Spain and Portugal to propose EU cap of 180 eur/MWh on energy prices

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MADRID/LISBON, March 17 (Reuters) - Spain and Portugal will propose limiting wholesale electricity prices to 180 euros per megawatt hour (MWh) in the European Union to tackle a record-breaking surge in energy prices.

Governments across Europe have scrambled to cushion the effect on consumers of gas prices that have rocketed amid concerns over supply disruptions after Russia, Europe's top gas supplier, invaded Ukraine.

"We are working on a European response to lower energy prices," Spanish Energy and Environment Minister Teresa Ribera told Onda Cero radio on Thursday, adding that Spain would take its own measures if the EU did not reach an agreement at the next EU summit on March 24-25.

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Portugal's Environment Minister Joao Matos Fernandes told Reuters the proposal would be finalised on Friday but it would only be discussed at the summit.

With the new joint proposal, Spain and Portugal wish to reinstate the limit of 180 euros/MWh in the electricity "spot" market they were forced to eliminate in 2019 when the EU decided to remove curbs on energy prices across Europe.

"Until two years ago, the maximum price of 180 euros per MWh seemed like a fantasy that would never be reached, and today it has been largely surpassed," Ribera said. "There is little argument that this should be the maximum we should accept in our market."

Earlier this week, Matos Fernandes said combined-cycle natural gas plants, where the cost per MWh is more than 180, would be paid the difference from the European Compensation Fund under the proposal.

He told Reuters on Thursday the program could also be funded through the countries' electricity tariff deficit if no deal is reached on EU-wide funding.

He said the proposal would allow Portugal and Spain to save up to 5.7 billion euros ($6.30 billion) every month.

"The wholesale electricity market is strongly pressured by the price of natural gas, which is registering maximum prices never seen before," Matos Fernandes said on Tuesday. He argued that without the cap "irreversible harmful effects" could impact Europe's industries and families.

Matos Fernandes told Reuters he was still not sure if other EU countries would back the plan, but argued that it was crucial for them to do so.

"This cap is a way to protect the current electricity tariff and avoid an increase in electricity's inflation, which is unnecessary and damaging," he said.

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Reporting by Christina Thykjaer in Madrid and Catarina Demony and Sergio Goncalves in Lisbon, editing by Mark Heinrich and Tim Ahmann

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