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    The Government approves the gas price cap but will not apply it until final approval is obtained from Brussels

    May 13, 2022 - CE Noticias Financieras


      The Government has approved this Friday in an extraordinary Council of Ministers the Royal Decree Law that includes the mechanism to intervene in the price of gas used in electricity generation and reduce the bill of millions of consumers.

      However, the mechanism will not be applicable until the European Commission gives its final approval to the Spanish and Portuguese regulations. The vice-president for Ecological Transition, Teresa Ribera, has not been able to specify when this entry into force will take place. "It depends on the European Commission. It could be a few days, a week, two weeks...", she has pointed out, although she has expressed confidence that the green light will come after having already received a preliminary pass.

      "The entry into force will take place the day after the publication in the BOE, which will be tomorrow or Monday, and we will have to wait for the European Commission to finally adopt the endorsement of this regulation. During this time, the electricity companies will have to provide detailed information on retail contracts," she said at the press conference after the Council of Ministers.

      Ribera also acknowledged that the measure will benefit with "immediate effect" only 37% of domestic consumers, who are those covered by the PVPC regulated tariff. She has insisted that the rest of the households will have a "progressive effect" and will notice the lower market price when it is their turn to renew the supply contract with their electricity supplier. The effect will be wider on the industry, benefiting 70% of the companies.

      The OCU estimates that the measure will reduce the average bill of customers subscribed to the regulated PVPC tarifffrom 100 euros to 85 euros, i.e. it would mean a saving of 15 euros but would remain at historically high levels. The vice-president for Ecological Transition has avoided, however, putting figures on the percentage of savings that consumers will achieve, pointing out only that the cost of the electricity market will go from an average of 210 euros per megawatt hour in the first quarter of the year to 130 euros after the application of this mechanism. To this amount will have to be added the compensation to gas plants for the difference between the political price set by the Government and the market price.

      The measure will reduce the price of gas used in electricity generation to a maximum of 40 euros per megawatt for six months, after which it will start to rise to an average of 48.8 euros over the one-year period during which this extraordinary mechanism is expected to remain active.

      The difference between this political price and the market price will have to be compensated by consumers. "Those who are benefiting will be contributing to the additional cost due to the introduction of the reference cost. In any case, there will be a net reduction for everyone," he explained.

      Ribera has limited himself to pointing out that it will mean a reduction in the extraordinary profits of the large electricity companies, which will charge much less for the electricity sold in their nuclear or hydroelectric power plants than the market prices. These claim that the production of these facilities is sold at a price much lower than that marked by the electricity market itself after the intervention, but the Government distrusts and forces them with the new rules to detail the prices at which they sell the final light to their customers.

      The ecological vice-president has charged hard against the companies because she understands that they have not contributed to solve the current energy price crisis and, in particular, she has assured to feel "embarrassment" for the words of the president of Iberdrola, Ignacio Sánchez Galán, in which he called "fools" to the customers who were still linked to the regulated tariff.


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