Spain seeks EU permission to adjust power price mechanism: report

Spain's government is planning to seek permission from the European Union to set its own power prices outside the internal energy market system as it looks to offset the impact of bullish gas prices, Spanish newspaper El Pais reported Oct. 26, citing a government position paper.

Spain "believes the way the electric, gas and CO2 emission markets function needs to be reviewed and analyzed," Spanish State Secretary for Energy Sara Aagesen Munoz said prior to a meeting Oct. 26 of the EU's Transport, Telecommunications and Energy Council.

"We need extraordinary solutions for the extraordinary context," she said.

Besides accommodating inframarginal prices, the proposal included a gas price cap in the market, the Secretary said.

The document proposes a new methodology to de-link the final energy price from high gas prices by using a median price which also references clean inframarginal technologies, such as renewables, El Pais said.

Use of inframarginal prices to help set final prices is a departure from the current internal market design, in which the most expensive marginal unit sets the price for the whole generation stack.

The Ministry was not available for immediate comment Oct. 26.

The change from a marginal price system would be directly linked to the national production mix, protecting consumers from excessive volatility, the report said.

On Oct. 25 nine EU Member States, including Germany, signed a letter rejecting the need for modifications to Europe's wholesale power market design.

Two more member states, Sweden and Belgium, backed the joint statement, Luxembourg's Minister for Energy and Spatial Planning, Claude Turmes, said Oct. 26 ahead of the ministerial meeting.

Spain and Portugal needed more interconnection, while Spain needed to look at how its regulated tariffs were calculated, Turmes said.

"Why has Portugal much lower retail prices than Spain? In Spain, consumer prices are linked too closely to the spot power market. Portugal has a better system, bringing back revenues from renewables to consumers via Contracts for Difference," he said.