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Keys To The Government’s Measures On Electricity

The electricity bill and its constant increases are being one of the hottest topics on the political agenda in recent weeks. This Tuesday the Council of Ministers approved a measure , announced by President Pedro Sánchez, to detract the benefits of electricity companies obtained by the evolution of gas prices in the market, so that consumers pay less for the receipt of the light. This also coincides in time with another record on the bill, which will stand this Wednesday at 172.78 euros per megawatt hour .

“We are going to detract those extraordinary benefits that energy companies have, they can afford it, and redirect consumers to face the rise that is going to come in the coming months in the price of gas, hit the gas bill, and with this measure also to reduce the electricity bill, “the chief executive had already explained in an interview on TVE.

Government measures regarding the electricity bill.Government measures regarding the electricity bill.Henar de Pedro
The pulse is assured because the power companies assured that the Spanish nuclear power plants will be forced to stop their production if the Government approves the bill. In addition, in a statement, the nuclear sector employers regret that the new measures approved by the Council of Ministers to lower the electricity bill, despite being temporarily applied, “further deepen the penalization of nuclear power generation.” .

But what exactly are the measures and how do they affect the average citizen? Rafael Pampillón , professor at CEU San Pablo University, Roy Cobby , digital economy researcher at King’s College London, and Astrid Portero , associate researcher at the European Council on Foreign Relations (ECFR) answer the question for 20 minutes.

Less taxes … a good measure?
For now, the Government has approved a reduction in the special tax on electricity from 5.1% to 0.5% and will extend until the end of the year the suspension of the 7% tax on the sale of electricity production, as well such as the reduction of VAT from 21% to 10%, which had already received the green light. The Government’s objective is that by the end of 2021 the price is at the level of the mark in 2018.

Price of light.Price of light.Henar de Pedro
Precisely due to the abolition of taxes, some of the proposals of the Foundation for Applied Economics Studies (Fedea) pass. They are in favor, among other things, of ending this tax on electricity generation, a tax levied on electricity generation at 7% and that must be paid by producing companies, although they end up passing it on to the user in their energy consumption.

In this sense, from Fedea they defend that the definitive abolition of this tax “would undoubtedly have a positive impact on the final bill of the electricity consumer .” In addition, they consider that in a context in which income from CO2 emission rights will remain high, we are facing “the right moment” to propose their definitive withdrawal.

In addition, the Executive has approved by decree the minimum vital supply , which establishes that vulnerable consumers will enjoy a power of 3.5kW for six months once the four months during which they are currently protected in case of non-payment have been exhausted. This causes that the prohibition to cut the light extends up to 10 months.

How much savings will these measures entail?
The Minister of Ecological Transition, Teresa Ribera, assured that the “shock plan” approved by the coalition government will mean a reduction of the bill of 22% , and that if the measures already adopted so far are added – such as the reduction of VAT , which was approved months ago-, the drop in the electricity bill will reach 30%.

Although other experts believe that this saving will remain at 15%. In addition, the measures will oblige the electricity companies to return part of the extraordinary benefits they obtain by passing on the gas costs they do not bear on the electricity generation plants, an amount that the Executive estimates at 2,600 million euros.

For Pampillón, what the Government does is “collect” the benefits of the plants that do not emit CO2 and thus “compensate.” The professor considers that what Sánchez seeks is to make “a social policy”, but he acknowledges that the problem of the rise in the electricity bill comes from behind and the Government now hopes that the measures “will work”.

Cobby, for his part, believes that the general trend “is that for the moment the bill continues to rise” and that now the question is whether the measures taken “will actually be seen in the final bill.” Regarding the percentage of 30% savings managed by the Government, the researcher considers that “adding all the components” could be achieved “in a specific case”, but only in situations, for example, of someone in a “vulnerable situation”.

Are they enough?
A priori no. This is how Astrid Portero considers it. “It is something that will alleviate the effects a bit in Spain, but it is not a panacea,” he says. The expert does recognize that the measures are “many” and “brave”, but they fall short. “I am not saying that a reduction of 15% is wrong, but it is not enough because part of those measures that are going to be taken cannot be sustained for too long,” adds Portero, who also takes into account that the Spanish energy market is ” very convoluted. “

“In the short term, it is necessary to take into account that the functioning of the market is determined by the EU “, recalls Cobby, and in that sense the measures may be sufficient, although some more can be added such as “increase the discount on the invoice” , something that Italy has already proposed. But for the expert it is as important as tackling the problem and thinking in the medium and long term.

And in the medium term?
Rafael Pampillón makes it clear that the rise in the bill is something that should not be seen in isolation, because the price of gas or oil has also skyrocketed. The economist also warns that Spain will continue to have “expensive electricity” because “it has decided to decarbonize before” and that ecological transition, with the new taxes it entails, causes “prices to rise.”

Portero agrees on that, who says that “the bill will continue to rise” in the medium term. “And that is a conversation that will have to be raised sooner or later for the consumer, especially as CO2 emissions become more and more expensive, which is where we are heading in the EU as part of the European Green Deal and Fit for 55 “, he comments. And it launches a warning for the future: “If the energy companies do not put the batteries and make a more or less rapid transition (that nothing indicates that it will be like that) I imagine that there will be a time when this weight falls on the consumer on the final invoice “.

The solution, the researcher ends, is to address the issue at the EU level. “Ideally, this conversation should be addressed at the community level because although energy markets are different between member countries, the problem in the long run is going to be more or less the same, ” he concludes.

In this sense, Roy Cobby points out that the Spanish Government, like other European partners, should “promote a transformation of the market” and in the longer term set its sights “on the entire chain” , with the Executive being “more imaginative to the time to intervene “. That does not mean, he clarifies, “that the automatic response has to be the creation of a public company or nationalization” but it is possible to “intervene to lead specific projects” or even bet on a model “closer to German” , with more options such as consumer cooperatives or other “more local” possibilities.

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