The government keeps arming its anti-crisis shields as energy prices swing
The government continues to deploy a sequence of protective measures aimed at softening the impact of volatile electricity and gas costs on households and businesses. Over the past two years, price fluctuations spurred a series of reforms designed to shield consumers from steep spikes in energy bills. The goal remains clear: to blunt the blow of rising prices during an election year that promises ongoing political churn.
Legislation rolled out and revised to date has included price ceilings, targeted relief, and temporary tax relief. These steps form a broad safety net intended to prevent sudden, unaffordable increases in electricity and natural gas bills for millions of homes and firms should tensions reappear in energy markets.
Iberian exception carries into December
Spain and Portugal secured Brussels’ approval to extend the Iberian mechanism, which caps the price of gas used for electricity generation, through the end of the year. The cap, scheduled to expire on May 31, is designed to keep other power generation methods insulated from new gas price shocks that reached historic highs during the energy crisis. By reducing wholesale pressure, the measure helps to stabilize end-user electricity costs.
Officials estimate that the policy has saved Spanish consumers more than 5.1 billion euros since its June 15 launch, a reflection of falling wholesale prices. The extension will involve modest adjustments to the gas ceiling, nudging increases from 55 to 65 euros per megawatt hour in December, with the aim of smoothing the transition.
In March, the Iberian mechanism was not triggered because wholesale gas prices stayed below the ceiling. That favorable dynamic could persist for several months. Still, if gas markets tighten again, the Iberian border acts as a crucial safeguard for both Spain and Portugal’s energy users.
[Cited analysis indicates ongoing cost containment under the Iberian cap]
Taxes, deductions and assistance
Throughout this year, the executive extended a suite of measures designed to prevent sharp rises in electricity costs. Tax reliefs reduced the value-added tax on electricity from 21 percent to 5 percent, suspended a 7 percent tax on electricity generation, and lowered the special electricity tax from 5.1 percent to 0.5 percent, all aligned with the EU’s permissible minimum.
As part of early crisis response, an agreement was announced to scrutinize unexpected profits by electricity providers at the end of summer 2021. The aim was to prevent producers from exploiting price increases to boost revenues. Practically, the government put a ceiling on electricity contract prices and committed to maintaining it through at least 2023.
The policy sought to prevent the sales of power from nuclear, hydroelectric, and renewable sources at wholesale prices driven by natural gas and CO2 allowances that these technologies do not incur. The mechanism compelled nuclear, hydro, and renewable generators to return extraordinary revenues above 67 euros per MWh. The government quantified refunds totaling 450 million euros in a little over a year.
Concurrently, social electricity support expanded for vulnerable consumers, and temporary boosts to bill discounts—up to 65 percent and 80 percent of the total amount, depending on the degree of vulnerability—were introduced. A ban on disconnecting vulnerable households was extended as part of these anti-crisis measures. A new exceptional social bonus was created for low-income families, with a two-adult, two-child household earning up to 27,700 euros eligible for a 40 percent discount on electricity bills. The ministry overseeing ecological transformation is examining reforms to set income-based limits for larger families receiving direct benefits regardless of overall income levels.
Help with gas bills
Steps were also taken to shield millions of homes from rising gas costs by capping increases in regulated rates and setting a cap on the maximum price for butane cylinders at 19.55 euros. To cushion the impact, the government injects subsidies funded through the public budget, helping to reduce regulated gas rate bills by around 40 percent for affected households.
Last autumn, a broad package was launched to deter sharp increases in regulated gas tariffs through 2023 and to create a new kind of discount for centrally heated homes in neighboring communities. These measures aim to close the gap in the gas system’s finances with a public budget, covering discounts for roughly 2.5 million customers while excluding some households that rely on market-rate gas tariffs. The government also extended the cap on increases for the Last Resource Tariff, updated quarterly to reflect gas price movements, through the end of 2023. The contingency plan also introduces a new type of regulated gas rate for residents with central heating, designed to reduce bills by about half for qualifying households.
Overall, these policies reflect a deliberate effort to keep energy affordable during a period of economic uncertainty and geopolitical disruption, while preserving incentives for energy suppliers to maintain a stable and secure supply chain.