Spain reimburses € 3bn from operating costs as electricity prices rise

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Spain has announced a 3bn strike on power profits and temporary consumer tax cuts as it tries to address the political crisis caused by rising electricity and gas prices that have forced governments across Europe.

The program of rising prices has been a major problem for Pedro Sánchez’s sub-government, which is on the verge of voting. Retail prices have been rising all summer, with consumer debt rising by 35% in the 12 months to August.

In response, the Spanish prime minister approved a number of measures Tuesday, including an estimated 2.5 billion euros in “extraordinary profits”, in addition to previous attempts to recoup nearly 650 million euros from power plants.

The government will use the money to pay for construction costs that would otherwise fall on consumers, thus reducing domestic debt.

Sánchez also said that consumer electronics taxes will be cut by € 1.4bn by the end of this year. “We are fully committed to ensuring that all citizens pay the same amount of electricity [this year] as of 2018, ”he said, describing the profits of energy companies as“ illegal ”.

Because many consumers pay different rates instead of fixed taxes, the prices of electricity sold in Spain are closely related to the common electricity market in the country.

But rising prices are affecting the whole of Europe, driven by factors such as the dissolution of natural gas by China as an alternative to coal, higher gas prices and lower supplies from Russia.

“In Spain people are struggling financially, but this is not a problem in Spain; it’s a European problem if not a global problem, “says Angel Talavera, Europe’s chief economist at Oxford Economics.”

Indeed, in the near future the French government will consider increasing the number of people eligible for oil subsidies, while Greece has announced a 150 million euro reform fund to provide the latest rise in electricity prices.

Last week, Germany’s electricity supply prices for next year reached 90 megawatt hours, or twice as much as at the start of the year, surpassing the record that hit the summer of 2008 when oil prices were around $ 150 barrels.

Julien Hoarau, chief executive of EnergyScan, France Engie’s arms watchdog, warned that without a clear indication of Russia’s air traffic leading to Europe during the winter the market could be tight and prices could rise. “We are in September so it is a concern for the coming months where we will have more fuel for heating,” he said.

Roberto Cingolani, Italy’s environment minister, warned Monday that Italian electricity prices could rise by 40% in the next quarter due to rising electricity and carbon prices.

Rising electricity prices have also helped the European Commission, which in July issued a large package of green policies, plus the cost of carbon for fuel and heating.

The directive has sparked outrage in countries including Spain and France, which are said to have hit the poor, unable to exchange green and cheap oil.

The MEP was discussing the changes, which require international approval by the European Parliament in Strasbourg on Tuesday. To address the criticism, the council will provide a fund to support families most affected by the new carbon footprint.

Additional reports by Eleni Varvitsioti and Miles Johnson

* This article has been modified since it was first published to remove Spain’s dependence on foreign power sources, which affect electricity integration and not just the electricity market.