Spain and Portugal may extend gas price cap until the end of the year

Spain and Portugal may extend their system for setting a maximum price for gas used to generate electricity until the end of this year. Spanish Minister for the Ecological Transition Teresa Ribera announced this today, saying that the governments of both countries had agreed on the move with the European Commission (EC). The two countries introduced the mechanism a year ago to protect their residents from a sharp rise in energy prices following Russia’s invasion of Ukraine, the EFE news agency reported.

The government mechanism applies to gas used to generate electricity. It sets a maximum price, with the government covering the difference between that price and the market price, thereby reducing generators’ production costs. Since gas-fired electricity has been the most expensive in recent months, lowering its price also has a positive impact on electricity prices from other sources.

The European Commission approved the mechanism in the spring of last year. Spain and Portugal said they form a highly integrated yet isolated energy market. “This instrument will protect Spanish and Portuguese consumers until the end of the year,” Ribera said.