Portugal Begins to Deregulate Energy Market

Portugal is preparing to liberalise its energy market, and domestic electricity prices are expected to increase by 2.8% next year. The increase is being proposed by the Entidade Reguladora dos Servicos Energeticos (ERSE), and would represent an increase of an extra €1.24 on the average monthly bill of €47.

This tariff will operate from the beginning of January until the end of March next year, and further price updates will be given at three monthly intervals until 2015, by which time it is expected that the electricity market in Portugal will be completely liberalised.

The energy market in Portugal is being deregulated as part of an agreement between the Portuguese government and the Troika, in an effort to try and cut the country’s budget deficit. The increase will affect around 5.6 million domestic consumers, and a similar proposal for an increase in tariffs for natural gas is expected to be made in December. Those on lower incomes will see their electricity bill increase by a lower percentage which will remain the same for the whole of next year.

A succession of governments have continually protected domestic consumers from paying the true cost of electricity though regulated price fixation, which has led to an electricity tariff deficit of around €1 billion. This deficit is expected to take another eight years to resolve. Apparently the ERSE will continue to recommend energy tariffs to try to ensure that the deregulated market has a tariff reference, helping to prevent huge price increases during this transitional phase.

 

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