It will reverse part of the 96% reduction in the charges of the electricity bill that it applied, via Royal Decree-Law, on September 14, 2021.
The Government of Spain has just removed public consultation the Draft order establishing the prices of charges for the electrical system applicable as of January 1, 2022. In other words, what will be the ministerial order regulating key aspects of electricity prices next year.
It contemplates the reversal of some of the measures to lower the invoice that were taken last September 2021.
Specifically, it was on September 14 when the Council of Ministers approved, in the form of a Royal Decree-Law, a Shock Plan to lower the price of electricity.
This contemplated, in addition to tax reductions that affected the Special Tax on Electricity (IEE), the Tax on the Value of Electric Power Production (IVPEE) and VAT, a reduction of 96% of the so-called ‘charges’ of the invoice and what are, among others, the premiums for renewables or the debt of the electricity system.
The tax cuts appear to last beyond January 1, 2022, however, those ‘charges’ will be partially recovered on the invoice.
The remuneration of the electricity companies will continue without being reduced
This Royal Decree also included, as compensation for the loss of revenue arising from the lower taxes, an additional source of income consisting of “a new model for setting electricity prices, a mechanism by which the remuneration that companies have is reduced, the growth of the price of natural gas in domestic bills will be limited and the electricity sector law and the water law will be modified ”.
With this mechanism, the Government of Spain intended to enter 2,600 million euros in 6 months. However, shortly after the Executive succumbed to the pressure of the electricity companies and backed down.
On October 26, 2021, The Council of Ministers approved the decree that softened the cut to electricity companies and that was validated by the Congress on November 25, 2021. In addition, it included a increase in the discount on the electricity bill granted by the social bonus for vulnerable consumers.
In the memory that accompanies the order that will establish the prices of electricity from January 1, 2022, it is made clear that next year those known as “Benefits fallen from the sky” of electricity.
Textually, it says that, although the Royal Decree of September 14 introduced “a new source of additional income that has a direct impact on the charges of the electricity system (income from the mechanism of reduction of the remuneration of the electricity market caused by the high price of quotation of natural gas in international markets, regulated in title III of the aforementioned royal decree-law), it has been deemed pertinent not to consider any income due to the application of the principle of accounting prudence, since the settlements from that regulatory instrument are, at the time of preparation of this draft order, provisional, and are also pending validation by the National Commission of Markets and Competition “.
What has been taken into account to prepare this price forecast are 2 new measures that will lower the electricity bill: rules that, they foresee, will be in force in the second half of 2022 and consist of the creation of the National Fund for the Sustainability of the Electricity System and action on the remuneration of CO2 not emitted from the electricity market.
The price of electricity continues to break records
When the Government of Spain approved the Royal Decree on urgent measures, the Third Vice President of the Government and Minister for the Ecological Transition and the Demographic Challenge, Teresa Ribera, assured that they would mean, “almost immediately, a saving in the bill of the electricity of 22% per month ”. Percentage, he stressed, “which will rise to 30% when the effect of the VAT reduction and the freezing of the IVPEE begins to be noticed.”
What’s more, the president of Spain, Pedro Sánchez, promised that in 2021 consumers would pay the same as in 2018 after discounting the CPI. Both predictions have been dismantled, since, as pointed out from FACUA, “The electricity bill for December would have to be negative for Sánchez to fulfill his promise”.
This Wednesday, December 15, 2021, the price of electricity has set its historical record. It is, on average, 291.73 euros / MWh. Above 288.53 euros on October 7, 2021 and also higher than the price set last Tuesday (287.78 euros), which becomes the third highest in the historical series.
This article was published in Business Insider Spain by Óscar F. Civieta.