The Government will approve today to expand the Iberian mechanism to make electricity cheaper

The Council of Ministers will approve today the extension until December 31 of the so-called Iberian mechanism, the instrument agreed with the European Commission and Portugal to cushion the impact of the price of gas on the electricity bill and which began operating on June 15 2022 for an initial period of 12 months.

Oliver Thansan
Oliver Thansan
28 March 2023 Tuesday 01:25
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The Government will approve today to expand the Iberian mechanism to make electricity cheaper

The Council of Ministers will approve today the extension until December 31 of the so-called Iberian mechanism, the instrument agreed with the European Commission and Portugal to cushion the impact of the price of gas on the electricity bill and which began operating on June 15 2022 for an initial period of 12 months. Although the College of European Commissioners must give its formal approval to the measure in the coming days, the Government has received confirmation of its "support" for the petition, explained the Vice President and Minister for the Ecological Transition, Teresa Ribera, in Brussels.

The Iberian exception "has been notified, the issue has been worked on and closed and today it will go to the Council of Ministers," Ribera announced upon arrival at the meeting of European energy ministers. "What we have is a tool that allows us to continue protecting Spanish and Portuguese consumers until the end of the year. If natural gas remains at current prices, the mechanism will probably not be activated" but "if it were to go up again, it would allow the price of electricity at a "reasonable" level.

The mechanism, in its current form, limits the price of gas for electricity generation to an average of 48.8 euros per MWh, 40 euros/MWh in the initial six months to 55 euros/MWh in the final 12-month period. . The 55 euros/MWh is the figure that will be taken as a reference in the extension and that will rise to 65 euros/MWh, a "smooth" curve, the vice president has insisted, of an additional two euros per month.

Vice President Ribera and the Portuguese Minister for the Environment and Climate Action, José Duarte Cordeiro, met at the beginning of January in Brussels with the Head of Competition of the Energy Commission, Margrethe Vestager, to request the extension of the Iberian solution. The desire of both countries was to achieve a one-year extension, but already at that meeting Vestager told them that with the current framework, the adoption of exceptional measures is limited until December 31. Technically, it is not a new measure but rather an extension of the one approved in 2022.

The Government calculates that, since its implementation, this price intervention instrument has saved some 5,100 million euros for Spanish consumers since its implementation. The mechanism, in its current form, limits the price of gas for electricity generation to an average of €48.8 per MWh (€40/MWh in the initial six months to €55/MWh at the end of the 12-month period). .

Its impact has therefore been greater the higher the price of gas has been and less in recent times, when it has only been activated intermittently, since in recent months it has become considerably cheaper and although it is trading above the recent historical average it is far from the peaks of recent times.