Spanish Prime Minister Pedro SÃ¡nchez on Monday evening announced a series of measures aimed at lowering soaring costs of natural gas and electricity for consumers.
Spain’s wholesale electricity market, which sets the amount paid by companies that supply electricity to households, has seen record prices since the start of the summer. On Monday, the cost reached â‚¬ 154.16 per megawatt hour (MWh), the highest on record, and more than triple the figure recorded a year ago, when it was only â‚¬ 46.
According to the National Institute of Statistics (INE), consumers’ electricity bills increased 7.8% in August compared to the previous month and 34.9% compared to August 2020.
Escalating prices in the wholesale market have prompted the Spanish government – led by a center-left coalition of the Socialist Party (PSOE) and its junior partner Unidas Podemos – to take action to reduce the cost of energy bills Household.
Of Spain’s 27.5 million consumers, around 10.7 million are subject to a regulated electricity tariff called PVPC, which is indexed to the wholesale market and is generally cheaper than the unregulated alternative. But households at the PVPC tariff are more exposed to recent price increases, as consumption – one of the items paid for when subscribing to the electricity supply in addition to other regulated costs – fluctuates according to the market.
While the government has no control over the wholesale market – which is secured by a daily auction – SÃ¡nchez told state broadcaster RTVE that he aims to limit the impact of these price increases with a new action plan that will be approved by the Spanish Cabinet on Tuesday. .
The plan has four fronts: structural reform to promote cleaner and cheaper energy, measures to protect the most vulnerable households, cuts in certain taxes and redirecting part of the profits made by energy companies towards the economy. consumer.
â€œThere are energy companies making extraordinary profits right now. This is not acceptable to me, because these are profits that come from the evolution of energy prices, â€SÃ¡nchez explained Monday in a TV interview with RTVE.
There are energy companies making extraordinary profits right now. This is not acceptable to me, because these are the benefits that come from the evolution of energy prices
Spanish Prime Minister Pedro SÃ¡nchez
“We will take these gains from the energy companies, they can afford it, and redirect them to consumers. […] to cap the cost of gas and also reduce electricity bills, â€said SÃ¡nchez.
According to government sources, the Spanish government is expected to approve a temporary reduction in excess gains obtained by power plants that are not affected by the rise in the price of gas in the market but benefit from it on consumers’ bills, government sources said. . A formula similar to that aimed at limiting windfall profits for hydroelectric and nuclear power plants which do not emit COâ‚‚ but benefit from a higher price of COâ‚‚ will be applied. The latter initiative is already gaining ground in Congress, the same sources said.
The spike is due to rising international prices for gas, which is used in combined cycle power plants, as well as COâ‚‚ emission rights, where carbon prices have increased over the past week to reach 62 â‚¬ / tonne. Added to this is the lack of wind power, which has reduced the share of renewable energies in the mix and increased the share of combined cycle energies.
Regarding taxes, SÃ¡nchez said the current 5.11% tariff on electricity will be reduced to 0.5%, the minimum allowed by regional law. This special tax is collected by the state and transferred to regional governments. If the tax cut is finally approved, the government will have to compensate the regions for the lost revenues.
Ahead of Monday’s announcement, the government also reduced the Value Added Tax (IVA) on electricity bills from 21% to 10% for consumers with up to 10 kilowatts of contracted power, in cases where the average monthly cost of one MWh exceeded 45 â‚¬. , and suspended the 7% tax on energy production – two measures that will be extended until the end of the year.
english version by Melissa Kitson.