Spain is preparing to reduce rising electricity bills.


The Spanish government on Tuesday approved emergency measures to help households pay the rising cost of electricity and has promised to cap profits made by power companies following the recent rise in the price of natural gas .

Wholesale natural gas prices across Europe have reached levels almost five times higher than in 2019. Rising prices are pushing up electricity bills as gas is often used to generate electricity. Some other European governments have also recently presented plans to help consumers, including Greece, where the government is setting up a fund to subsidize electricity bills paid by households.

In Spain, the sharp rise has become a political problem. Pedro Sánchez, the Socialist Prime Minister, heads a minority left-wing coalition government that relies on the support of Unidas Podemos, a party committed to protecting the most vulnerable households. The emergency package would protect, among other things, the poorest families who cannot pay their bills by extending the grace period before utilities can cut their electricity.

The government action was announced after Mr Sánchez laid out his plans in a television interview on Monday evening. Without providing details, he said about 650 million euros (about $ 770 million) of “extraordinary profits” would be taken from energy companies and “redirected to consumers.”

Some welcomed the government’s decision. “No Spanish government has ever dared to attack the energy companies that control our market as an oligopoly, so I consider this historic, but it will obviously create a lot of anger in these companies,” said Javier García Breva , a former Spanish legislator and expert in renewable energies.

But opposition Ciudadanos party politician Edmundo Bal said Sánchez was hastily applying a “patch” on the energy problem, rather than looking for a long-term solution.

Power companies have said these measures will be counterproductive. Natural gas prices have risen across Europe due to a variety of factors, including a resurgence in global demand after pandemic shutdowns and a late-winter cold snap that depleted storage levels.

Iberdrola, one of Spain’s three main electricity companies, said energy prices were rising due to “international factors” and would not be held back by government action. The association representing Spanish nuclear power producers threatened to suspend its activities in response.

Mr. Sánchez pledged to reduce the electricity prices paid by consumers to 2018 levels, excluding inflation. The measures approved on Tuesday include a reduction in the tax on electricity production, which is paid by consumers, until the end of this year. In June, the government reduced the value added tax paid on electricity bills to 10% from 21%.

The latest data from the National Statistics Office shows that Spaniards last month paid around 35% more than a year earlier for their electricity, while the wholesale price of electricity continued to increase these last few weeks.

Teresa Ribera, Spain’s Minister for Ecological Transition, told reporters that the emergency measures would help reduce the monthly electricity bill paid by households by 22%.

To achieve this goal, the government will cap the profits made by energy companies from the global rise in natural gas prices until at least March, when the situation will be reviewed.

“The forecasts for the coming months point to an unprecedented spiral,” said Ms. Ribera, which in turn “impacts the well-being of families and the entire Spanish economy”.

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