The government launches a plan to begin the new tax process targeting large energy firms and major banks. PSOE and United We Can will bring the bill to Congress this Thursday, aiming to introduce a temporary levy on the extraordinary profits of the giants in both sectors. The goal is to raise about 7 billion euros over two years to fund measures that cushion households and businesses from the inflationary squeeze.
Government to present temporary tax on banking and energy to Congress
The Ministry of Finance, the body charged with shaping the technical details of the new tax in recent weeks, has not disclosed the specifics yet. Details on the applicable rate, the tax base, how to calculate the extra gains, and the exact impact on individual companies remain undecided. Despite these uncertainties, the leading energy players dispute the notion that they enjoy extraordinary profits that would justify a new tax.
As the plan is unveiled alongside its half year results, Iberdrola and Endesa — the country’s two largest electricity groups — cautioned the government that the supposed extra gains are nothing more than a claim and that the large firms should not be singled out for higher taxes amid the energy crisis and rising prices. Their profits have, in fact, shown mixed movement this year.
Iberdrola reports a record first half with net income reaching 2,075 million euros, up 36 percent, driven by a downturn in international trade in the United States, Brazil, and the United Kingdom. It warns that the strong earnings surge is partly due to withdrawing from international markets and notes a slowdown in Spain. The company also points out that its net profit in Spain declined 26 percent from January to June due to energy prices not fully passed along under fixed price contracts.
Endesa, meanwhile, posted 916 million euros in net profit by June, up 10.1 percent, largely helped by the partial sale to Enel, its main partner in the electric mobility sector. Excluding this transaction, ordinary net profit fell 11.8 percent year over year to 734 million in June, reflecting soft performance in Spain. Endesa emphasizes that it buys more energy on the market than it sells, so higher market prices translate into higher costs and weigh on results.
Opponents brief
Across Europe, the profit gains have mainly favored gas and oil producers rather than integrated electricity groups. Iberdrola’s president commented during a conference with analysts that competitors like Naturgy and Repsol are in different circumstances, arguing there are no extraordinary profits for electricity firms at this time.
Electric utilities have consistently denied receiving large subsidies, while the government contends these benefits would be trimmed. In recent months, they have been selling much of their electricity generation at prices lower than those set in advance within the market. Iberdrola asserts it has sold all of its production to date, projecting 80 percent in 2023, 60 percent in 2024, and 40 percent in 2025.
J. Osé Bogas, CEO of Endesa, told analysts that the firm enjoys solid profits, though he emphasized that the company would not see extraordinary gains from recent legislation. The government has already rolled out several measures to curb electricity price surges, including interventions in prices defined in corporate contracts that feed into rising consumer costs.
State oversight
The administration demands clear proof that power producers are not exploiting high market prices to profit from energy generated by nuclear, hydro, or renewable sources, including the impact of rising natural gas costs. Regulators have been required to disclose data from thousands of contracts detailing the prices at which production is sold; if contracts exceed a maximum threshold, the difference must be refunded.
For large electricity groups, a deeper examination will review internal contracts between subsidiaries and evaluate the final price charged to customers if extraordinary benefits are cloaked in the value chain. This level of scrutiny has not yet been extended to gas and oil firms.
Today, major electricity companies like Iberdrola and Endesa map out strategic plans for the coming years, projecting continued profit growth aligned with heavy investment in renewable energy, grid improvements, and energy efficiency. Iberdrola aims for a record profit range around 4,000 to 4,200 million euros by year’s end, while Endesa maintains a target near 1,800 million euros.
A 7,000 million euro target
As stated by the Spanish president in the State of the Nation debate, the government intends to levy a temporary tax on extraordinary profits earned by electricity, gas, and oil firms through price increases during the energy crisis and amid higher ECB rates. The plan is projected to raise roughly 4,000 million euros from large energy players and about 3,000 million from financial institutions over roughly two years.
Opponents argue that such levies will ultimately be passed on to consumers through higher prices or fees. The Treasury has suggested that the forthcoming law would explicitly ban passing on these costs to final customers, and future regulation will empower the National Markets and Competition Commission to monitor behavior and penalize firms that fail to comply with the new rules or that shift the tax burden to customers.