Finally, after months of waiting and lengthy negotiations, we can confirm that there is an agreement. Spain and Portugal will be able to apply the “Iberian exception” to reduce the cost of electricity.
The agreement enables the creation of a temporary mechanism that will cap the price of gas to an average of 50€/MWh (Megawatt Hour). In turn, this should show a welcomed reduction in our energy bills.
“This is an agreement that, on balance, is positive for consumers”, Spanish minister Teresa Ribera briefed following the meeting with members of the European Commission.
The agreement will come into force “immediately”, but first, as a decree, must be approved during the next Council of Ministers meeting taking place on 3rd May.
The decree is set to last for 12 months and throughout its duration, will limit the price of gas on the wholesale market.
Both Spain and Portugal describe themselves as an “energy Island”. Spain and Portugal have much less dependence on Russian gas than the rest of European market. The majority of their imports of gas are coming from African nations, primarily Algeria, and with such a high production of renewable energy within the two countries, had been fighting for a 30€/MWh price cap. But after long negotiations, the two have had to settle for the agreed 50€/ MWh.
“Our price was 30 euros/MWh, but it is a complex process and the fact that we have sought to extend it to cover all consumers, not only electricity, but also gas consumers, means that in the overall balance, the agreement is positive for consumers”, said Ribera.
What does this mean? Basically, the cost of electricity once the decree is approved will become less on the wholesale market, better prices at the wholesale market should equate to lower prices being offered by suppliers. With a 50€/MWh price cap, this in theory should translate to about a 40% reduction on the wholesale cost of electricity.
The lower prices should start to be seen from around mid-May and continue for as long as the decree is in place, currently set for a period of one year.
How will this be reflected on your bills? At this moment in time, Si Compare are unable to specify new rates or how quickly any suppliers will release new prices. However, with the wholesale price set to be reduced, we will be sending out another email once the decree is signed on 3rd May, and once better prices are available to advise of the best option going forward.
We look forward to further good news and sending you a follow up email in the coming days advising of the better prices as they become available.
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