MADRID, Spain: In a coordinated move last week, Spain and Portugal approved a temporary cap on natural gas prices.
The move was described by Portugal's environment minister as an "unprecedented" bid to slow soaring energy prices and inflation.
As a result of energy prices surging across Europe following Russia's invasion of Ukraine, earlier this year Spain and Portugal joined forces to ask the European Union's executive arm to exempt them from the bloc's common-market rules.
The European Commission agreed to allow a price cap on gas used for power generation, averaging some $52 per megawatt-hour, for the next 12 months.
As Europe grapples with volatile energy prices that are driving record inflation, Spanish Minister for Ecological Transition Teresa Ribera said the measure would protect consumers and businesses, adding that the cap is expected to immediately reduce costs for one-third of domestic consumers and 70 percent of both nations' industries.
Portuguese minister for the environment and climate action Duarte Cordeiro said the measure would capitalize on "unexpected" windfalls in the system to reduce prices.
"This is an unprecedented measure, a mechanism with a set of very clear goals. Firstly to stop the escalation of prices, secondly to protect those who are more exposed and thirdly, to socialize the costs and benefits," he said.
However, Spanish energy companies have criticized the plan, citing concerns that the new rules will distort the market.
The cap on prices could result in an increase in gas consumption, said Jos Bogas, chief executive of Spain's Endesa, adding, "That is the opposite of what is intended."
After news broke that the European Commission was considering the proposal from Spain and Portugal in early April, Ignacio Snchez Galn, CEO of Spanish power utility Iberdrola, called for the EU to instead seek a common solution.
Ana Maria Jaller-Makarewicz, an analyst who focuses on Europe for the Institute for Energy Economics and Financial Analysis, said prices for energy have been steadily climbing in Spain since last year, adding, "It is one of the highest prices in Europe, they have to protect consumers."