The Spanish government will suspend a 7pc blanket tax on power generation for the third quarter as part of provisional measures to mitigate the impact of high wholesale electricity prices on consumers' bills, environment and energy minister Teresa Ribera said.
The three-month tax suspension — as well as a six-month reduction in value-added tax (VAT) on power from 21pc to 10pc — will be approved on 24 June, Ribera said.
Consumers with less than 10kW of contracted supply will pay 10pc VAT in July-December if monthly average wholesale prices exceed €45/MWh. The reduction will be applied to vulnerable consumers irrespective of wholesale prices.
The two measures will help reduce electricity bills by around 10pc, Ribera said.
The minister had already disclosed that the government was considering a temporary suspension of power taxes, in a hearing in the Spanish congress on 16 June. Forward contracts moved down sharply that day because of the news, despite limited falls in EU emissions trading system (ETS) allowances and small increases in PVB gas prices.
Power futures fell again in the following session, shrugging off increases in PVB and EU ETS prices, with the third-quarter contract recording the highest number of trades on the day.
The third-quarter contract fell from deal prices as high as €87.50/MWh on 16 June to as low as €82.25/MWh on 17 June — a 6pc drop. It has since recovered amid increases in PVB and EU ETS prices — it was trading at €86/MWh in the early afternoon today.
The Spanish third-quarter premium to France reached a high of €14.05/MWh on 15 June but narrowed following the tax news, ending at €10.80/MWh on 18 June.
