On Tuesday this week the Spanish government approved a raft of measures to help reduce the ever-increasing electricity bills that we've been talking about in recent months.

Electricity prices have been rising to record levels in Spain, with one of the highest prices yet at €172.78 /MWh, expected this Wednesday (15th Sept)...almost four times the figure registered one year ago, when it was just €46

According to the National Statistics Institute, consumers’ bills grew 7.8% in August from a month earlier, and an eye-watering 34.9% from August 2020.

Of Spain’s 27.5 million consumers, around 10.7 million are on a regulated electricity tariff called PVPC, which is indexed to the wholesale market and is usually cheaper than the non-regulated alternative. But it is these households on the PVPC tariff that have found themselves more exposed to the recent price rises.


The Plan

While the government has no control over Spain’s wholesale power market, which sets the amount paid by the companies that supply electricity to households, they have been able to take action to limit the impact of these price rises on householders.

The plan involves four fronts: 

  • Structural reform to promote cleaner and cheaper energy

  • Measures to protect the most vulnerable households - Prohibiting companies from cutting off electricity for low-income families.

  • Cuts on some taxes - The current tariff of 5.11% on electricity will be reduced to 0.5%, the minimum allowed under regional legislation. The government had already reduced the IVA (value-added tax) on electricity bills from 21% to 10% for consumers with up to 10 kilowatts of contracted power, and suspended the 7% tax on energy generation– These two measures are to be extended until the end of the year.

  • Redirecting some of the profits made by energy companies back to the consumer - The government expects to channel about €2.6bn from companies to consumers in the next six months.

Prime Minister Pedro Sánchez said it is not "acceptable" that electricity companies are reaping "extraordinary benefits", which is why he also intends to "cap gas bills" before the expected price rise over the coming months.

Spain’s minister for ecological transition, Teresa Ribera, added that this measure would remain in place until the end of March, when natural gas prices are expected to stabilise after consumption falls from winter peaks.

The spike has been shown to be mainly due to the rising international prices of fossil gas, which is used in 'combined cycle' plants to generate electricity, and is relied on heavily here in Spain.

Added to this is the increased cost per ton in CO₂ emission rights and...a lack of wind, would you believe.