Two years ago, amid an energy crisis, the government put a system in place to curb extraordinary profits from electricity sales and to shield consumers from sudden price surges. Spain set a ceiling on the price for electricity sales contracts, acting earlier and more strictly than many EU peers. The price limits were notably lower than the levels later approved by Brussels for all member states.
The executive then let this mechanism lapse when its validity ended on December 31. An extension was not foreseen in the omnibus decree on anti-crisis measures approved by the Council of Ministers that Wednesday. Implemented in October 2021, the measure aimed to stop energy firms from selling the electricity they generate from nuclear, hydro, and renewable sources at exorbitant prices tied to wholesale market dynamics. Price spikes followed the rise in natural gas costs and CO₂ emission rights, factors that these technologies do not inherently justify.
Since then, the government has instructed nuclear, hydro, and renewable energy producers to earn extra income only through contracts that respect the established ceiling price of 67 euros per megawatt hour (MWh). With markets normalizing, the administration argued that extending the ceiling was hard to justify. The rule was and remains an exceptional, temporary measure, and now producers can set their selling price with greater freedom, without a formal upper limit.
Returns totaling over 800 million euros
According to several outlets, electricity companies have already returned excess revenues amounting to 812.7 million euros to the system. Industry observers forecast that mandatory revenue cuts by year-end would bring the total to about 1,000 million euros for a regime lasting more than two years.
The National Markets and Competition Commission (CNMC), tasked with reconciling costs in the sector, reported that mandated revenue reductions from October to December 2021 reached 131.8 million euros, bringing the 2021 total to 370.4 million euros. In 2022, the adjustments continued to reduce overpayments in the sector.
The commission did not disclose the year-round refund amount as the settlements are public only after they close. Still, sources with direct knowledge indicate that this year, firms continued to add revenue to the electricity system until July, with the total reaching 310.5 million euros from January to July. These figures reflect ongoing settlements in the electricity sector, not a single monthly spike.
The ceiling price policy for electricity sales contracts was introduced in October 2021 and has since been revised and extended for various reasons. The most recent extension covered a period through the end of 2023, alongside other emergency measures to curb electricity, gas, fuel, and food prices. The government has kept some of these social shield measures in place for the coming months or into next year, depending on the situation. However, the policy to reduce excess income from power plants has not been extended.
In October last year, the Twenty-Seven reached a common understanding on continued electricity sector measures through June 2024. Yet the final text agreed with the European Commission and the European Parliament did not sustain those provisions. Spain currently applies a 67-euro ceiling for electricity contracts, even as the EU framework contemplates a general cap around 180 euros per MWh.
Overall, Spain’s approach demonstrates a balancing act between preventing windfall profits for generators and allowing market pricing to reflect supply and demand conditions. The country continues to monitor the energy landscape and adjust policy tools to protect consumers while ensuring the reliability of electricity supply. These adjustments come in the context of broader EU cooperation and ongoing discussions over how to align national measures with European rules, always with an eye on affordability and security of supply. The system remains under review to determine the right mix of safeguards and market incentives, with decisions grounded in the evolving dynamics of energy markets and fiscal considerations. (Source: CNMC reports and sector briefings.)