Spain approves emergency plan to deal with high energy bills

An electricity pylon of high voltage power lines is seen in Galapagar, Spain January 20, 2017. REUTERS/Juan Medina/File Photo

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MADRID, March 29 (Reuters) – Spain will cut connection fees and tax excess profits on new power supply contracts as part of a multibillion-euro contingency plan to protect consumers. businesses and consumers from soaring energy prices, the government announced on Tuesday.

Initially announced on Monday, the cabinet on Tuesday approved the 16 billion euro ($18 billion) package of subsidized loans and direct aid which also includes measures to cap rent increases and boost employment for young people and women. Read more

“The objective for electricity prices is: as low as possible,” Economy Minister Nadia Calvino said at a press conference after the weekly cabinet meeting.

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Introducing the package, which is due to come into force on April 1 and last for three months, Energy Minister Teresa Ribera said Spain would spend around 2.5 billion euros on reducing interconnection charges for power-hungry users.

Soaring energy prices, exacerbated by the Russian invasion of Ukraine, have sparked widespread social discontent that the minority government is now trying to assuage.

Returning to a measure that caused consternation among power companies when it was introduced in a different format last year, Ribera said the government would cut profits on new fixed-price, long-term contracts. whose price exceeds 67 euros per megawatt hour.

She added that from 2023 the government would encourage power utilities to sell power directly to businesses and bypass the wholesale market, in a bid to cut costs.

Of the total package, most of which still needs to be approved by the European Commission, €6 billion will come from direct aid and mostly extended tax cuts from a previous package linked to the COVID-19 pandemic. 19, while the remaining 10 billion euros are subsidized loans.

Ministers are still finalizing details of a so-called ‘Iberian exception’ granted by the EU which will allow Spain and Portugal to cap gas prices. Read more

Bank of Spain Governor Pablo Hernandez de Cos said earlier that the current energy shock should be addressed through a common European response given the weaker or limited fiscal capacity of some European countries, including Spain.

In this context, De Cos underlined that the rescue plan for Spain should be temporary to avoid overburdening public finances.

Although Spain’s public debt has shrunk to 118.7% of gross domestic product from 120% in 2020, it is well above the EU average of 97.7% recorded in the third quarter, according to Eurostat .

($1 = 0.8984 euros)

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Reporting Inti Landauro, Belén Carreño and Jesús Aguado; Editing by Nathan Allen, David Evans and Tomasz Janowski

Our standards: The Thomson Reuters Trust Principles.

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