Spain and Portugal have reached an agreement with the European Commission to cap the price of natural gas used to produce electricity at 40 euros per megawatt-hour initially and 50 euros on average throughout the year-long implementation period. Pending further details on the measure, this means that from its implementation, consumers in the regulated market will pay at least half for their electricity bill compared to what they paid in March, which ended as the most expensive in history after the skyrocketing increase in gas prices due to the war in Ukraine.
In the third month of this year, the price of electricity in the wholesale market averaged 283.30 euros per megawatt-hour, while in the first 26 days of April it was 188 euros, a difference of 33%. Once the Government implements the cap on gas prices (which is expected to be done in May), the wholesale market could have an imaginary cap of around 130 euros per megawatt-hour, approximately. This is 54% lower than the average price in March.
According to the National Markets and Competition Commission’s simulator, a consumer with a peak and off-peak power of 3.5 kilowatts (kW) and a consumption of 178 kWh (52 kWh in peak, 43 kWh in flat and 83 kWh at off-peak) paid around 61 euros for his bill in March, 41% more than in April (105 euros). That is, the difference in the price of the bill is higher than the difference in the price of electricity on the wholesale market. According to this, therefore, in a hypothetical month in which the wholesale market price was on average 130 euros per megawatt-hour, the bill for this consumer would be more than 54% lower than in March.
Electricity bills to be halved
On the other hand, according to preliminary calculations by energy expert Francisco Valverde, if the new cap was to be applied from the beginning of May, the bill for that month for a typical consumer with a contracted power of 4.4 kW and a consumption of 3,500 kW/h would be around 65 euros, 55% lower than in March, when he would have paid 144.3 euros.
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