MADRID (AP) — Spain and Portugal signed a temporary cap on natural gas prices on Friday, in a coordinated move described by Portugal’s environment minister as an “unprecedented” attempt to temper soaring prices. energy and inflation.
As energy prices rise in Europe, exacerbated by Russia’s War in UkraineSpain and Portugal joined forces earlier this year to ask the European Union executive to allow them to circumvent the bloc’s common market rules.
Citing the large amounts of renewable energy used in both countries and their weak connections with the European electricity grid, the European Commission agreed to allow a cap on gasoline prices used for electricity generation, on average around 50 euros ($52) per megawatt hour for the next 12 months.
The cap is expected to immediately reduce costs for a third of domestic consumers and 70% of industry, she added.
“For the first time, it’s not the usual people paying for this,” Ribera said. “The measures adopted are fundamentally aimed at reducing the extraordinary profits of energy companies so that this adjustment benefits us all.”
She did not provide further details on how the plan would be funded.
In Portugal, Duarte Cordeiro, the environment and climate action minister, said the measure would capitalize on “unexpected” bargains in the system to reduce prices.
“This is an unprecedented measure, a mechanism with a very clear set of objectives. First to stop price escalation, second to protect those most exposed and third to socialize costs and benefits.
The joint plan will now go to the European Commission to get the final green light, Ribera added, and is expected to come into full effect in the coming weeks.
Spanish energy companies have criticized the plan, fearing the new rules will distort the market. José Bogas, general manager of Endesa in Spain, said the price cap could lead to an increase in gas consumption.
“It’s the opposite of what’s expected,” he said on a conference call with analysts earlier this week.
In late April, after news broke that the European Commission was examining Spain and Portugal’s proposal, the CEO of Spanish electricity company Iberdrola, Ignacio Sánchez Galán, called on the EU to seek a solution instead. common. Speaking on a conference call with analysts, he described the idea of an exception for the Iberian Peninsula as “unjustified and contrary to the single market”.
Energy prices have been rising steadily in Spain since last year, said Ana Maria Jaller-Makarewicz, an analyst who focuses on Europe for the Institute of Energy Economics and Development. ‘financial analysis. “It’s one of the highest prices in Europe…they have to protect consumers.”
It remains to be seen how exactly the cap will impact energy prices or whether governments or companies will end up covering the costs of the cap, she added. “It depends on how they handle it now.”
AP journalist Helena Alves reported from Lisbon.
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