The shock plan to lower the price of the electricity bill reaches the Council of Ministers today and the President of the Government, Pedro Sánchez, advanced some details yesterday. In this way, the Government will approve this Tuesday in the Council of Ministers tax cuts and additional measures to try to limit the rise in electricity bills derived from the rise in prices in international markets. In detail, Sánchez announced yesterday as a star measure that a formula will be approved to deduct the benefits of the electricity companies obtained by the evolution of gas prices in the market. “We are going to Detract these benefits from energy companies, they can afford it, and redirect consumers to face the rise in the price of gas in the coming months, hit the gas bill, and with this measure also reduce the electricity bill, “he said in an interview on RTVE.
The Executive intends to “redirect” those profits to consumers, who will face today a price of electricity that will reach 153.43 euros per megawatt hour.
In addition, Pedro Sánchez announced yesterday that rwill lower the special tax on electricity to 0.5% (the minimum required by Brussels) and that the suspension of 7% will be extended to generation until the end of the year. The reduction of VAT from 21% to 10% and the suspension of the 7% tax on the sale of electricity production will also be extended until the end of the year.
‘Profits fallen from the sky’
With the new measure that will be approved today by urgent means, Sánchez made reference to what are known as ‘benefits fallen from the sky’ of energy companies. This is the name in the sector for the profits obtained by companies for producing electricity using cheap energy such as hydroelectric or nuclear that are paid in times of high demand as if they were as expensive as thermal or combined cycles.
It should be remembered that the Council of Ministers already approved in early July to start the processing of a draft law to reduce the so-called disparagingly ‘windfall profits’ from nuclear and hydraulic power plants, as reported ABC. This measure would reduce consumers’ electricity bill by approximately 5%.
The expression ‘profits from the sky’ refers to the fact that these plants would already be amortized over their long useful life and should not benefit in the wholesale market from the high prices paid for electricity when natural gas is the one that sets the price for all electricity generation. In other words, the electricity that is generated in nuclear and hydroelectric plants obtains a ‘surcharge’ that the Government now wants to penalize in order to lower the cost of the bill.
Beneplácito de Podemos
Reactions to Sánchez’s announcement were immediate. The Secretary General of Podemos and Minister of Social Rights and Agenda 2030, Ione Belarra, celebrated yesterday that the Government is going to stop the gas. “It is the best news that our partner in the Government has accepted some of our proposals to regulate the electricity market and lower the electricity bill,” Belarra said in a message posted on the social network Twitter. For his part, the Minister of Consumption, Alberto Garzón, celebrated the forthcoming approval of “measures to regulate the energy market and restrict the extraordinary benefits of the oligopoly.
Tomorrow in the Council of Ministers we will approve a set of measures to regulate the energy market and restrict the extraordinary profits of the oligopoly. Working families will be much more protected and the electricity bill will go down.
– Alberto Garzón🔻 (@agarzon) September 13, 2021
In addition to capping gas, the Executive is working on an expansion of tax cuts related to electricity that will have a notable impact on public coffers. Only the reduction of VAT and the elimination of the generation tax will cost the State 1,400 million. The government is also considering launching electricity auctions outside the wholesale market. The price of electricity is now established in a bid known in the sector as an electricity pool in which producers, distributors and marketers participate. Most of them belong to a handful of companies.
In addition, the Government is studying the approval of measures to strengthen the supply of vulnerable households with difficulties in paying their bills. On the table is the creation of the vital minimum supply of energy. This supply would prevent the power outage temporarily for another four months to vulnerable households that do not pay the bill, to which must be added the four that already existed before. In this way, if after eight months it has not been paid, the supply may be cut off.
The price of electricity will barely fall today by 0.5% and will reach 153.43 euros per megawatt hour due to the increase in gas prices.