Spain’s leftwing minority
government to claw back
€3bn from utility groups
Spain has announced a €3bn raid on
energy companies’ profits and tax cuts
for consumers as it tries to contain political damage caused by soaring electricity and gas prices that are putting pressure on governments across Europe.
The measures were agreed by Pedro
Sánchez, prime minister, and his cabinet yesterday but prompted an angry
response from Iberdrola, the Spanish
renewable energy group, which accused
the government of undermining
investor confidence. The surge in
energy prices has become the most
pressing issue for Sánchez’s leftwing
minority government after wholesale
prices hit record levels throughout the
summer. Bills for consumers rose 35 per
cent in the 12 months to August.
Madrid said it was targeting €2.6bn in
“excess profits” from utilities that do
not use gas but have benefited from the
way rising gas prices have driven electricity prices higher. This follows a similar initiative, announced in July, to claw
back about €650m from energy companies whose income has increased
because of the rising cost of carbon.
The government says it will use the
funds to pay infrastructure charges that
would otherwise have fallen to consumers, thus reducing household bills.
Sánchez also said consumer taxes on
electricity would be cut by €1.4bn until
the end of this year. “We have made a
firm commitment that all citizens will
pay the same electricity bill [this year]
as in 2018,” he said, describing energy
companies’ levels of profits as “not
Iberdrola said the plan would “only
create more problems for customers in
the months and years ahead”.
The company added: “It will also
undermine investor confidence in the
country, at a critical time when Spain
needs billions of euros of private investment to deliver the projects behind
ambitious climate change targets.”
Because many consumers pay variable rather than fixed tariffs, Spain’s
retail electricity prices are particularly
closely linked to the country’s wholesale
But rising prices are affecting Europe
as a whole, driven by factors such as liquefied natural gas demand in China as
an alternative to coal, higher carbon
prices and reduced supply from Russia.
“In Spain people are feeling the pinch
in their personal finances, but this is not
a Spanish problem; it is a European, if
not a world problem,” said Angel Talavera, head of European economics at
Oxford Economics. “Because of the different way the Spanish market works,
much of the world has not noticed it yet,
but sooner or later a similar trend will
happen in other countries.”
The French government has suggested it would consider extending
direct subsidies for fuel payments, while
Greece plans a €150m fund to compensate for recent electricity price rises.
Last week, benchmark wholesale
electricity prices in Germany for delivery next year reached more than €90 a
megawatt hour, or about double the
level at which they started the year, surpassing the previous 2008 record.
Julien Hoarau, the head of EnergyScan, the analytics unit of French utility
Engie, warned that without more clarity
on the level of Russian gas supply to
Europe over the winter the market
would remain tight and prices elevated.
Roberto Cingolani, Italy environment
minister, warned on Monday Italian
electricity bills could rise by as much as
40 per cent in the next quarter because
of rises in gas and carbon prices.
Rising energy prices have also put
pressure on the European Commission,
which in July proposed a package of
green policies, including a carbon price
on car fuel and heating for buildings.
The proposal has sparked a backlash
from countries including Spain and
France, which argue it will hit poor people, who cannot easily afford to switch
to greener and lower-emissions fuels.
Additional reporting by Eleni Varvitsioti
and Miles Johnson