Either reduce the rates, or reduce your additional benefits

The government warns electricity companies: either reduce tariffs, or reduce additional benefits. The stellar event launched by Pedro Sanchez in Brussels, the Iberian border at the price set by the combined cycle plants (natural gas), will have to wait several weeks. Meanwhile, the executive has approved, among other things, the strengthening of the mechanism for reducing excess profits in the electricity market caused by the high price of natural gas.

The government has stepped up this mechanism to reduce the sector’s extraordinary profits as part of a plan to respond to the Ukraine war, which was approved by the Council of Ministers on Tuesday. It did so because, according to sources in the Ministry of Environmental Transition, there is already “evidence” that these additional benefits for aragas technologies exist, after the International Energy Agency (IEA), the European Commission and the last European Council.

This now enhanced mechanism is not fiscal in nature (it is not a tax on electricity companies), but rather regulatory and seeks to force inframargin technologies (nuclear, hydropower and some renewable power plants) to return what is over-taxed. High market prices, wholesale trade caused by gas in recent months.

The government released it in September but then had to remove its decaffeinated to save its approval in Congress by leaving bilateral contracts at a stable price. In the sector, they argue that their mere existence allowed for some self-restraint in their profits. But the government is strengthening it with a price cap that new or renewed contracts cannot exceed.

Thus, every company that renews long-term bilateral power supply contracts should consider whether to raise the price of energy by more than 67 euros per megawatt hour (MWh). This margin is calculated according to the historical price of the Iberian gas market (20 euros / MWh). “Either we save to reduce consumer taxes, or companies will be more competitive,” ministry sources said.

For factories that set prices above 67 euros / MW / h, the adjustment coefficient (so-called alpha factor) is set at 10%. Anything above this figure will be collected by a system designed for taxes: a regulated portion of a government-approved receipt that pays for items such as premiums for ancient renewable energy, additional production costs or debt outside the peninsula. The so-called tariff deficit.

The received collection will depend on how the new contracts are concluded. “We expect contract prices to decrease. And if this is not the case, we will have an additional collection to clear the bills of each customer, “- explained the Ministry and opens the door to a new tax drop depending on what can be accumulated for these excesses. Advantages.

The mechanism also applies to intra-group contracts signed by large energy companies between their subsidiaries. In the case of Endesa, it stated that the price at which it sells basic electricity (nuclear, hydropower and non-regulated renewable energy) is 54 euros / MWh in 2022 and 58 euros in 2023; The company claims that it has sold 97% of its base products at this price (54) for this year and 55% by 2023 at a price of 58 euros, so in this case, the effect of this reduction will be practical. Zero.

Renewable energy advancement

Another major measure approved in a decree approved Tuesday is the $ 1,800 million advance paid by factories covered by RECORE mode – renewables, cogeneration, waste – that had to adjust their status in January 2023 due to high wholesale trade. Prices for the last few months. This will allow taxes to be reduced by 55%. The effect will be a € 6 discount for the average consumer. In addition, facilities in RECORE mode have the right to enter into bilateral contracts with marketers or major customers.

Added to this are other measures already announced, such as reducing invoice taxes and boosting the social bonus. In the case of these discounts, the main novelty is that the limits of access to them are increasing: the so-called. The IPREM limit increases 0.3 times for adults and 0.5 times for minors. And there is “symbolic change,” said Vice President Ribera, but “it’s important: stop talking about families and talking about people living together” at home so you can access the bonus.

60% and 70% discounts for vulnerable and severely vulnerable customers will last until June 30. And to enforce the Supreme Court ruling in January last year, the bonus funding obligation extends to the entire electricity business network (including transportation and distributors), which runs for two years and is automatically transferred. Beneficiaries of Minimum Living Income (IMV). Thus, the number of beneficiaries will increase by 600,000 households, to 1.9 million.

Another novelty is that in order to accelerate the deployment of clean energy and the accumulation of applications, a “super-accelerated procedure” has been introduced for the processing of small renewable energy installations: up to 75 megawatt (MW) wind power and 150 MW photovoltaics, provided they are specially designed. Without protection and does not contain evacuation systems for more than 15 kilometers.

It is a “more flexible” procedure, but with “all guarantees”, on which it “worked with the European Commission”, Ribera said. Network access capacity of at least 7 GW is also reserved for self-consumption.

According to the plan approved this Tuesday, the electricity-intensive industry will see electricity bills reduced by 80% by 2022, as well as more compensation for the cost of CO2 transmitted to electricity. In addition, strategic natural gas reserves will move from 20-day consumption to 27.5 days, with more flexibility.

With regard to the so-called Iberian Exemption Mechanism, the scheme planned by the government involves the holding of the first auction in which gas plants will bid on current prices and which will be a reference for French exports. The second compliance will use this limit, which, for example, will result in a price of 120 Euros / MWh instead of the existing 250 Euros. The difference in gas payments will be proportional to the rest of the generation. As a result, according to the Ministry, there will be significant net savings for consumers, the so-called. Without the use of a tariff deficit.