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

Spain's cabinet passed emergency measures on Tuesday to reduce sky-high energy bills by redirecting billions of euros in extraordinary profits from energy companies to consumers and capping increases in gas prices. In the first such broad response in Europe, where wholesale prices have doubled in a year, Spain plans to limit the profits that hydropower and other renewable power generators can make from surging electricity prices.


Reuters | Madrid | Updated: 14-09-2021 21:43 IST | Created: 14-09-2021 21:39 IST
Tackling soaring energy bills, Spain to cap gas price, utilities' profits
Representative image Image Credit: ANI
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Spain's cabinet passed emergency measures on Tuesday to reduce sky-high energy bills by redirecting billions of euros in extraordinary profits from energy companies to consumers and capping increases in gas prices.

In the first such broad response in Europe, where wholesale prices have doubled in a year, Spain plans to limit the profits that hydropower and other renewable power generators can make from surging electricity prices. The government expects to channel some 2.6 billion euros ($3.1 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. Analysts at RBC capital markets estimated leading utilities Iberdrola and Endesa would take revenue hits of about 1 billion euros from the measure. Endesa shares fell 5.1% by the closing bell.

The impact on Naturgy and EDP would be about 200 million and 65 million euros respectively, RBC said. In parallel, Spain will use an extra 900 million euros it expects to raise by auctioning carbon emission permits this year to reduce bills, citing high market prices as the reason for the additional funds.

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. Ribera said the measures under the "shock plan" would slash the average consumer's monthly bill by 22% until year-end.

Though companies will have to shoulder the higher costs while the measures remain in place, they will be reimbursed through higher tariffs later, meaning the overall cost to them will be neutral, the ministry said. Still, Spain's nuclear power association said the new measures would make nuclear plants financially unviable and provoke a total shutdown of the industry.

The left-wing coalition government has been under pressure from the opposition and civil society organisations to reduce electricity bills as spot prices, which make up around a third of consumer power bills, have broken records for weeks. 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.

Altogether, the measures will reduce government revenues by around 1.4 billion euros in 2021. Italy is also looking at energy sector reform to combat an expected 40% increase in retail power prices in the next quarter, Reuters reported on Tuesday.

($1 = 0.8472 euros)

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)

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