A year ago, the Spanish government issued the first decree to offset the effects of the rising cost of electricity. At that time the war in Ukraine was not even on the horizon, even though Russia was making threats about cutting off the gas supply, but the increasing costs were making bills unaffordable for many. That package included tax and regulatory measures designed to make them cheaper.
A year later, electricity bills have changed completely. Twelve months ago the cost of electricity used by a household (euros per kw/h) accounted for a quarter of the sum paid to the company each month. Now it is more than 75% of the bill. The problem is that this is the part that has increased most during the past year.
Taxes have been most affected. In June 2021 the government reduced IVA (VAT) on electricity bills from 21% to 10%, an unprecedented move. Then came a reduction in the electricity tax from 5.11% to 0.5%, and finally IVA was reduced again, from 10% to 5%. In total, taxes only now account for 5.7% of the bill.
Cap on the price of gas:
The fixed part of the bill, the money that we pay even if we don’t use a single kilowatt of electricity, has also been reduced over the last 12 months. The first package of measures reduced these charges by 90%.
However, despite all these measures, the average electricity bill has continued to rise in recent months due to the increased cost of generating electricity, which has almost matched the reductions applied since June 2021.
And, to make matters even worse, since June 15th of this year the price of the gas which is used to generate electricity has been capped, but the gas companies have to be paid the full price, not the reduced price. This is an additional charge on the electricity bill, and it will be in force until at least May 2023 when the so-called Iberian exception, the dispensation granted by the EU for Spain and Portugal to cap the gas price, is due to expire.
