The Government has approved an additional credit of 2 billion euros to compensate part of the electricity bill rebate on consumers’ bills this year and next, according to the anti-inflation package published on Wednesday in the Boletín Oficial del Estado (BOE). This figure is not trivial when compared to the government’s star initiative approved on Tuesday, the VAT rebate on certain foods products for six months, to which the Executive has allocated some 1.8 billion euros. Moreover, the figure is more than 10% of the total amount of the electricity system costs which usually amount to about 17 billion euros.

Justified by elevated electricity prices

In the royal decree-law’s explanatory memorandum, the Executive justifies this move because “the situation of elevated electricity prices has led to a sharp decline in the electricity system charges.” The charges component is one of the parts of the electricity bill -along with fees, taxes (reduced to 80%) and the price of energy in the wholesale market- with which renewables, the surplus cost of energy production in non-peninsular territories and the tariff deficit are financed. The Executive lowered the rate of charges on bills by 30% throughout 2022 and foresees a further reduction of close to 10% by 2023 to offset the rise in energy prices.

In addition, the tax on electricity production was also suspended throughout this year -like the tax rebate on bills, consisting of VAT and the Special Tax on Electricity, will remain so until December 31st of 2023–, meaning the electricity sector will have to be compensated “for the amount equivalent to the reduction in revenue”.

In the absence of such revenues, and as added in the text of the royal decree-law, the high prices of the cO2 emission allowances have resulted in “additional income during the 2022 fiscal year.” Specifically, according to the budget execution report from the Ministry of Finance, by the end of November, the State had collected almost 3 billion euros through these tenders, 32% more than a year earlier. In fact, the Government adds that these revenues “make it likely that this year will close with a small surplus in terms of charges”

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