The Government eliminates the €67 limit for electricity contracts and calls for a new escalation to the 'unreal' EU gas cap of €180

The year 2024 will begin without national safeguards in the face of a new uncontrolled increase in energy prices. After giving up on requesting a new extension of the Iberian mechanism that Brussels would not have authorized, this Wednesday the Government dropped another limit, which prohibited charging more than 67 euros/Mwh in electricity contracts, which since 2021 had thus reduced profits. extraordinary payments from the electricity companies, which assumed the difference with the real price. Without an extension, this measure will expire on December 31 and only the 180 euro cap on gas prices throughout the EU will remain in place, which has never been activated because it was too high.

The continuity of the so-called reduction in profits of electricity companies was one of the unknowns in the face of the new anti-crisis decree that the Government approved this Wednesday, in which it began to withdraw some, such as VAT on electricity and gas, as requested months ago by the European Commission and supported by the fact that the energy prices that gave rise to them are stabilized and close to normal. The text published this Thursday in the BOE does not contemplate an extension of this instrument.

The cap of 67 euros per megawatt hour at which electricity companies could charge for electricity in their contracts with consumers will disappear on December 31, more than two years after its creation in October 2021, to try to get electricity companies to contribute part of their enormous benefits to reduce the cost of electricity, which at the gates of the Russian attack in Ukraine had already been at levels much higher than normal for months. At first, this limit of 67 euros was applied only to new contracts but was extended to all, including those that were renewed, in March 2022, when the energy price crisis was already more than a reality.

As has happened with each Government measure to intervene in energy prices, the electricity sector has been very critical of this cap, which it considered the most restrictive of the others that existed in Europe and, despite this, the possibility that the Government would choose to extend it.

Too high a ceiling

This has not been the case, nor will it happen with the Iberian mechanism, which has not been activated since February of this year because the price of gas in the market has not exceeded the set limit since then.. Even so, the Government defended it as a “safety net” in case prices went out of control again but finally gave up asking for a second extension because the European Commission made it clear that it would not approve it beyond December, at a time when The price of gas in the Iberian market is around 33-34 euros/MWh, almost half of the ceiling of 65 euros set for this last month of existence.

According to Commission sources, if the Government wishes from now on to subsidize the generation of electricity with natural gas again – which is what, in the end, the Iberian mechanism has been, which thus managed to decouple its more expensive price, than other cheaper technologies – could turn to it to request state aid according to European regulation.

Thus, with the end of the Iberian mechanism and the cap of 67 euros/Mwh for electricity contracts, the only instrument that remains 'alive' for Spain to contain the price of electricity if it were to skyrocket again would be the cap of 180 euros/Mwh for the gas price that the EU agreed on last year and that a few weeks ago decided to extend until June 2024. It was a minimum agreement that managed to overcome the pressures against Germany but was born useless.. Although in the summer of 2022 gas rose to between 200 and close to 300 euros/Mwh hours, these prices are something that will hardly be seen again and, to date, 180 euros has not been seen either, so this cap – already much higher than normal or acceptable gas prices – has not been activated even once.

Fuel discount and local TUR

On the other hand, and as expected, the Government has decided not to extend beyond 2023 the discount for gasoline or diesel, which began at 20 cents per liter for all drivers in April 2022 and which, as the over the months and the drop in fuel prices, it became increasingly residual.

In December of last year it was limited only to transporters and agricultural workers, which later became 10 cents and in its last modification, in January 2023, the discount was reduced to 5 cents per liter only for these professional groups.

The decree of urgent measures approved this Wednesday does not contemplate it, so its validity will expire at the end of the year.

What is extended is the regulated gas rate for neighborhood communities with central heating (TUR4), for which an expense of 300 million is expected.. Although with one exception: the communities that on October 1 had not fulfilled the obligation to install individual meters or sent the responsible declaration that was established in exchange for accessing this more advantageous rate will not be able to continue benefiting from the TUR4 in 2024.

Those that did not do so on that date were already paying a surcharge of 25% of their gas consumption in November and December before moving to the free market in January, something that communities that completed the process on time and want to continue will be able to avoid. with the regulated rate. According to the decree, they have until January 15, 2024 to terminate “without penalty” their new gas contracts with free marketers that they had signed before knowing that the TUR4 would be extended.

The Government gives a new opportunity to neighborhood communities to install individual meters or cost allocators: those that take advantage of this extension and did not have them installed on October 1, 2023 will have to do so before October 1, 2024. Otherwise, a charge of 25% of the cost of all the gas consumed since they signed up for TUR4 will be applied.