Spain extends gas price cap amid fears of total Russian gas cut-off

Spanish Prime Minister Pedro Sanchez attends a news conference with Colombian President Gustavo Petro, in Bogota, Colombia August 24, 2022. REUTERS/Luisa Gonzalez

MADRID, Sept 6 (Reuters) - Spain will extend a gas price cap to power plants linked to heavy industry amid fears Russia could cut off all gas supply to Europe by land or sea, Spanish Prime Minister Pedro Sanchez said on Tuesday.

Sanchez said the government will temporarily change power market regulations relating to the use of heat from industrial processes such as producing tiles, concrete, or fertilisers.

"We will make an exception for big (gas) users so that they are temporarily covered by the Iberian mechanism," he said during a speech in Senate, referring to an agreement with the European Union that allows Spain and Portugal to subsidise the cost of natural gas in power generation. read more

Sanchez said the cap on gas prices used for electricity generation had already saved Spanish households two billion euros since mid-June.

He expressed pride in the fact that European Union energy ministers will on Friday debate introducing the same measure across the bloc as part of a range of options to rein in soaring energy prices. read more

In Spain, those prices have caught out companies in energy-intensive businesses who now have to choose between selling their products below cost price or scaling back and reducing production. read more

The lobby for the companies concerned, Acogen, said the measure could facilitate the opening of 400 idle factories and allow them to compete "on a level playing field".

RBC Capital Markets analyst Fernando Garcia said the announcement was "good news for industrial activity in Spain."

"These plants are linked to industrial processes and are much more efficient than combined cycle gas plants," he said.

The measure to help them was announced in a special appearance by the Spanish Prime Minister in the Senate to outline energy saving measures approved by the government and hold a first debate with the new centre-right opposition leader, Alberto Nuñez Feijoo.

The People's Party leader - who replaced Pablo Casado in April after an internal scandal - is climbing in popularity according to the polls and the PP has staunchly opposed as "superficial" the government's energy-saving measures.

Feijoo called on Sanchez to delay the phasing out of Spain's nuclear power plants, and extend measures to support struggling businesses, such as via a reduced value-added tax.

Reporting by Belen Carreno, Inti Landauro, Christina Thykjaer and Isla Binnie. Writing by Emma Pinedo; Editing by Alex Richardson, Alistair Bell and Bernadette Baum

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