THE European Union has agreed to extend a price cap set on natural gas used for power generation in Spain and Portugal until December 31.

The so-called Iberian exemption began in the spring of 2022 after the two countries reached a deal with the European Commission in which fossil fuel plants’ power costs are subsidised in a bid to bring down rising electricity prices.

The governments pay the difference between the cap and the market price, which jumped following the Russian invasion of Ukraine, with the current exemption set to end on May 31.

The extension though is now largely symbolic, as gas prices have fallen sharply in the wholesale market, meaning the measure is acting more as an insurance policy in case of a shock price hike.

Speaking in Brussels on Tuesday, Ecological Transition minister, Teresa Ribera, said:

“It’s good news as we have a tool to continue protecting Spanish and Portuguese consumers until the end of the year.”

“If natural gas is maintained at current prices, the mechanism will probably not be activated, but if it rose again we would be able to keep electricity at a reasonable price and not so dependent on gas,” she added.

The gas price will be capped at an average of €55 per megawatt-hour, rising to €65 by the end of the year.

The €65 figure is the same level of natural gas price that would have been reached this May if the exemption had not been introduced.

Back in January, Teresa Ribera said the government wanted to extend the price cap until the end of 2024 and set the cap at up to €50 per megawatt-hour.

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