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    Gas price cap cuts 25 euros off a skyrocketing bill


    June 20, 2022 - CE Noticias Financieras

     

      The average price of electricity for regulated tariff customers linked to the wholesale market rises 45.6% on Monday compared to Sunday, to 258.68 euros per megawatt hour (MWh). This increase comes after two consecutive days of decreases. This price for PVPC customers is the product of adding the average price of the auction in the wholesale market and the compensation to be paid by demand to combined cycle power plants for the application of the 'Iberian exception' to cap the price of gas for electricity generation. In the absence of the 'Iberian exception' mechanism to cap the price of gas for electricity generation, the price of electricity in Spain would have averaged around 283 euros/MWh, which is around 25 euros/MWh more than with the compensation for regulated tariff customers, who will thus pay 8.7% less on average.

      In the auction, the average price of electricity in the wholesale market - the so-called 'pool' - is 157.48 euros/MWh for Monday, which is 34.87 euros more than yesterday's price (122.61 euros/MWh), an increase of 28.4%, according to data from the Iberian Energy Market Operator (OMIE) collected by Europa Press. The maximum price of electricity for this June 20 will be recorded between 22.00 and 23.00 hours, with 197.91 euros/MWh, while the minimum for the day, of 110.44 euros/MWh, will be between 16.00 and 17.00 hours. To this pool price is added the compensation of 109.36 euros to the gas companies, compared to yesterday's 50.03 euros. This compensation has to be paid by the consumers who are beneficiaries of the measure, the consumers of the regulated tariff (PVPC) or those who, despite being in the free market, have an indexed tariff.

      These prices are being registered in a context marked these days by the heat wave and the high demand, with a very exceptional participation of gas plants in the generation. In fact, the demand for natural gas for electricity generation is breaking records these days and the price of gas has continued to increase as a result of the reduction of Russian supplies to the EU.

      The Iberian mechanism, which finally received the green light from Brussels last week, limits the price of gas for power generation to an average of 48.8 euros per MWh for a period of twelve months, thus covering the coming winter, a period when energy prices are more expensive. Specifically, the 'Iberian exception' sets a path for natural gas for electricity generation at a price of 40 euros/MWh in the initial six months, and thereafter, a monthly increase of five euros/MWh until the end of the measure.

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