The Government approved this Friday the mechanism agreed with Brussels that should lower the electricity bill from June: cap the price of gas used to produce electricity. It is the fruit of the call “Iberian exception”, with which Spain and Portugal convinced the Commission that their low dependence on Russian gas allowed them to intervene in the market outside their European partners. With this mechanism, which limits a price of 40 euros per megawatt hour (MWh) in the first six months, and which will gradually rise to 70 euros per MWh within a year, the Executive states that consumers (first, those with the regulated and later, the rest) will note the results on their receipts. A solution that pretends to be quick, but that is also temporary and halfbecause the energy crisis in Europe (not only Spain, although it pretends to be an “island”) is much more complex.

Fixing the price of gas is the last response of the Spanish Executive to stop the rise in the electricity bill. Before, it had already cut the regulated part of the electricity bill, lowering taxes, which has had a relative effect, because it has been absorbed by the unstoppable rise in gas prices, which in the current marginalist system is what sets the price for that all electricity is paid for (even if it is only used by combined cycle plants and the other sources used are cheaper). By limiting the price of gas, the extra cost in other plants (hydroelectric, nuclear and renewable) is avoided. It is estimated that this could lower what consumers pay by 30%. Assuming there is no geopolitical upheaval, for example, that the war escalates and Russia decides to cut off all the gas it supplies to the EU. Now it seems very unlikely, but so far it has already done so with the gas pipeline through Poland. And the Kremlin’s reaction to Finland’s rapprochement with NATO remains to be seen.

Trending on Canadian News  Old-growth activists dump manure at BC premier's office

It is logical that the consumer welcomes any discount on the bill. The risk is that the practical result is not the expected one. We have seen it with fuel prices, which continue to rise despite the subsidy of 20 cents per liter. Vice President Nadia Calviño has commissioned Competition to study whether operators are not transferring that bonus to customers. There are other fringes in the measure approved this Friday. For example, what will happen to the gas that is exported to other countries, such as France, since it will also be subsidized by Spain. Also the way in which the gas plants will be compensated, since it will be the clients of the regulated tariff who will assume the difference in their bills (although Minister Teresa Ribera assures that in the final sum they will end up paying less). And finally, how will it be said PVPC regulated rate (Voluntary price for small consumers), because Brussels demands a reform of this rate from 2023. It is expected to be more stable, but the fine print is missing.

Analysts forecast that the biggest problems will come after the summerwhen energy demand grows, if by then Europe has not found alternatives to Siberian gas. United States, Qatar and Algeria they can expand their supply, but the infrastructures are not ready and, furthermore, some of these countries could exert pressure to benefit their interests. That Spain limits the price of gas for a year solves a specific problem, but it is nothing more than that, a patch. The definitive answer must come through a joint strategy of the European Union.

Trending on Canadian News  Peso is appreciated in the market attentive to Powell's appearance


Leave a Reply

Your email address will not be published.