Electricity prices to fall significantly

Prime Minister Durão Barroso has pledged that electricity prices will fall following the creation of the single Iberian Electricity Market, known as Mibel. The agreement, signed between the Portuguese and Spanish governments, was formally ratified in Lisbon recently. Barroso would not be drawn on the details of the new tariffs, but promised that there would be “a very significant decrease” in future electricity prices and maintained that the development would be beneficial to Portuguese enterprises.

“One of the obstacles standing in the way of our international competitiveness has been the high cost of energy in Portugal,” he said. The creation of the single Iberian market will establish equal rights for Portuguese and Spanish users, serving 53 million people when it is fully operational – in April for Portuguese firms and after July 1 for consumers.

Rodrigo Rato, the Spanish Minister of the Economy, pointed out that, in Spain, about 330,000 families and small businesses had changed their electricity supplier during the last 12 months of total price liberalisation and cited a 35 per cent reduction in charges between 1997 and 2003. He also said that the Iberian market accounts for 10 per cent of the European Union’s total energy market, making it the fourth largest in Europe. Spanish Premier José María Aznar also described the creation of a single market as a positive development which “would set a precedent” for other countries. But not all reactions were so positive. Portuguese trade unions, notably the Federation of Electrical Industry Unions (FSTIEP), held a protest rally near Belém Cultural Centre to draw attention to what they claim could be the negative repercussions arising from the agreement. José Luís Quinta, head of FSTIEP, said he thought Spanish firms, such as Endesa and Iberdola, will have more capacity than EDP because they have already had more time to adjust to the liberalised market. “Also, it’s far from clear that price liberalisation always lowers prices, as we have seen recently with the price of petrol,” he added.