Ten million households in Spain await decision about measures to help keep electricity and gas bills down

The end of the reduced IVA (sales tax) on electricity and the regulated gas tariff would cause bills to increase by up to 25%

José María Camarero

Madrid

Monday, 13 November 2023, 16:29

Households in Spain are awaiting a decision on whether the government will extend its support package of measures to lessen the impact of the Ukraine war on families.

The Cabinet will decide on 31 December whether it will extend measures to alleviate rising inflation, such as reduced IVA (Spain's sales tax) on electricity and gas implemented since the start of the Russian conflict in March 2022. IVA on electricity was reduced from 21% to 5%; the electricity tax was also reduced from 5.1% to 0.5%, and there have been social bonuses involving discounts of up to 80% for vulnerable families. But household bills could rise by up to 25%, all at once, from 1 January next year if the measures are not extended.

Electricity contract holders have a wide range of options in the free market with the prices currently in force. The most competitive offers currently are around 0.12 euros/kWh, depending on the conditions of each type, according to the National Competition Commission (CNMC). The regulated tariff for last month, according to Competition's calculations, applied an average tariff of 0.13 euros/kwh.

Residential communities, on alert

Meanwhile, the doubts surrounding natural gas stem from the possible extension of the regulated tariff (TUR). This has been strongly protected by legislation since October last year. At that time, the government decided to extend the limitation on increases for this gas tariff. Since November 2021, increases in the TUR were limited to around 5% in each quarterly review, despite the rate of the increase in gas prices causing an increase in this tariff of up to 30%.

The government therefore agreed to extend this cap on the regulated gas tariff and enabled a new regulated tariff (TUR 4) that could be used by residents' associations with communal boilers. According to the current law, this system ends at the end of the year.

If this tariff is not extended, these residential communities will have to leave the regulated tariff and turn to the deregulated market, which would cause a hit to the pocket in the face of winter. Buildings with a regulated gas tariff are paying 4.5 cents per kilowatt per hour, when in the deregulated market it is 7.5 cents.

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