The government introduced a measure at a difficult moment, during a severe energy crisis almost two years ago. It aimed to curb extraordinary profits by electricity suppliers and prevent misuse of income as energy prices surged. Spain moved ahead of other European Union members in adopting such controls, implementing a price ceiling on electricity contracts and enforcing stricter limits than those later approved by Brussels for all member states.
The policy, which began in Spain in October 2021, sought to stop profits from being generated by selling electricity generated in excess of the ceiling price. Some nuclear, hydroelectric, and renewable sources were driving steep wholesale prices, driven up by natural gas costs and CO2 emission rights, costs not aligned with the actual production expenses of these technologies.
To address this, the government required nuclear, hydro, and renewable producers to return excess revenues from contracts signed above the 67 euros per megawatt hour (MWh) ceiling. These so-called windfalls had to be returned to stabilize the system, resulting in a total excess income of 812.7 million euros being redirected, according to estimates available to EL PERIÓDICO DE ESPAÑA.
The National Markets and Competition Commission (CNMC), responsible for assessing sector costs and expenses, reported mandatory income reductions totaling 131.8 million euros. The agency did not disclose the year’s rebate figures because settlements are published only after the entire year has closed.
In the current year, companies continued to inject extra revenue into the electricity system, reaching 310.5 million euros between January and July, based on multiple sources familiar with the sector’s formal agreements. Figures for this year and the previous one exceed initial estimates released by the Ministry of Ecological Transition, which had anticipated reductions around 330 million euros annually.
Measures to curb electricity, gas, fuel, and food prices after a crisis-driven surge
This year, some firms still directed additional revenue into the electricity system, with credible sources confirming the figure reached at least 310.5 million euros between January and July. These amounts align with assessments from various observers who track sector agreements, and they underscore the government’s ongoing effort to soften price shocks for consumers.
Extending the price ceiling?
The price cap was activated in October 2021 and has been reviewed and extended multiple times, with its validity extended beyond its initial term. By the end of 2023, an array of exceptional measures remained in place to influence electricity, gas, fuel, and food prices. The current administration has not announced a firm plan to further extend anti-inflation measures, but it is inclined to keep some measures in effect through the end of the year, contingent on market trends.
Last week, the Twenty-Seven reached a common stance on electricity market reform, which now awaits negotiation with the European Parliament and the European Commission for final approval. The agreement, supported by all member states except Hungary, allows countries to maintain price controls at least until mid-2024. Spain continues to apply a ceiling of 67 euros per MWh for electricity contracts, though the broader EU framework contemplates a potential ceiling near 180 euros in certain scenarios.
Long-term effects of Europe’s electricity reform on consumer bills
“The non-marginal revenue cap has often provided a crucial revenue stream for member states to soften the impact of high electricity prices on households.” The reform text, approved by the Twenty-Seven, also equips member states with tools to offer relief during price spikes. It envisages maintaining these tools until at least June 30, 2024, effectively signaling that price controls may continue for an additional period while markets stabilize.
In practice, the reforms look to balance short-term relief with longer-term market adjustments, aiming to stabilize bills without strangling investment in the energy sector. Analysts note that while the immediate reductions help consumers, the real effect on monthly bills will unfold over several quarters as new pricing structures and market dynamics take hold. The path to full implementation remains gradual, with ongoing negotiations shaping the final framework across Europe.