Over the past year, the government introduced a mechanism designed to curb outsized profits by electricity providers. This move followed a period of sharp price increases driven by an energy crisis and high wholesale costs. The policy aimed to prevent nuclear, hydro, and certain renewable producers from charging market prices that exceeded their actual costs, especially as natural gas and CO2 rights climbed. Its core objective was to deter abusive pricing while maintaining incentives for cleaner energy, setting a ceiling that determined how revenue could be generated and shared across the system.
The mechanism, activated by the state and adjusted several times since, covers nuclear, hydro, and renewable sources. It requires refunds of revenue earned when contracts exceeded the government’s maximum cap of 67 euros per megawatt hour (MWh). That cap served as the boundary between crisis-driven profits and windfall gains, according to government calculations.
Since the deduction system began, electricity companies have had to return a total of 366.2 million euros. Official figures reported by a major Spanish daily indicate the refunds occurred from September 2021 through July 2022, tied to revenue adjustments from contracts that surpassed the cap.
A national regulator responsible for reconciling industry costs, the CNMC, disclosed a revenue adjustment of 131.8 million euros between September and December of the prior year. It has not publicly detailed the impact on the major energy groups since then. In the current year, firms reportedly continued to add revenue to the electric system, totaling 234.4 million euros from January to July, as cited by the same reporting source and not formally published by the regulator.
Last September, the government first implemented the system to compel certain nuclear, hydroelectric, and renewable sources to generate additional income under the policy. Later, a broader macro decree tied to anti-crisis measures related to the war in Ukraine prompted a review of the framework. The update lowered extra revenue and expanded the mechanism to cover all high-priced contracts (above 67 euros per MWh). It also drew scrutiny over windfall benefits along the contractual chain, including price transfers within corporate groups that can ultimately affect end consumers. [Citation: EU regulatory updates, 2023]
ELECTRIC COMPANIES CONTEST EXTRA BENEFITS
Industry players deny that these extra benefits exist and insist that they sell all production under bilateral contracts at prices well below wholesale market levels. The sector notes a notable reversal from the previous year, with the 366 million euros refunded illustrating that profits were not derived from wholesale price spikes. The government had initially estimated a potential 2.6 billion euros in revenue within six months under the early version of the mechanism, a figure since moderated by regulatory changes. [Source: Government statements, 2021–2022]
The government has opposed using revenue reductions to help firms set prices, arguing that the policy allows suppliers to sign new contracts or renew existing ones at prices up to the cap of 67 euros per MWh to avoid returning extra income. [Cited analysis: Market watchdogs, 2022]
In parallel, the regulator has launched or is preparing additional measures to blunt windfall gains and lower electricity costs. One feature, operational since June, is the Iberian mechanism that places a ceiling on the price of gas used to generate power. By preventing gas price fluctuations from polluting the wholesale electricity market, this measure helps limit wholesale spikes that would otherwise ripple through other technologies. Separately, a special tax is being designed for large electricity firms to ensure they contribute a share of their income to social and business support programs, aligning with EU member state decisions. The exact structure of future taxes will be adapted to fit European Union guidelines while aiming to share burden more evenly across consumers and companies.