The extraordinary governing council will approve the cap on gas price in a few hours. The measure with which Moncloa will reduce the price of electricity is 202.99 euros/MWh this Friday. The rule has gone through a long administrative journey forcing the executive to delay its implementation by up to two times. These are the keys to measurement.
How much will the cost of electricity be?
Most experts advised that the implementation of the measure would reduce the pool to 130–150 EUR/MWh. In other words, gas contamination would be limited during the twelve months the measure was in force.
Who will benefit from stocking?
For consumers falling under regulated rate. At the end of 2021, more than ten million Spanish homes paid for electricity which marks the daily market. They are the ones who have endured the historic rise in prices in recent months. Specifically, it accounts for 40% of Spanish domestic consumers and 80% of the industry.
Out of measure 19.8 million users are covered by the free market. Those who maintain a fixed price that can be reviewed annually have escaped the market volatility of the previous year and, moreover, benefited from government-approved tax cuts to reduce electricity costs.
Who will pay the cost of the remedy?
By limiting the price of gas, there is a mismatch between the cap and the actual price. The Minister for Ecological Transitions, Teresa Ribera, confirmed that this cost “will be borne by energy consumers.” In addition, the measure will be financed through the reduction of “extraordinary benefits to power companies that use other technologies (hydraulic or nuclear) that have not been affected.” In any case, these companies are expected to make an impact on their customers.
Most likely, all users will bear the cost. Both those who are set to benefit (regulated rates) and those who have enjoyed fixed prices during the energy crisis, have already started a massive increase in their annual contracts.
In the end, there will be only one auction that will reduce the pool price for everyone. Both for Spanish consumers and for the countries to which Spain sells internally generated electricity on a daily basis. France, and to a lesser extent Morocco, would benefit from the capped price of Spanish electricity. The government has not anticipated how it would prevent this from happening.
Cap on gas for the entire EU?
By extension, Brussels is studying the implementation of the measure at the community level. The index which includes the rest of the European countries is different from Iberian. According to the economic newspaper – which cites sources in the region – the proposal will be analyzed by the European Council at the end of May.
How does the government-approved gas price cap affect you today?