MADRID: The European Union has agreed to extend a price cap set on natural gas used for power generation in Spain and Portugal until Dec. 31, Spanish Energy Minister Teresa Ribera said on Tuesday.

“This tool allows to keep protecting Spanish and Portuguese consumers until the end of the year,” Ribera told reporters in Brussels.

The Commission still needs to make the decision official but has issued an explicit support, she said.

“The agreement enables the extension of this temporary mechanism that will cap the gas price at an average of 55 euros ($59.48) per megawatt-hour to 65 euros per megawatt-hour,” an Energy Ministry spokesperson said.

The so-called Iberian mechanism, in place in Spain and Portugal after the countries reached a deal with the European Commission in the spring of 2022, is a joint scheme through which fossil fuel plants’ power costs are subsidised in a bid to bring down soaring electricity prices.

The governments pays the difference between the cap and the market price, which jumped following Russia’s invasion of Ukraine.

The formal decision has not been made yet, a spokeswoman for the EU Commission said.

Ribera said that as current gas prices are below the cap, the mechanism is not applied.

“Were natural gas prices to rise again, we would manage to contain electricity prices at a reasonable level that would not depend on the price of natural gas,” she said.

The mechanism was set to expire on May 31.

Ribera had said in January that her government wanted to extend the price cap until the end of 2024 and set the cap at 45 or 50 euros per megawatt-hour.