Spain and, to a lesser extent, Portugal, are in a hurry for the mechanism that limits the price of gas and coal to come into force. Brussels, on the other hand, looks closely at every step that is taken in this process. Three weeks after the two Iberian countries detailed in their official gazettes the measure with which they seek to lower the electricity bill, and after several promises from the Spanish Government —it will arrive “immediately”, the third vice president told this newspaper last Monday and Minister for the Ecological Transition, Teresa Ribera—, the European Commission has still not given the green light required for the measure to move from the land of promise to reality. Community sources explain that the notification arrived just over a week ago, in a few days full of holidays in Brussels, while in Madrid they maintain that it was sent the previous week.
A month has passed since the Hispano-Portuguese plan received preliminary approval from the Community Executive. But the definitive acquiescence of the technicians is still not materialized. And each day that passes is a lost day to reduce the pressure on households and companies and, ultimately, mitigate the rise in inflation: in May the CPI worsened again, climbing to 8.7%. The very structure of the Spanish market amplifies the impact on the pocketbook: the percentage of clients that are in the regulated market is greater and, unlike what happens in the neighboring country – in which the tariff of these households is linked to contracts futures—prices draw from the much more volatile spot market.
Futures remain confident that the measure will take effect soon, but the daily Iberian electricity market is going its own way. With exports to France at a maximum —to compensate for the nuclear break in the neighboring country—; the wind blowing little —less cheap supply—; foreign tourism returning to pre-pandemic normality and air conditioners starting to smoke —more demand—, the price of electricity has settled again in recent days above 200 euros per megawatt hour (MWh). The somewhat calmer weeks, thanks to the boost from renewables and lower consumption, have been left behind.
The Spanish Government trusts that, once approved, the mechanism will allow a reduction of 22% in the wholesale market and “between 15% and 20%” in the bill of those who are covered by a regulated rate (also known as PVPC). Portugal, for its part, calculates that, had the mechanism been in force, Portuguese consumers would have saved 18% on their bill since January.
He knows in depth all the sides of the coin.
In the hands of Vestager
Faced with the Iberian pressure, Brussels defends itself. The mandatory notifications, they point out in the Commission, arrived in the community capital a little over a week ago. And since then there have been two holidays (Thursday and Friday last week), two weekends and there will be another holiday next Monday. Both elements largely explain the delay in the final approval. The unprecedented absence of a limit on the price of fuel that feeds thermal power plants is another reason for the delay: all the paperwork starts from scratch.
The approval of the Community Executive, however, can come at any time. The administrative procedure in this case does not require the approval of the College of Commissioners – the equivalent of the Council of Ministers in the European sphere, which is usually held on Wednesdays – but, according to community sources, a “written procedure” is sufficient. In other words: as soon as the department headed by the almighty Margrethe Vestager concludes that everything is in order, the mechanism could come into force. An agile procedure that contrasts with the accumulated delays.
Both Madrid and Lisbon claim to have done everything possible to accommodate Brussels’ demands in their legislation. Even those —such as the impossibility of establishing a second auction at the border to avoid the sale of subsidized energy to France— that go against the interests of its consumers. Or those that, such as the reform of the regulated tariff or PVPC, will force the bill of 10 million households to be completely rewritten throughout 2023.
A formal difference in the Spanish and Portuguese processes, however, has contributed to sowing uncertainty about the measure, something that Brussels always rejects. The depth of the Madrid decree (63 pages full of details, technicalities and mathematical formulas only intelligible to experts in the field) contrasts with the synthesis applied by Lisbon, which opted for a much more concise text (7 pages that do not give rise to rhetoric). In this desire for simplification, some disparities arose with respect to its Spanish counterpart that raised doubts about a potential differential treatment of households and companies on both sides of the Iberian border.
Last week, the Portuguese Minister for the Environment and Climate Action, Duarte Cordeiro, denied the majority in a conversation with EL PAÍS: “Spanish and Portuguese consumers will be treated equally after the gas price limit,” he defended. Teresa Ribera’s counterpart blamed the reduced and general scope of the decree on the fact that part of the regulation will be developed by the Regulatory Entity of Energy Services (ERSE), the independent body that acts on the natural gas, electricity and fuel sectors in Portugal. “We have different regulatory construction processes. In our case, ERSE assumes part of the process, which is why the decrees have these differences. What matters is that in the end they are symmetrical and the application is identical”, he concluded. This Thursday, almost three weeks after the decree, the regulator published a final explanatory note on the mechanism.
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