Spain rules out setting maximum cost of electricity amid soaring prices

The Spanish government has ruled out setting a maximum cost of electricity following a month of soaring prices that, on Tuesday, will see the eighth all-time high since mid-July.

This record, however, will be short-lived: on Wednesday, MWhs will average €132.47, with a high of €139.95 from 9 pm to 10 pm and a low of €114.74 from 3 am to 4 am. 

In a four-hour appearance before congress, the Spanish ecological transition minister, Teresa Ribera, said that this measure would be "against EU law."

For her, these kinds of regulations "end up turning into a lack of confidence in the country and in fines with interests which oblige us to the electricity companies back."

"We have to respect constitutional and EU law. Not doing so would be extremely risky, even if this would look attractive in the short term."

The government has ruled out a proposal from its junior coalition partner, Unidas Podemos, to set a maximum price for nuclear and hydroelectric power.

Ribera added that her cabinet is "concerned" about users not benefitting from a decrease in costs due to renewable energy, but said that the Spanish government could not fix the reasons behind the soaring prices such as pricier gas.

Yet, she said that in order to lower utility bills, her executive could increase the interconnection electricity network and further regulate prices by adding "less volatile" factors.

Record highs on Tuesday and Wednesday

Electricity in Spain cost €42.01 on August 31, 2020. A year later, the price continued on its unprecedented upwards trend, reaching a new average high of €130.53 per MWh, a 209% increase. That is, Spaniards who have a contract in the regulated electricity market will pay three times more than they did on the same day last year.

The priciest time to use electrical appliances will be from 9 to 10 pm, when a MWh will cost €137.46.

The cheapest time to use them on Tuesday will be from 4 to 5 pm, when it will slightly fall to €123.35.

A day later, the average price will rise by €1.94 to €132.47, peaking at just below €140 per MWh. This means electricity will cost on average 13.48% more than last Wednesday (€116.73/MWh) and almost three times more than a year earlier (€46.01/MWh). 

Attributed to the rising cost of the gas used by combined cycle power plants as well as carbon emission trading and the limited use of renewables, electricity is now three times pricier than it was a year ago when prices decreased following a pandemic-related drop in demand.

Not a new phenomenon

The price on Tuesday will surpass that of Monday, the day before, which for a very short time, will have the all-time high in electricity prices. Experts had already warned that soaring prices were not going away any time soon.

"We have to get used to seeing these prices until the end of the year," Marc Bonet, who is in charge of business development at Barcelona Energia, told the Catalan News Agency.

The current upwards trend has been ongoing for over a month, with the first peak on July 21, at €106.57 per MW/h – surpassing the January 2012 record of €103.76.

The Spanish government is under growing pressure due to this crisis, and its ecologic transition minister, Teresa Ribera, will appear before the congress to give an explanation on Monday evening.

'Lack of transparency' of some companies

In parallel, on June 1, new tariffs came into force, with higher, middle, and cheaper rates.

On Wednesday, Spain's competition regulation authority (CNMC) said that some companies made the most of the changes by raising prices by up to 30% more than what the tariffs allow without warning their customers.

CNMC denounces a "lack of transparency" of several firms – whose names have not been revealed – and calls for those affected to be compensated.