe unrest of the Spanish and Portuguese economies”. .

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