The ‘Iberian exception’, a measure introduced to maintain low electricity prices in Spain and Portugal, has been extended until the end of the year by Brussels. The measure acted as an “insurance scheme” in the electricity market, which kept electricity bills low for households and companies by lowering wholesale market prices.
On Tuesday 25 April, the European Commission approved the extension until the end of 2023 with a slight alteration. A price cap of 55 euros was implemented, which would gradually increase to 65 euros in December.
Spain’s Minister for Ecological Transition, Teresa Ribera, described the extension as a “very important” step for the Spanish government. She said, “It is positive news that confirms and closes the circle that allows us to have this additional insurance system for Spanish and Portuguese electricity consumers.”
During winter, higher than expected temperatures allowed for a high level of gas reserves to be maintained at a European level, which helped to contain prices.
“If energy costs remained at current levels, the mechanism will most likely not be activated,” Ribera said in March. However, the European Commission’s approval provides Spanish and Portuguese consumers with an “additional safety net” against price surges.
The ‘Iberian exception’ was first introduced in June last year and capped the price of gas used to generate electricity at 40 euros per megawatt hour (MWh). This price was maintained for the first six months and then increased by five euros per month. Between April and December, the increase would be more gradual, at 1.1 euros per month.
The Spanish and Portuguese authorities financed the system using part of the profits from electricity trading between France and Spain, as well as a levy imposed on buyers benefiting from the measure.
Brussels stated that the ‘Iberian exception’ had led to total net savings of around €5 billion for Spain and Portugal.
