Spain, Portugal to approve gas price cap on Tuesday, PM Costa says

LISBON (Reuters) -The governments of Portugal and Spain will decree on Tuesday the introduction of a Brussels-backed temporary cap on reference prices of natural gas and coal used by power plants, Portuguese Prime Minister Antonio Costa said on Monday.

The European Commission agreed two weeks ago to allow the Iberian nations to initially cap prices at 40 euros per megawatt-hour, with the price limit projected to average out at 50 euros over the coming 12 months.

European countries are struggling to manage surging gas and power prices, pushed higher by Russia’s invasion of Ukraine, and to cushion their impact on consumers’ spending power.

Spain and Portugal had convinced Brussels they should be allowed to manage their own electricity prices, which are often set by expensive fossil fuel even though Iberia has large amounts of renewable power and little interconnection with the rest of Europe.Costa said that after poring over the technical details, the Commission on Monday gave the final go-ahead to the plan “in order to avoid the contamination of the electricity price by the gas price increase”.

“Spain’s Cabinet usually meets on Tuesdays and we are going to hold an extraordinary Cabinet meeting for the measure to come into effect simultaneously throughout the Iberian Peninsula,” Costa told reporters in Strasbourg.

A European Commission spokesperson said it had given a preliminary assessment of a draft technical measure for the scheme and was awaiting further information.

“The Commission’s main objective is to come to legally solid decisions as soon as possible,” the spokesperson said, adding that it would seek to ensure the measures do not negatively affect trading conditions.

Spain will present a piece of legislation setting out the details of how the proposal will work as soon as possible, and potentially as early as Tuesday, a spokesperson for Spain’s representation to the European Union said.

The measure limits the price of gas purchased by thermal plants, including gas plants, co-generation sites and coal plants, and is designed to preserve the integrity of the EU energy market and maintain incentives to shift to cleaner energy.

(Reporting by Sergio Goncalves and Patricia Vicente Rua; additional reporting by Kate Abnett; editing by Andrei Khalip, Ed Osmond, Hugh Lawson and Paul Simao)