Power exchanges urge Spain and Portugal not to act alone on electricity prices

People work at the Enagas liquefied natural gas (LNG) terminal at Zona Franca in Barcelona, ​​Spain, March 29, 2022. REUTERS/Albert Gea

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MADRID, April 25 (Reuters) – Electricity exchanges are urging the Spanish government not to intervene alone in the system that sets the price of electricity, in its bid to bring down sky-high utility bills, according to a letter seen by Reuters.

European countries are scrambling to agree on ways to handle soaring gas and electricity prices, pushed up by Russia’s invasion of Ukraine, which is eroding purchasing power people across the block. Read more

Spain and Portugal received permission in March to take their own temporary measures to contain prices. Neighbors have been working on ways to limit the impact of expensive gas, which often sets the overall price of the electricity system. Read more

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Spain’s Energy and Environment Minister Teresa Ribera said the easiest option is to cap the price at which gas-fired power plants can sell their electricity on the market. Portuguese Environment Minister Jose Duarte said last week that details were still being negotiated. Read more

In response to these discussions, the Spanish derivatives exchange MEFF and the clearing house BME Clearing, as well as their Portuguese counterparts OMIP and OMIClear wrote to the Spanish Secretary of State for Energy to express their concerns.

“In our view, potential regulatory intervention that affects the pricing mechanism of the underlying asset, as an administrative action unrelated to actual market conditions, and that deviates from the pricing model which is common across Europe, would generate a high risk of regulatory uncertainty,” they said in the letter dated April 22.

Any changes must be made “in harmony with the rest of the EU”, the letter says.

The Spanish association of electricity suppliers AELEC – made up of electricity companies EDP (EDP.LS), Endesa (ELE.MC), Iberdrola (IBE.MC) and Viesgo – has also expressed concerns about possible unintended consequences. any mechanism to create a benchmark price for gas used to generate electricity, in a letter to European officials dated April 8 and seen by Reuters.

AELEC said such a mechanism would cost more than it saves and suggested it would even encourage the use of gas.

The group said its members were not consulted and based their comments on leaked documents as there had been no official communication from Spanish or Portuguese authorities at the time.

Ribera and Duarte will meet EU antitrust chief Margrethe Vestager in Brussels on Tuesday to discuss their joint proposal and work out the details of the Iberian mechanism, Ribera’s ministry said.

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Reporting by Isla Binnie; Editing by Marguerita Choy

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