It will only reduce the average monthly household bill by around €3 but will be a helpful start – given that electricity typically costs just under 86% more nowadays than it did 15 years ago.
The new minister for Energy Transition Teresa Ribera – who took up her post in early June – has already been facing a critical moment in her career as power bills have continued to rise rapidly since she started the job, and measures to curb the upward spiral have become an emergency.
Among these measures is cutting out the 7% energy generation tax and increasing the eligibility criteria for ‘special needs’ discounts, applicable to those on very low incomes.
Sra Ribera is also discussing introducing a low-income discount on heating bills.
Yesterday (Tuesday) saw electricity reach its highest-ever price per megawatt (MW) per hour (MWh), at €75.93, although it dropped slightly to €74.45 today.
It has waxed and waned between €44.86, on June 17, to €65.46, on May 29, and has soared by nearly €20 in a month.
The 7% generation tax was introduced in 2012 when utility bills rocketed almost overnight – and it will not technically be removed, but reduced to just above zero so it can be increased again if bills start to go down.
It was added by the previous PP-led government in an attempt to eat into the State’s €30-billion deficit with primary power suppliers.
At present, the average household in Spain will be paying €80.73 per month for electricity, although the MWh price still only accounts for 40% of the bill – with almost two-thirds of what customers pay for power being taxes and charges, the incentive to try to cut down on home energy use is minimal.
But it still means the average household bill has risen by €12 based upon the same month in 2017.
And electricity consumption in large parts of Spain is higher in summer than in winter, given the necessary use of fans and air-conditioning round the clock.
Heating is still an issue in northern, inland and mountainous areas, where many houses and commercial premises have highly-effective systems including radiators, central and under-floor heating, compared with the southern and Mediterranean coasts where homes are built to keep the heat out, rather than protect against the cold, and where the very chilly part of the winter may only last a month or two at worst and heating is not strictly necessary at all between late February and early December.
The heating ‘bonus’ created will, however, help out the 10% of the population of Spain who cannot afford to protect themselves from the cold in winter, and who are mainly single-parent families, the elderly, and young adults who do not live with their parents.
Ribera is also working on a series of ‘structural reforms’ to energy laws which will involve shifting some of the cost of electricity from the wholesale market to a bilateral contract system, and leaning more towards renewable sources.
“Spain is one of the few European countries where the majority of energy comes from the wholesale market, so we have a long journey ahead of us,” Ribera says.
Among suggestions from opposition parties in government are reducing IVA from the top-rated 21% down to either the mid-band 10% or the bottom level of 4%.
Spain’s government has already discussed cutting IVA to 4% on a wider range of ‘basics’, as yet undefined, and Ribera says it is ‘illogical’ for the ‘vulnerable’ or low-income consumer to have to pay the highest rate of IVA for a totally indispensable service.
This said, reducing IVA on any commodity requires special and additional procedures, given that it is a European Union charge rather than merely national.
National ombudsman Francisco Fernández Marugán has criticised the fact that electricity in Spain is among the most expensive in the whole of the EU.
Part of the problem has, historically, been the fact that energy prices fluctuate considerably due to being dependent upon bi-monthly power supply auctions.