Updated on Tuesday, 14 September 2021 – 13:45
The Council of Ministers approves a package of eight measures destined, in the last instance, to bring the invoice to levels equivalent to those of 2018
High voltage towers and power lines in the Ensanche de VallecasJavi Martinez WORLD
The Government has approved in the Council of Ministers a package of measures with which it intends to cushion the effect of the high price of electricity in the wholesale market. The executive expects clients to pay an invoice similar to the one paid in 2018 by the end of 2021; that is, of about 600 euros per year. For this, they will inject 2,600 million obtained by the electricity companies as a result of this crisis.
The average low voltage consumer, according to government calculations, has 4.1 kilowatts of contracted power and a consumption of 2,500 kilowatt hours per year. In the scenario that they contemplate, at the end of the year pay about 600; something else if you take into account the effect of inflation, as Pedro Sánchez has already warned. Achieving this will mean reducing charges by 96% in the next three months.
Ministry sources explain that what these eight measures do is “distribute the effort among all in favor of the general interest.” They are both transitory and structural tools of a social, economic and environmental dimension. They will be divided into five blocks: reinforcing the protection of vulnerable consumers, fiscal and sectoral measures to lower the bill, limit the rise in the regulated rate for natural gas, reform the electricity market by increasing the liquidity of forward markets and measures related to environment.
Some of these measures were already known and others were advanced by Pedro Sánchez in an interview on TVE. This is the case of fiscal ones, such as the temporary suspension of the sales tax on energy production, of 7%, which will last until December 31, 2021. Sánchez also advanced the reduction of the special tax on electricity (IEE), which goes from 5.11% to 0.5%. Both will have an immediate impact on the bill. The Royal Decree also recalls that it will be necessary to analyze the impact it will have on regional financing resources to see if it is necessary to take compensatory measures, since it affects the communities.
With regard to the redistribution of extraordinary profits from electricity companies – “they can afford it,” assured the president on public television – they will inject 900 million additional from emission rights auctions to the system to reduce charges. Ministerial sources recall that there are “more resources available from these auctions” and consider that it makes “all the sense” that they go to the electricity system. In any case, it is a temporary measure.
The reduction in gas, the price of which is key in determining the wholesale market price, will also be temporary. The ministry also aims to take “extraordinary actions” and redirect a “totally unexpected” profit to lower charges. It is taken based on a floor, 20 euros per megawatt hour -the average price of the Iberian system since it came into operation in 2017-, and an alpha factor of 0.9 is included to increase proportionality.
That is, the entire flight attendant is not deducted, but only 90% and only affect the extraordinary income of infra-marginal technologies, non-emitters and without a regulated remuneration framework, which will be mainly nuclear, hydraulic that is not in a specific remuneration regime and renewables that are on the market and have not even attended. regulated frameworks or the most recent auctions. Installations smaller than 10 megawatts will not be affected by the reduction. This measure will apply until March 31, 2022, which is when the Government expects the price escalation to mitigate.
Minimum vital supply
The first block of measures, aimed at protecting vulnerable consumers from the consequences of energy poverty, sets up a figure that had been in the pipeline for a long time: the minimum vital supply. This will be included in the law of the electrical sector and is defined as a power of basic comfort conditions, which will be 3.5 kilowatts.
In addition, also with this idea of protecting the most vulnerable, a precautionary principle will be applied and the period of time in which the power outage is not allowed from four to four is increased. six months on the reliable notification of non-payment of the invoice.
On the other hand, with regard to the natural gas rate, a cap will be introduced in the methodology for calculating the TUR (last resort rate). Thus, growth for this quarter and the first of 2022 is limited to 5% in each case. From the Ministry they explain that, if this measure is not taken, they will rise between 20% and 40% in the next quarter, which coincides with winter and its low temperatures.
In the block dedicated to the reform of the electricity market, the auctions of long-term energy purchase contracts will be activated, which will be articulated as an obligation to sell energy for the four dominant operators in generation (the list is articulated by the CNMC with annual character; currently they are Iberdrola, Endesa, EDP and Naturgy) and a right to go as a buyer to these auctions for direct consumers in the market (large groups that buy energy without the need for intermediaries), traders with a client portfolio (they cannot belong to the main operators; the five largest companies) and the reference marketers. The Royal Decree already announces an auction before the end of the year, with a generation capacity of 6.3% of the national generation.
Finally, a block is dedicated to modifying the Water Law to include criteria for the rational use of water resources. Thus, article 55.2 is modified to include new criteria in reservoirs of more than 50 cubic hectometres of total capacity (provided that their use is not supply, irrigation or other agricultural uses). Each hydrological year, the basin organization will set a series of variables (such as minimum or maximum flows or a minimum reserve that must remain in storage).
Finally, it is not necessary to touch, at least for the moment, the operation of the regulated tariff (PVPC) to link the price to energy cost futures instead of the wholesale market, which, as these months have shown, is much more volatile. However, I do know that there is a willingness to reflect on the possibility of revising this formula.
From the Ministry they recognize that the sector is prone to litigation, so it would not be surprising if the electricity companies took their own measures before the package. In any case, they consider that it is legally robust, so they believe that these tools cannot be knocked over.
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