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BRUSSELS (AP) — The European Union has authorized Spain and Portugal to use billions of euros in state aid to help ease the burden of soaring electricity prices on consumers across the region. Iberian Peninsula as Russia’s war in Ukraine exacerbates an energy shortage.

The aid of 8.4 billion euros ($9 billion) – 6.3 billion euros ($6.8 billion) for Spain and 2.1 billion dollars ($2.3 billion) dollars) for Portugal – is intended to help pay the fuel costs of electricity producers. The European Commission, which controls state aid rules, allows the program to last for one year.

The war in Ukraine has caused gas prices to rise, creating a ripple effect on already high electricity prices in both countries.

Spain and Portugal last month signed a temporary cap on natural gas prices in a coordinated move described by Portugal’s environment minister as an ‘unprecedented’ attempt to temper soaring energy prices and inflation.

The decision approved on Wednesday evening in Brussels circumvents EU common market rules, but the EU’s executive board said it allowed it, “recognizing that the Spanish and Portuguese economies are experiencing serious disruption”. That means gas used for power generation will cost on average just under 50 euros ($54) per megawatt hour until May 31.

Spain estimates that it will immediately reduce costs for a third of national consumers and 70% of industry. But some Spanish energy companies have criticized the plan, fearing the new rules will distort the market.

Commission Executive Vice-President Margrethe Vestager said the program would also allow Spain and Portugal to reform their electricity systems in line with climate change objectives and “ultimately further mitigate plus the effects of the energy crisis on end consumers”.


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