Portugal and Spain propose to cap the price of gas for electricity production at 30 euros/MWh


Spain’s Minister for Ecological Transition and Demographic Challenge Teresa Ribera attends an emergency meeting to discuss the energy situation in Europe amid the Russian invasion of Ukraine, in Brussels, Belgium February 28, 2022. REUTERS/Yves Heman

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MADRID, March 31 (Reuters) – Spain and Portugal have offered Brussels to cap the price of natural gas and coal to power power plants at 30 euros per megawatt hour (MWh), Spain’s energy minister said on Thursday. ‘Energy, Teresa Ribera.

European Union leaders at a summit last week gave Spain and Portugal special permission to manage their own electricity prices and Iberian nations spelled out details of how the price should be fixed.

In Spain, the cap is part of a larger package of 16 billion euros ($17.73 billion) of direct aid and subsidized loans to help businesses and households cope with price l exorbitant energy sources that drive up inflation and stoke social discontent. Read more

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“We have proposed the cheapest gas price at which we think this adjustment should be made, 30 euros per MWh,” Ribera told reporters, ending speculation that the cap would be closer to 50 euros.

The proposal is a starting point for talks with the European Union, Ribera said.

The prices at which Spanish and Portuguese producers sell electricity on the regional wholesale market (MIBEL) are determined by the highest marginal cost of production, which is currently that of gas-fired and coal-fired power plants.

By limiting the price of fuel for these plants, Spain and Portugal hope to reduce energy bills, which were already rising as global economies rebounded from the COVID-19 pandemic and were exacerbated by the Russian invasion of the Ukraine.

Data from Spanish gas market operator Mibgas showed gas was trading at 112.46 euros per MWh on Thursday, down from just 18.10 euros on the same day a year ago.

During the year 2021, which, according to the operator, was marked by high volatility, prices fluctuated between 14.92 euros per megawatt hour and 183 euros.

Portuguese newspaper Publico, which first announced the cap, said the measure would be temporary and that the 30 euros per MWh would be considered “a ‘normal’ price for pre-crisis periods”.

($1 = 0.9023 euros)

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Reporting by Inti Landauro, Emma Pinedo and Sergio Goncalves; Editing by Nathan Allen, Elaine Hardcastle and Mark Porter

Our standards: The Thomson Reuters Trust Principles.

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