As energy prices soar, Spain will recover 3 billion euros from the utility group

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Newsletter: Euro Express

Spain has announced a 3 billion euro raid on energy company profits and temporary tax cuts for consumers in an attempt to curb the political damage caused by pressure on European governments due to soaring electricity and natural gas prices.

this Price surge This has become the most pressing issue for the left-wing minority government of Pedro Sánchez, who has fallen behind in the polls. Wholesale prices hit a record high throughout the summer, and consumer bills have risen by 35% in the 12 months to August.

In response, the Spanish cabinet approved a series of measures on Tuesday, including a surprise inspection of approximately 2.5 billion euros in “excess profits” of utility companies, and an effort to recover approximately 650 million euros from energy companies.

The government said it will use the funds to pay for infrastructure costs that should have been borne by consumers, thereby reducing household expenditures.

Sanchez also said that by the end of this year, the electricity consumption tax will be reduced by 1.4 billion euros. “We have made a firm commitment that all citizens will pay the same electricity bill [this year] It’s the same as in 2018,” he said, describing the profitability of energy companies as “unacceptable.”

Since many consumers pay variable electricity prices instead of fixed electricity prices, retail electricity prices in Spain are particularly closely related to the country’s wholesale electricity market.

However, driven by factors such as China’s demand for LNG as a coal substitute, rising carbon prices, and declining supplies from Russia, price increases are affecting Europe as a whole.

“In Spain, people feel personal financial tensions, but this is not a Spanish problem; Angel Talavera, head of European economics at the Oxford Economics Institute, said that this is a European problem, if not a world problem. “Because of the different ways of operating the Spanish market, most parts of the world have not noticed this, but sooner or later other countries will see similar trends. “

In fact, in the past few days, the French government has proposed to consider expanding the number of people eligible for direct fuel subsidies, while Greece announced the establishment of a 150 million euro energy transition fund to compensate for the recent increase in electricity prices.

Last week, the benchmark wholesale electricity price delivered by Germany next year reached more than 90 euros per MWh, about twice the level at the beginning of the year, and surpassed the record set in the summer of 2008 when oil prices approached 150 US dollars per barrel.

Julien Hoarau, head of EnergyScan, the analysis department of the French utility company Engie, warned that if there is no clearer information on the level of Russian gas supply to Europe in the winter, the market will continue to be tight and prices will rise. He said: “We are only in September, so we will have higher heating gas demand in the next few months, which is very worrying.”

Italian Environment Minister Roberto Cingolani (Roberto Cingolani) warned on Monday that Italy’s electricity bills could rise by 40% in the next quarter due to rising natural gas and carbon prices.

Rising energy prices have also brought political pressure to the European Commission. The European Commission proposed a large package in July. Green policy, Including the carbon price of car fuel and building heating.

The proposal has aroused strong opposition from countries such as Spain and France, who believe it will hit the poor, who cannot easily afford to switch to more environmentally friendly and lower-emission fuels.

Members of the European Parliament debated reforms in Strasbourg on Tuesday, which require the approval of most member states and the European Parliament. To avoid criticism, the European Commission proposes to establish a social fund worth billions of euros to help families most affected by the new carbon pricing system.

Additional reporting by Eleni Varvitsioti and Miles Johnson

*This article has been revised since its original publication, deleting the reference to Spain’s dependence on foreign energy, which relates to the overall energy structure, not just the electricity market

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