Tackling soaring energy bills, Spain to cap gas price, utilities' profits

With voracious demand for natural gas accounting for much of the recent increase in European power prices that have stoked inflation, Spain will limit regulated price increases for the fuel at 4.4% in the third quarter, compared with forecasts for a 28% hike. The left-wing coalition government has been under pressure from the opposition and civil society organisations to reduce electricity bills.

Spain's cabinet passed a suite of emergency measures on Tuesday to reduce sky-high consumer energy bills that will see the government recoup billions of euros in extraordinary profits from energy companies and cap increases in gas prices.

By limiting the profits that hydro- and other renewable power generators can make from surging electricity prices, the government expects to redirect some 2.6 billion euros ($3.07 billion) from companies to consumers in the next six months. Energy Minister Teresa Ribera told a news conference the measure would remain in place until the end of March, when natural gas prices are expected to stabilise after consumption falls from winter peaks.

In parallel, Spain will auction an extra 900 million euros in carbon emission permits this year, with the proceeds to be used to reduce bills. With voracious demand for natural gas accounting for much of the recent increase in European power prices that have stoked inflation, Spain will limit regulated price increases for the fuel at 4.4% in the third quarter, compared with forecasts for a 28% hike.

The left-wing coalition government has been under pressure from the opposition and civil society organisations to reduce electricity bills. Prime Minister Pedro Sanchez announced on Monday that a special electricity tax would drop to 0.5% from 5.1% until the end of the year, while a reduced VAT rate and the suspension of a 7% generation tax would be extended until January.

($1 = 0.8472 euros)

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