European leaders met last Thursday to discuss rising energy prices in a debate that focused not on diesel and gasoline prices, but on rising electricity prices. At the moment, there is no agreement to promote joint European solutions. Each country will have to continue to take action at the national level.

National measures, which are still not very clear, and the Minister of the Environment Matos Fernandez has already guaranteed that “given the price of light that is in sight, there is no need to reduce the VAT.”
In fact, the Portuguese government and the Energy Services Regulatory Authority (ERSE) managed to turn off the lights the following year. In fact, ERSE is talking about an increase of 0.2% in January 2022, but this increase refers to “the average price for 2021, which includes an upward revision of the electricity tariff in July and October 2021”.

However, if the comparison is only made with invoices from October to December 2021, the ERSE already notes a decrease of -3.4% from prices in effect at the end of 2021.

Good news for the 993,000 families still in the regulated market (20% of consumers, 5% of consumption). But those who will benefit even more are free-market consumers who can expect to see “an average decline of about -35% in the final bill.”

What’s more: the government itself has announced some price reduction measures, such as eliminating additional production costs under the Special Regime for Renewable Energy (PRE) and eliminating additional costs under a contract for the purchase of energy (CAE) Pego’s coal-fired power plant.

The ERSE proposal for its president is an “oxygen cylinder”. According to Pedro Verdello, “we have a situational problem with prices on the wholesale electricity and natural gas market. The electricity tariff proposal is an oxygen bottle to solve the problem starting in January, but we have to reach it, ”he said in parliament.

Ricardo Evangelista, Senior Analyst and CEO of ActivTrades Europe SA, has no doubts: “In the context of the trend towards continued growth in energy prices in the wholesale markets, in my opinion, it is positive for consumers that they have already been identified and supported even in the event of a new upturn in the markets, ”he says to Nascer do SOL.

Enrique Tome, an analyst with brokerage company XTB, recalls that Pedro Verdello said that “the rise in energy prices can be resolved in the spring and, in fact, such a possibility exists.” Therefore, according to the analyst, “a seasonal peak is expected this quarter as temperatures begin to drop. However, as spring approaches, prices are expected to begin to correct downward. “

The Minister of the Environment spoke about this again on Friday and assured: “Those who link the energy crisis to the climate are lying. Fuel prices are rising because oil is expensive. And if electricity in Portugal does not grow, despite the fact that gas is so expensive, it is because 60% is from renewable sources, ”he said. And he added: “If we were much further ahead, [na independência dos combustíveis fósseis], the energy crisis will be much less tangible. “

European position

But the truth is that rising electricity and natural gas prices are not only affecting Portugal but also a common problem in Europe. The upward trend has already prompted the European Commission to propose a range of measures, such as vouchers, that can help the most disadvantaged.

A request that has been processed by several countries so far. A community source told Lusa that Portugal is one of six European Union member states that have already offered support measures to tackle the energy crisis following the European Commission’s recommendations to curb price increases.

This Wednesday, the President of the European Commission again spoke on this topic and recalled that the European Union is very dependent on gas imports, so she called on the 27 member countries to “really work together.”

“Let me start with two simple facts. First fact: gas prices are cyclical and are fixed by world markets. But with gas prices rising, many families are struggling to pay their bills, and businesses are at risk of shutting down. Second fact: solar energy is now ten times cheaper to produce than it was 10 years ago, and even wind power – which by definition is more volatile – is now 50% cheaper than it was ten years ago, ”said Ursula von der Layen.

But are the measures proposed by the European Commission necessary? “It seems to me that any intervention that helps mitigate the impact of rising energy prices will be welcomed for those who, due to the less favorable socio-economic situation, would feel it more,” – Ricardo Evangelista defends.
Enrique Tome is confident that these initiatives are “important and can help mitigate the rise in commodity prices.” But he leaves a warning: “However, its impact could be limited if prices continue to rise and businesses need more aggressive intervention.”

An example of one country that has already started to work is France, whose government has adopted a set of measures to protect consumers and businesses. But this “shield” implies a loss of tax revenue. When asked if this measure can be taken by the Portuguese government, the XTB analyst replies that “they can be adapted to Portuguese realities if the government is willing to give up some of the tax revenues.” And he adds: “The tax burden on fuel remains high and the truth is that the government still has reserves to deal with the recent rise in raw material prices.”

portuguese position

Literally this week, based on data from Eurostat, ERSE published prices for electricity and natural gas for the first half of the year. Portugal ranks eighth in terms of the cost of light in the countries of the European Union. Overall, Portugal saw a decline in electricity prices in the domestic (-1.7%) and non-residential (-1.8%) segments compared to the same period last year. However, it is important to keep in mind that the rise in electricity prices had not yet been recorded at the time when the price records came later.

In terms of gas, the country ranks seventh on the list. But there may be changes. “The rise in energy prices is being felt throughout Europe, so it is unlikely that this factor, the rise in wholesale prices, will by itself contribute to a change in this ranking,” explains Ricardo Evangelista.
In turn, Enrique Tome recalls that “if inflationary pressures persist, this could lead to an adjustment in electricity prices due to increased reserves of raw materials.” On the other hand, he understands that “the state can act to limit and mitigate this increase if it decides to take a more interventionist stance.”

And this winter?

While the governments of different countries decide what can and cannot be done, what can happen this winter, when consumption is usually higher?

“Right now, the outlook points to a continued rise in natural gas prices, mainly due to the position of Russia, the main supplier of Europe, which is trying to gain political and geostrategic advantages by reducing supplies,” notes Ricardo Evangelista. The analyst explains that “the rise in the price of natural gas, which is also a consequence of the efforts that many countries have made to use it as a substitute for other, more polluting energy sources, has a side effect on the cost of fuels such as oil and coal, which are the reason has also become more expensive, as this more ecological position is being reversed. ” Therefore, he concludes: “With no end in sight to this dynamic, it is likely that the trend towards high energy costs will continue.”

This opinion is shared by Enrique Tome when he reminds that “the latest forecasts of experts indicate a harsh winter.” Thus, if these forecasts come true, “the use of raw materials should increase, and excess demand could put further pressure on prices for both natural gas and oil.” In other words: “In seasonal conditions, this time of year tends to support natural gas prices, and therefore there is a possibility that prices will rise even more.”