The Government expects to reduce the electricity bill by 22% with the new shock plan against the escalation of electricity
Teresa Ribera, third vice president and minister for the Ecological Transition, in an interview with CincoDías.Pablo Monge

The Government expects to recover 2,600 million euros from energy companies until March 31, 2022 for the return of “the extraordinary profits that have arisen” due to the high prices of gas in the wholesale market. This is included in the Royal Decree-Law approved this Tuesday by the Council of Ministers to lower the price of electricity bills and which is part of the shock plan to keep the final electricity bill of consumers in 2021 at the same level as 2018 , as promised by the president, Pedro Sánchez. The plan, which also includes seven other measures of immediate application, will mean a reduction in the invoice of an average consumer of 22% per month until the end of the year, which, with the VAT reduction approved last June and the temporary abolition of the generation tax, is increased to 30%, according to government sources. In August, electricity rose 34.5% to the highest level in the historical series, according to the INE.

The impact of the high price of natural gas in international markets and the high price of CO₂ in the EU in the wholesale electricity market, which tomorrow will pulverize all records with a price of 172.78 euros megawatt hour (MWh), They have led the Government to take these shock measures “considering that the mismatches between supply and demand in the global gas market will remain for the next few months.” According to government sources, “the critical situation of the energy markets coincides with the path of recovery after the pandemic and it is a priority to avoid a slowdown in the rate of growth.”

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“The projection for the coming months draws an unprecedented spiral that generates an amplifying effect in the price of electricity and that has a systemic impact on the well-being of families and the Spanish economy as a whole,” said Teresa Ribera, vice president third of the Government Minister for the Ecological Transition and the Demographic Challenge, during the press conference after the Council of Ministers. Ribera stressed that the measures contained in the Royal Decree-Law are in accordance with the internal legal system and with European regulations.

In addition to the so-called “extraordinary benefits”, the Executive has approved seven other measures, some temporary and others permanent, in the regulated tariff to which some 10.5 million households are subject (another almost 17 million have a free tariff) . These are:

Temporary decline. A temporary reduction of the “excess remuneration obtained by non-emitting power generation plants in the wholesale market (mainly hydroelectric and nuclear) will be applied thanks to the impact of gas costs that they do not support”, consists of applying a formula similar to the one used to reduce the carbon dividend of non-emitting plants, now pending in Congress. The remuneration reduction will be proportional to the price of the Iberian Gas Market (MibGas), which is set at 20 euros, with a limit of 90%. That is, what is passed from that ground, the electricity companies must return it as of the entry into force. The Executive expects that by March 31, 2022, the tensions in the global gas market will have been overcome, so it will not be necessary to extend this grace period beyond the six and a half months that is now established. “The reduction is a proportionate measure that acts on the extraordinary benefits, which occurred suddenly and unexpectedly due to the imbalances in the international natural gas markets, and that could not be considered in the business forecasts,” explain sources from the Ministry’s environment for the Ecological Transition.

Special Tax. Reduction of the Special Tax on Electricity from 5.11% to 0.5%, which is the minimum allowed by community regulations. This tax is charged on the electricity tariff and is transferred to the autonomous communities, so it will be necessary to find a way to compensate them. The ministry will analyze the impact to determine the amount that it will have to later transfer to the communities.

Generation tax. The Tax on the Value of Electric Power Production, which levies 7% on electricity generation, is suspended. This tax was abolished until the end of this quarter, but the Government has decided to extend it until the end of the year. This rate, which was already temporarily abolished in 2018 during another climate crisis, is charged directly to electricity producing companies, which then indirectly pass it on to the rate.

CO₂ auctions. The Government has decided to increase by 900 million euros the contribution from the collection of CO₂ auctions destined to cover costs of the electricity system, which means raising the figure to 2,000 million during the year.

Reduction of loads. These measures will allow the applicable charges to be lowered in the electricity tariff by 96% over the current ones. In this way, the regulated part of final consumer bills (extra-peninsular costs, renewable premiums, tariff deficit) will be in a range that ranges from 47.2% of households to 24.5% of the large industry, according to official data. Additionally, the lower tax burden will be applied to this decrease. The immediate application of the measures will leave the economic effort of consumers to cover their electricity demand in 2021 at the same level as in 2018 (without considering the CPI), about 600 euros per year in the case of an average consumer in low voltage.

Energy auctions. In order to increase the liquidity of the forward markets, the Government will call auctions of energy purchase contracts. The dominant business groups will offer electricity in proportion to their quota, and independent marketers, as well as large consumers, may acquire it and sign term contracts with them with a settlement period equal to or greater than one year. The rule also provides for the reform of the regulated tariff (the voluntary price for small consumers, PVPC) so that it incorporates the auction price reference with a maximum weighting of 10%. Free trading companies that purchase energy in this way must indicate this on their customers’ invoices. The Ministry for the Ecological Transition will approve a calendar for these auctions and the first will take place before the end of the year. The companies Iberdrola, Endesa, Naturgy and EDP will offer 15,830 gigawatt hours (GWh), equivalent to 6.3% of the national electricity demand in 2020.

Minimum Vital Supply. Along with these conjunctural measures, the protection of vulnerable consumers, families and SMEs is increased, establishing a Minimum Vital Supply that prohibits the interruption of service due to non-payment to the beneficiaries of the Electric Social Bonus for six months in addition to the four already existing.

Last Resort Fee (TUR). The impact of the cost of raw material in the calculation of the three bands of the rate of last resort (TUR) is limited for one semester so that the average increase in the next quarterly review, on October 1, will be 4, 6% instead of 29%. The amounts owed will be passed on in subsequent reviews, with a buffer mechanism similar to the one existing for butane cylinders. In addition, a new mechanism is created to promote the contracting of electricity in the future, which will especially benefit the industrial fabric.

Seville / 09-01-2021: Power lines on the outskirts of Seville.  PHOTO: PACO PUENTES / EL PAIS
Seville / 09-01-2021: Power lines on the outskirts of Seville. PHOTO: PACO PUENTES / EL PAISPACO PUENTES / EL PAÍS

Water Law. The Government modifies the Water Law “taking into account the consideration of dammed water as a good of the first economic, social and environmental order” to avoid sudden discharges. At the beginning of each hydrological year, the hydrographic confederations will set a minimum and maximum regime of monthly flows to be discharged in reservoirs greater than 50 cubic hectometres, both for situations of hydrological normality and prolonged drought, as well as a regime of minimum volumes of reserves. stocked for each month. This introduction of criteria for the rational use of water resources will avoid, according to the Government, unwanted effects on flora and fauna, and will contribute to achieving the environmental objectives set by European regulations. Likewise, it will help to face the effects of climate change on the availability of water in Spain, higher than 15% in the medium term and between 35% and 40% in a long-term horizon. To this end, efforts will be made to facilitate the development of sustainable economic activities linked to the revitalization of riverside municipalities.

These shock measures are added to those already approved last June to cushion the impact of gas prices on electricity. At that time, the Executive reduced the VAT on electricity from 21% to 10% until the end of the year, for supplies up to 10 kW, and decided to suspend the 7% Tax on generation during the third quarter, which was later extended until the end of year.

The measures are added to the two projects to the National Fund for the Sustainability of the Electricity System, which will redistribute among all energy vectors the cost of historical renewables in the next five years, and that which acts on the remuneration of CO2 not emitted from the market electric (the so-called benefits fallen from the sky). Its complete application will reduce the final household bill by more than 15%.

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