Spain's government confirmed Sept. 15 a series of short-term temporary "shock measures" that it will implement with immediate effect as it fights to reduce consumer power bills to a similar level to 2018.
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The measures intend to bring "an immediate halt to the effect that the electricity price is having on other sectors of the economy," including its impact on inflation and industrial competitiveness, it said in the State Gazette (BOE).
The main target is to reduce the impact that record gas prices are having on the power market, with a target of achieving an overall reduction of 30% for consumers' bills.
Spain's marginal price market sees the daily price usually set by gas-fired CCGTs with all technologies receiving that price.
As a result, certain technologies are making "excess income" during the current exceptional situation, the government said.
Each Eur10/MWh of gas price increase would lift power by Eur20/MWh ($24/MWh), compared with a Eur3.70/MWh impact for a Eur10/mt increase in the CO2 price.
The emergency measures focus on "non-emittng controllable power," effectively nuclear and hydro, via a series of auctions organized by the regulator.
Operators will have to offer annual forward contracts for 25% of each plant's generation based on a 10-year average.
The mechanism will include a reserve price calculated between the companies themselves and the regulator.
The first auction will be held this year with 15.8 TWh to be auctioned to smaller distributors and consumers, it said.
By company, Endesa will have to offer 6.74 TWh, Iberdrola 7.32 TWh, Naturgy 1.41 TWh and EDP 364 GWh, according to the BOE.
A second measure will target the gas impact via a clawback on all non-emitting power plants over 10 MW until March 31, 2022.
Utilities may face around Eur55/MWh of a clawback, according to a research note from RBC.
RBC estimates around a Eur1 billion impact for Iberdrola, Eur900 million for Endesa, Eur200 million for Naturgy and Eur55 million for EDP and Acciona Energia.
The government also confirmed a modification to its Water Law to avoid speculative emptying of hydro reservoirs.
The market measures will be accompanied by fiscal changes including a reduction in the 5.1% electricity tax to 0.5% and the extension of a 7% generating tax suspension for Q4.
The Eur900 million surplus from CO2 permit sales will be allocated to reduce consumer bills, it added.
VAT for electricity for 2021 has already been cut from 21% to 10%.