By Sergio Goncalves
LISBON (Reuters) -Portugal’s Prime Minister Antonio Costa called on Tuesday for a maximum reference price for natural gas to be established in the European Union and for value-added tax on energy products to be urgently reduced to protect consumers from soaring prices.
EU leaders are due to discuss new measures at a March 24-25 summit in Brussels, after gas prices jumped to record highs following Russia’s invasion of Ukraine.
“It is urgent to intervene. There are several solutions that have been discussed…this solution of a cap on the price of gas is a well balanced solution,” he told Portugal’s parliament as part of preparations for the summit.
Spain and Portugal last week said they had drawn up proposals to impose a 180-euro-per-megawatt-hour (MWh) price cap for electricity, but a Spanish Energy Ministry source said on Monday that Madrid would prioritise instead an idea to decouple the price of electricity from that of gas.
Costa said, however, that “Spain had not deviated” from the initial intention, adding that any cap should not compromise Europe’s natural gas supplies, “which could affect many European countries, such as Germany, which are highly dependent” on gas.
“We have been working on it with other member states and with the European Commission,” Costa said, calling also for joint EU procurement mechanisms, “not just for energy, but for various fundamental agro-food components such as fertilizers”.
Portugal has already asked Brussels to allow a temporary reduction of VAT on energy products, and Costa said that “the European Commission should allow all European countries to do so”.
The cap is needed so as to not “contaminate” electricity prices with soaring gas prices, Costa said. The price of electric energy at which all generators sell electricity in the wholesale markets is determined by the highest marginal cost of production, which is currently that of gas-fired power plants.
(Reporting by Sergio Goncalves; Editing by Andrei Khalip, Catherine Evans and Alexander Smith)