Monday, July 4

The Government cuts in half the savings on the electricity bill with the cap on gas

The third vice president and minister for the Ecological Transition, Teresa Ribera, recognized this Wednesday at the Davos Forum (Switzerland) that the savings on the electricity bill with the Iberian limit on gas will be half of what had been initially calculated: around 15%, and not 30%, as expected. “It is a saving for everyone, it is not what we would have liked”, the minister has indicated.

The Government approves the cap on gas to lower the electricity bill

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In statements to TVE at the Davos Forum, Ribera defended that the mechanism agreed with Portugal and that is awaiting final approval from Brussels “produces very important savings, a benefit for all consumers. It may not be of the dimensions that we would have liked, and this has a lot to do with the price of gas, with the sequencing that we have agreed with the European Commission”, he pointed out.

Sources familiar with the process explain that it is very difficult to calculate the final impact that the measure may have. According to the different scenarios, the reduction reaches the 30% that was announced at the beginning.

But the final impact will depend on the real price of the raw material, on the consumer base that is benefiting at any given time (the more consumers, the cost is distributed among more agents), and because initially the incorporation of the fixed contracts as they expire, and that he asked to include Portugal.

And the same thing happens with industry: it is also very difficult to pinpoint its effect because it depends on what part of its consumption is indexed to the wholesale electricity market. These days, marketers are sending millions of contracts with detailed information on these conditions.

Ribera has indicated that he hopes that the approval of Brussels for the mechanism will be received in a matter of days. Ecological Transition trusts that it will be a mere formality, once the letter of agreement from Brussels has been received, for the college of commissioners to confirm that what has been approved corresponds to the legislation approved by the two countries. In the case of Portugal, the neighboring country has complemented its decree with a regulation from the sectoral regulator, ERSE, while Spain has not done so.

The vice president recalled this Wednesday that the system that has finally been approved will allow all consumers to be integrated, respecting the term for reviewing their contracts.

With this, he affirmed, everyone benefits, because otherwise these contracts would be revised with higher prices and it will not be like that, which gives “much more solvency” to the mechanism and supposes a “reinsurance” against the volatility of the price of gas caused by the war in Ukraine for the next year. This week, the European reference for this raw material (the TTF) has traded below the level prior to the invasion, but in the face of what may happen this autumn-winter, uncertainty is maximum.

The mechanism was approved by the Governments of Spain and Portugal on May 13. It set an average price of 48 euros MW/h during the 12 months of validity. Although it has already been published in the BOE, Brussels still needs to give the green light to the measure for it to come into force. Finally, the limit accepted by Brussels was much lower than the 30 euros/MWh that Spain and Portugal initially sought and that would have cut the bill “by half”, according to Ribera.

As estimated by the Government when it approved the Royal Decree-Law a few days ago, the mechanism would cause a drop of almost 40% in the wholesale price of electricity, down to around 130 euros/MWh on average, and the experts estimated savings of up to 30% on the customer’s invoice.

The mechanism will immediately affect consumers covered by the regulated rate, about 10 million households, and up to 70% of industrial ones. Users of the free market will notice it progressively. To give it its approval, Brussels has demanded that Spain reform the regulated rate to make it less volatile and not be directly indexed to the pool, as it is now.