The Minister for the Ecological Transition underlines that the community framework prevents setting maximum rates in the wholesale market while August closes with a new record of 130 euros per megawatt
The third vice president and minister for the Ecological Transition, Teresa Ribera, has recognized this Monday the need to review the taxation of energy to contain the electricity bill, but has also stressed that a new regulation for the use of water must be approved on the part of hydroelectric plants, which he “blamed” for the strong price rises in the wholesale market, which has been smashing records in recent weeks.
During her appearance in the corresponding Commission of Congress, the minister explained that in the last three months (June, July and August), hydroelectric plants have set the price of the wholesale market between 59% and 65% of the hours when they have been climbing out of control. For example, this Tuesday, when the price of electricity in the wholesale market will mark a new historical maximum of 130.5 euros per megawatt / hour, hydroelectric power is the determining factor in 17 hours out of 24 hours. And all this without any external reasons that justify that the cost of hydroelectric energy – which does not depend on fossil fuels and whose only cost was the construction of the reservoirs – rises so much. On the contrary, Ribera accused the hydroelectric plants of speculatively taking advantage of the moment and the “scarcity prices” to make their fortune. Of course, he acknowledged that the “scandalous 70% reduction in dammed water is not ruled out that is compatible with the norm”, but added that “it is not reasonable.” And he issued a veiled warning: the lack of social empathy of these electricity companies will penalize them on the stock market.
Ribera once again hid behind the fact that the price formation system in the wholesale market is established by Community legislation and stressed that the Government “will never adopt measures that are fundamentally contrary to the Community framework” because that “ends up becoming fines and damages the credibility of the country. “We must respect the framework of community and constitutional law, otherwise it would be enormously risky, however attractive it may seem in the short term,” he said. United We Can, the coalition partner of the PSOE, has proposed to lower the electricity bill by limiting the price of nuclear energy and hydroelectric power by decree law. But the third vice-president has affirmed that it is impossible in the community framework to limit the wholesale price of energy. He only pointed out that the government “will fight” in Europe to change the market design so that consumers can benefit from the low costs of renewable energy.
Among the measures that the Executive can approve, according to Ribera, without waiting for a change at the community level, is the revision of taxation, a greater energy interconnection with neighboring countries, the reduction of the profits of companies after of price formation, the promotion of long-term contracting and self-consumption. He recalled that the two regulations in process (the creation of the national fund for the sustainability of the electricity system and the return to the consumer of the CO2 rights not issued) will allow a 15% reduction in the electricity bill.
Ribera has had to go to Congress to give explanations about the continuous and soaring rise in the price of electricity in the last two months, which this August has pulverized all records, which will translate into the most expensive bill in history for the consumers.
The unstoppable upward spiral in the price of electricity has led the political debate to focus on how to lower this cost. The Government has even opened the door to creating a public energy company that will take over the management of hydroelectric plants as their exploitation concessions end by the electricity companies, as has long been requested by its partner in the Executive , United We Can, but it is a possibility in the medium or long term.
For now, the only measures adopted by the Executive have been to lower the VAT on electricity from 21% to 10% until the end of this year for all consumers with contracted power up to 10 kilowatts (kW), and provided that the average monthly price of the wholesale electricity market is above 45 euros / MWh, and the suspension of the 7% tax on electricity generation for three months.
In any case, Ribera wanted to make it clear that although the price of electricity in the wholesale market has tripled compared to the previous year (and that of gas has multiplied by five and a half), the transfer to the domestic consumer’s bill has not been so serious. Specifically, in the first semester of 2021 the regulated rate rose 6.9% compared to the previous year, and that of households that are in the free market has fallen 4.6% compared to 2020, according to data from the minister . The reason for this contention was the reduction of VAT from 21% to 10%, a reduction that will continue until the end of the year, since the energy tax was suspended. Although in recent months, the free market bill has dropped in contrast to the regulated rate, the latter is still 20% cheaper than the free rates. Ribera reiterated the government’s commitment to regulate the PVPC rate again and make it less volatile, as requested by consumer organizations, but insisted that more will have to be paid for this security premium.
Light at highs
Compared to August of last year, the average price of electricity has tripled its values from about 35 euros in August 2020 to 103 euros per megawatt hour (MW / h) of this last month, according to the figures of the Operator of the Iberian Energy Market (OMIE). This Tuesday it will pulverize all the records previously seen and will shoot up to 130.5 euros per megawatt hour.