The price of electricity before taxes doubles in June that of the rate used by 10 million customers

The price at which the electricity companies buy and sell the MWh in the pool electricity, before taxes, in June is very far from the price that then pay the 10 million customers that have benefited from the regulated rate, after taxes. According to data from Red Eléctrica, this Wednesday the price in the spot market -the prices vary hourly according to the variation in demand and the availability of the equipment that exists at all times- has been at peak time, at 8:00 p.m., 105.5 euros per MWh, while the regulated rate paid by customers has set at the same time of the same day 262.4 euros per MWh. It is more than double, as you can see in the graph.

The consequence of this is that the price paid by customers of the regulated rate this Wednesday has been one of the highest in history, 24 cents per kWh at peak hours, while the cost for electricity companies is added to the ‘pool’ the electricity generated was half. Turning on the washing machine at 8:00 p.m. has had a cost of 50 cents per kWh, according to data from the consulting firm Selectra.

It must be taken into account that these prices have been set on a day in which, according to Red Eléctrica, renewable generation in Spain has registered a figure below the average, 42%. The average in May, for example, was 52%. Renewables, mainly hydraulic, is the cheapest technology, along with nuclear. In addition, the futures market for carbon dioxide emissions, CO2, has started to decline in June for the first time in 2021.

Industry experts, political opposition and consumer associations have repeatedly called on the Government to lower taxes, since it is the key element that triggers the price of electricity. The bill paid by households has three taxes and, especially, VAT, which in Spain is 21%, one of the highest percentages in Europe.

Inefficient Government Solution

Faced with this scenario, where the price of electricity paid by users is double that of the electricity pool, the President of the Government, Pedro Sanchez, and the Minister of Ecological Transition, Teresa Ribera, have announced a possible temporary suspension of a tax, “as was done in 2018.”

In September 2018, the Executive decided to suspend the 7% tax on electricity generation, which was resumed after six months. At that time, as reflected in the collection reports of the Tax Agency, the public coffers stopped entering 762 million euros, while the price of electricity did not drop decisively, according to Selectra.

Sánchez has ruled out in principle what would really lower the price of electricity, which is to reduce VAT from 21% to 10% or even 4%, like other basic products such as bread or milk.

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