Electricity prices to drop by 22.6% after ‘Iberian exception’ comes into force

Electricity prices to drop by 22.6% after ‘Iberian exception’ comes into force

Together with the adjustment costs to be paid by beneficiary consumers, the average final price for this Wednesday will be over €224/MWh.

“Iberian Exception” has “On Mode” activated. The average electricity price in the wholesale market on Wednesday will drop by 22.6% from Tuesday, the first day that the mechanism implements a price cap for natural gas power generation.

Specifically, the average electricity price this Wednesday was €165.59/ MWh, €48 lower than today’s price (€214.05/ MWh) and the lowest since May 29 last year.

However, in the afternoon update, adding the adjusted costs that consumers who benefit from the measure will have to pay will average €59.3 tomorrow, so the average final price this Wednesday will be over €224/MWh, as Iberia As a source at the Electricity Market Operator (OMIE) explained to Efe.

According to the same source, the increase in electricity prices was due to pricing that occurred on Monday, before gas restrictions took effect in the wholesale market.

Even so, for consumers whose bills are indexed to the “pool”, the final price tomorrow is about 6% lower than what was recorded if no such mechanism was available, at around €237/MWh.

The mechanism, which was finally approved by Brussels last week, caps the price of natural gas for power generation to an average of 48.8 euros per megawatt-hour for 12 months, thus covering the coming winter, a period when energy prices are more expensive.

The most expensive and cheapest time
The highest electricity price on 15 June this year will be registered between 01:00 and 02:00 at 194.07 EUR/MWh, while the lowest electricity price of the day will be 144.17 EUR/MWh and will be registered between 16:00 and 5:00: At 00:00 pm this way, there will be no periods of more than 200 EUR/MWh throughout the day.

​Air cap path
Specifically, the “Iberian exception” sets the stage for gas to generate electricity at €40/MWh for the first six months, while Mibgas offers gas at around €80/MWh, with subsequent monthly increases of €5/MWh MWh until the end of the measure.

According to the government’s accompanying impact report, the government calculated a 15.3% reduction in the average electricity consumer covered by the PVPC-mandated rate within 12 months of applying the approved natural gas generation cap. decree.

For industrial consumers who are fully affected by “spot” prices, the government estimates the drop to be between 18% and 20%, with fluctuations between 15% and 17% in the first month of the mechanism and between 13% and 15% in the end.​

Electricity bills are still 82% more expensive than they were a year ago
However, despite the significant drop in the “pool”, the average electricity price this Wednesday will be 82% more expensive than the 90.95 EUR/MWh on 15 June 2021 compared to a year ago.

The price of the “pool” directly affects the regulated rate – the so-called PVPC – which covers nearly 11 million households in the country and serves as a reference for the other 17 million households who have signed supply contracts in the free market.

In fact, the National Market and Competition Commission (CNMC) has confirmed that in 2021, within the framework of an energy spiral, about 1.25 million people will switch from PVPC to fixed-price free market rates.

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