How will the gas price cap affect consumers?

The Government has approved this Friday the intervention of the electricity market to put a gas price limit which is used to produce electricity from 40 euros per megawatt-hour for six months, which will grow “month by month” by 5 euros per megawatt-hour thereafter until it reaches 70 euros per megawatt-hour. In this way, the price of electricity in the wholesale market It will stand at 130 euros per megawatt-hour, well below the 200 euros per megawatt-hour at which it has been installed in recent months, as reported by the Vice President and Minister for the Ecological Transition, Theresa Rivera.

Who benefits: Regulated consumers

The main beneficiaries of this mechanism will be the approximately 10 million users of the regulated market (37% of electricity consumers) and 70% of industrial consumers who go directly to buy electricity from the ‘pool’.

Although the First Vice President and Minister for the Ecological Transition, Theresa Riverahas ensured that users of the free marketas they renew their contracts because the marketers will have some reference prices cheaper (from the 210 euros in which the wholesale market has been installed in the first quarter of 2022, it goes to those 130 euros per megawatt-hour on average).

This will cause a invoice price reduction around 30% on average throughout the period for 37% of the domestic consumers with PVPC rate (10 million consumers) and for 70% of industrial consumers who go directly to buy their electricity from the so-called ‘pool’.

According to estimates based on data from the OMIE and the National Markets and Competition Commission (CNMC), in the first month with the limit in force at 40 euros, an average domestic user with a PVPC rate could pay half that in the bill for March, the month with the most expensive price in history.

When: Starting in June

Their entry into force it will produce the day after publication in the BOE that “in principle it will take place this Saturday”, as reported by Ribera. But this does not imply the immediate application of the measure, for which we will have to wait for the European Comission formally adopt the endorsement of the standard through the agreement of the college of commissioners “It is possible that the formal approval of the European Commission takes one week, ten days or two weeks“, Ribera has pointed out.

In addition, the electricity companies have 5 working days to present the details of the contracts with the clients and another 7 more days to adapt the systems. “The effective and last term will be the later of the twothose 12 days or the formal authorization of the European Commission”, explain ministerial sources. That is to say, at the earliest early June this measure cannot be applied.

Who bears the compensation: Consumers

The difference between the price of the limit (those 40 euros per megawatt-hour) and the real price of gas (at the moment almost 80 euros) will be assumed by electricity consumers through the retailers, mainly consumers of the regulated market (about 10 million) who will benefit from the price reduction in the first instance, as well as those users who go directly to the market to buy their supply or who have contracts indexed to the ‘pool’. Users of the free market with fixed-price contracts of less than one year, they will be incorporated into the mechanism as they have to renew their rates.

“For the first time they do not pay the same. A situation like this has usually been settled by the contribution of the State’s general budgets. Let’s think about the financial crisis, the real estate crisis… This time it is not like that”, Ribera defended. Users will be the ones to pay this compensation, but that amount will be less than what they would pay without the limit because they only have to pay for the gas used by the plants that burn natural gas, while now the rest of the plants (nuclear, hydraulic and renewable) are also paid at that price when the combined cycles mark the price. That is why the Government defends that the true The payers of this measure are the electricity companies that will have lower profits than expected, “which does not mean that they will go into losses.” net benefit to consumers will be positiveif it were not, there is a clause that allows governments to act,” clarify ministerial sources.

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