The Spanish Government yesterday approved a package of measures to limit the price of light in Spain. The bill proposed by the Minister for the Ecological Transition, Teresa Ribera, will include measures that reduce the electricity bill of citizens by 30 per cent. But the Nuclear Forum, made up of 32 energy companies, has complained that the proposed tax changes will limit their profits by 25%.

With the project approved by Sánchez on Tuesday, the nuclear and hydroelectric power plants will have to return some of the rewards they receive. Currently, the average electricity price is EUR 55 per kilowatt hour, while the package will reduce to EUR 20 the maximum value companies can charge per kilowatt hour. Electricity companies will have to repay the amounts they obtain above that amount. The measure shall be valid for six months and shall last until March 2022.

The nuclear power lobbya has denounced that the measure is provisional, but imposes a "penalty" on electricity obtained through electricity. Companies in the sector, including Iberdrola, Endesa, Naturgy (formerly Gas Natural Fenosa), EDP and Repsol, foresee losses of some EUR 2,600 million in the six months that apply.

The companies claim that the project, together with the current tax pressure, would mean “the cessation of the activity of the entire nuclear park” and that the seven plants of the Spanish State should be closed down due to “lack of profitability”. In an interview with TVE, Minister Ribera reminded them, however, that they are not competent to make such a decision because they would require administrative authorisation to paralyse production.

The other solution that companies see is not to apply such a low limit to the price of electricity. In their view, the minimum price of kilowatts per hour should range from EUR 57-60 to ensure yields. Current prices, however, are far from the minimum expected by electricity companies. Invoices amounting to EUR 150 per hour are being implemented in recent months, and prices are still stagnating: prices of EUR 188 are being planned today. This increase is taking place throughout Europe as a result of raw material prices and rising prices for natural gas and carbon dioxide.

But despite the international growth in energy production costs, in the Spanish electricity sector these prices are multiplied by the mercado.La Minister Teresa Ribera, at the hearing on Tuesday, explained that: “Every time in the international market the price of gas rises by one euro, in the wholesale electricity market in Spain it rises by two euros, and that final price is what all electricity producers mark regardless of their operating costs.”

In this sense, Ribera has clarified that, until now, "with the extraordinary benefits" that are being produced, it is up to them to help companies. At least the price of electricity in a situation of “exceptionality” that many citizens are drowning. The Government expects a fall in wholesale market prices in March 2022 and, after that, electricity companies have pledged to return losses to the electricity sector until the law is implemented.

But lobbys have been against all the changes: they want to go on as they have done so far. The President of the Nuclear Forum, Ignacio Araluce, explained that the State's nuclear power plants work with operating permits that are periodically renewed and that to approve those already in force the companies took into account raw material prices and production costs. Araluce has confined itself to saying that if it had been known how changes in initial contracts would affect, licences would not be renewed for this reason.

On the other hand, the chairman of the lobby referred to the adverse consequences that will affect various sectors of society. On the one hand, he warned that jobs and the industrial infrastructure of the Basque Government would be lost. On the other hand, he pointed out that price volatility would increase in the wholesale market, which would generate a dependence on foreign energy in the territory.

The Government ' s measures, under way

To limit the rise in electricity prices, the Government cut VAT on electricity from 21% to 10% in June. In addition to the measure taken on Tuesday, the electricity bill in the population is expected to fall by 30%. In addition, they have announced that they will take other measures affecting price reductions.

The Electricity Production Tax (7%), which has been suspended for the third quarter of 2021, will be abolished until 31 December. Excise duty on electricity, on the other hand, is also reduced from 5.1% to 0.5% (minimum rate allowed by the European Union).

Finally, a new model for fixing electricity prices through auctioning of contracts for the purchase of energy will be established. At these auctions, the dominant operators – Iberdrola, Endesa, Naturgy and EDP – will have to offer a percentage of their generation capacity, an amount that can benefit from small traders or large consumers and industries. Prices will thus be lower than those on the wholesale market.