Government Studies Suspending Some Taxes On Electricity Due To Rise In Prices

The Government is evaluating the possibility of suspending some taxes present in the electricity tariff to moderate its final cost for the consumer. The Government does not rule out suspending some taxes, as it did in 2018 , when faced with an escalation in prices, it suspended the 7% tax on electricity generation for six months and deactivated the “green cent” for fuels for electricity production.

The price of electricity does not stop rising. This Wednesday it reached 94.63 euros per megawatt / hour (MWh) in the wholesale market, the third highest price in history, according to data from the Iberian Electricity Market Operator (OMIE).

If historical records are analyzed, this figure has only been exceeded by the 94.99 euros MWh that it reached on January 8, during the Filomena storm and the daily historical maximum, registered on January 11, 2002, which was 103, 76 euros.

All of the above will have an impact on the final electricity bill. According to the analysis carried out by FACUA-Consumidores en Acción on the evolution of the semi-regulated tariff (PVPC), “if the prices applied from June 1 to 15 are extrapolated to a full month, the average user bill would suffer an interannual increase of 27 , 53 euros and would stand at 88.11 euros (taxes included). It would be the second most expensive bill in history , with only 88.66 euros ahead of the first quarter of 2012 “.

The interannual increase of these fifteen days represents 45.4% for the average user compared to June 2020, when the monthly bill stood at 60.58 euros. The average user’s bill last May was 82.13 euros.

The average user used by FACUA in its analyzes has a contracted power of 4.4 kW and a consumption of 366 kWh per month. It is a profile prepared after the analysis of several tens of thousands of invoices for inhabited houses.

Regarding the percentages of consumption in the three time frames of the new billing system , the association has taken as a reference the current average user profile without hourly discrimination published by the CNMC, which consumes 45% of electricity in off-peak hours 29% during peak hours and 26% during normal hours.

The rise in prices is taking place in part due to the entry of the new bill, but mainly because gas prices are at their highest in the last decades. In addition, the price of CO2 emission rights (authorizations for power companies to use fossil fuels to generate electricity) have risen sharply in recent months in an attempt by Brussels to accelerate the decarbonization of the economy. However, it must be borne in mind that 70% of the cost of electricity is regulated by the Government.

What does the Government propose?
To combat this rising cost of electricity, the Government does not rule out suspending some taxes again, as it did in 2018 . It must be remembered that around 70% of the electricity bill are regulated costs that are largely made up of taxes.

The Minister for the Ecological Transition, Teresa Ribera, said this Wednesday in the Congress of Deputies that, together with a ” serious reform of energy taxation “, in which the Government is already working, “it is not ruled out that before a tense situation, like the current one, we have to go back to doing what we already did at the time “.

Measures taken in 2018
In 2018, the Government, given the rise in electricity prices in August and September of that year, adopted a series of measures , including the suspension for six months of the tax on electricity generation of 7% and introduced an exemption in the Hydrocarbon Tax to deactivate the tax known as “green cent” on fuels for electricity production.

At that time, Ribera explained that the suspension of these two taxes would have an impact of around 4% on the bill of domestic consumers.