The Ministry of Ecological Transition is finalizing a temporary reform of the electricity market to try to contain the runaway prices of electricity. The measure, announced for this coming Tuesday, will be delayed for several weeks, as the vice-president herself, Teresa Ribera, has recognized, until it manages to pass the examination of the European Commission. An extreme that, predictably, will not be achieved until the report on the wholesale market of European regulators (ACER) is known in detail.
Brussels wants to closely monitor the package of measures that Spain and Portugal are willing to adopt after the clash caused by Royal Decree 17/2021 and which caused a sharp drop in electricity companies on the stock market and a harsh letter of protest from the Community Executive to Spanish government after receiving strong complaints from investors.
After the European Council held last Thursday and Friday, Spain managed to start after a strong insistence from the Prime Minister, Pedro Sánchez, the inclusion of a brief comment in the final declaration in which he assured that “national circumstances and the mix of the member states will be taken into account”.
This simple declaration, together with the subsequent clarification by the President of the European Commission, Úrsula von der Leyen, that there would be an additional consideration with the Iberian Peninsula was enough for the Spanish Government to consider it a great victory after having carried out a extensive European tour that only served to verify what was already known: Europe does not want to modify the wholesale electricity market.
This coming April, the regulatory body Acer will release its definitive report on the functioning of the electricity market and it is expected that it will continue to defend its commitment to the marginal market, although everything indicates that some recommendations will be included for improve its operation in the medium term with bilateral contracts in both directions (consumers and generators) or the use of an aggregator model to be able to protect customers against high price volatility.
The European Commission has accepted the position of the Spanish Government that the negligible level of interconnections prevents being able to benefit from the advantages of a marginal market and, for this reason, it is willing to take into consideration some additional and temporary measures that Spain may propose provided they do not affect the functioning of the single market.
According to sources consulted by this newspaper, Spain and Portugal will propose setting a price limit for combined cycle offers in the electricity market. This limit, which could be around 180 euros (at a rate of 100 euros for gas), will entail the obligation to compensate for the cost of gas not covered, since otherwise the gas plants would not offer on the market and would go to the restrictions to operate.
The measure would mean an automatic lowering of the electricity rate for customers who are in the regulated market (PVPC) – from which nearly 1.2 million customers have fled over the past year – and for those industrialists who go to the market spot. In the medium term, it would also mean a reduction in offers on the free market, which since January have begun to reflect the strong rises in the wholesale market.
To deal with this cost, the proposal on the table proposes two options. On the one hand, that the calculation of the Recore semi-period be brought forward -only for renewables and leaving cogeneration out- in order to have around 3,900 million with which to face said cost or, the most likely option, that these amounts are prorated among all the hourly periods, giving rise to a second hourly marginal price that would be the definitive one but that would have allowed the so-called ‘windfall profits’ of the rest of the technologies to be eliminated.
To prevent this measure from involving financing by Spanish and Portuguese consumers of electricity that could be exported to France or Morocco, exports would be made at the latter price, which takes into account the price of gas.
In the case of carrying out the second option, the Government could also approve a reduction in charges or allocate part of the Recore money to support industrial consumers.
Meanwhile, this coming Tuesday it is expected that the Council of Ministers may extend some of the measures that are already in force, such as those corresponding to the minimum vital supply or the intervention in the natural gas rate for domestic consumers.
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