Spain's coalition government, led by the Socialists, announced Tuesday a cut in energy taxes and the imposition of a temporary tax on the profits of energy companies in a bid to reduce consumers' electricity bills. that have shot up to record levels and have generated protests, report international agencies.
The Minister of Ecological Transition, Teresa Ribera, said that the government's urgent measures respond to an "unprecedented" situation that has arisen at a "delicate" moment, while the economy recovers from the effects of the COVID-19 pandemic and winter is coming, says AP.
Domestic electricity prices have risen 35% over the past year, Spain's statistics agency said on Tuesday.
The galloping increases have angered the population and increased pressure from consumer associations on the government.
The wholesale price of electricity is more than 250% higher than it was a year ago.
The galloping rise continued on Tuesday, when the average wholesale price broke its previous record and reached 173 euros ($ 204) for a megawatt-hour of electricity, 19 euros ($ 22,4) more than the day before. The increase will be felt strongly in Spanish households, which largely use flexible rates.
The Spanish government's package of measures to address the sharp increase includes a new tax until March on windfall profits that energy companies have made, which are the result of the way wholesale energy prices are calculated.
Officials say that during daily power auctions the government pays for all the megawatts it buys from different power sources at the highest price of all. That is usually gas-generated electricity, the price of which has skyrocketed.
Consequently, even if electricity is produced from cheap renewable energy, companies are paid at the same price as much more expensive gas, which means artificially high prices and windfall profits for companies.