The state of shock protection measures grew from price increases, elevating consumer protection as the energy crisis deepened by the war in Ukraine. For two years, authorities have been refining and expanding their anti-crisis plans to cope with rising electricity, natural gas, and fuel costs. Now, the Executive is preparing to wind down many of the major safeguards that remain active for the coming year.
The government has informed the European Commission that current energy prices, while still high, have fallen from the historic peaks seen in the first half of last year. It is possible that most extraordinary measures could be withdrawn between this year and next. These protections were designed to shield homes and businesses from spikes in electricity and gas costs.
With cooling energy prices and inflation in view, the 2023-2026 Stabilization Plan and the National Reform Program, led by the Ministry of Economic Affairs under Vice President Nadia Calviño, anticipate winding back extraordinary support in 2023 and 2024 in response to the war’s impact. The executive stated that measures adopted in 2022 and 2023 are expected to be phased out in 2024, in line with evolving conditions.
The government maintains consumer protection schemes as a safety net should tensions in electricity and gas markets resurface. This safety net includes caps on sale taxes, direct support, and related protections that are being extended through the end of 2023, a period coinciding with local and regional elections. In principle, a general election is slated for December.
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The executive already signals to Brussels that it may withdraw these measures next year while some programs wind down. Earlier this year, the broad fuel discount of 20 cents per liter for all drivers was ended, leaving it available only to professionals in sectors hit hardest by fuel costs, such as transport, agriculture, and fishing.
Throughout the energy crisis, the Ministries of Economic Affairs, Finance, Industry, and Ecological Transition supported temporary extensions and hedging measures to gauge price movement and determine if continued protection was warranted. The latest expansion of the shield kept most energy protections in force for the entire year.
From the Ministry of Economic Affairs, the withdrawal will affect only interim energy-related measures currently scheduled to run through 31 December. Reductions in certain personal income tax categories, targeted aid for low-income households, and public transport subsidies are expected to remain in place, according to official sources from the Calviño-led department cited by El Periódico de España via the Prensa Ibérica group.
Inflation discount
The government argues that the measures designed to curb energy prices helped inflation ease from the double-digit levels seen last year, even though food prices continued to rise. The administration foresees inflation cooling further this year, with a slower rise next year as extraordinary protections are rolled back.
The sharp drop in electricity costs is expected to reduce production costs for businesses, easing price pressures driven by competition. By 2024, inflation is projected to fall moderately. The Stabilization Plan submitted to Brussels notes the gradual withdrawal of extraordinary energy measures. Yet the Bank of Spain expects a stronger disinflation path in 2025, which could push CPI growth below 2 percent.
The Bank also notes that the energy shield likely contributed to lower annual inflation by about 2.3 percentage points and supported modest growth. The national economy has benefited as a result of these protections, according to the bank’s annual report.
Shield through an election year
During the two-year energy crisis, the government has laid out consumer protection plans and offered a safety net for the remainder of the year in case tensions in electricity and gas markets flare again. Spain and Portugal’s Iberian mechanism, which caps the gas price used in electricity generation, is set to expire on May 31 but could act as a lifeline if gas markets tighten. The end of the Iberian exemption is expected by year’s end, with the new PVPC electricity tariff potentially reforming how electricity prices are linked to wholesale market movements.
The government also extended tax relief on electricity and gas bills through the end of the year, cutting the value-added tax on these bills from 21% to 5% and temporarily suspending the 7% tax on electricity generation, along with a reduced excise duty on electricity. A price cap of €67 per megawatt hour for certain types of generation contracts remained in place through 2023, with excess income being redirected to support the system and shield vulnerable households.
Additionally, the government expanded social support for electricity and gas with targeted reliefs for vulnerable consumers, including larger bill reductions and protections against supply interruptions. A temporary social bonus for middle-class families facing energy costs was introduced, offering notable discounts for households with two adults and two children earning up to €27,700 per year.
Help with the gas bill
The state also shielded millions of homes from rising gas costs by capping regulated-rate increases and setting a cap on butane cylinder prices. Subsidies funded by public money help reduce bills for customers on regulated gas tariffs by nearly 40 percent. In October, a one-time measure limited price increases for regulated gas tariffs through the end of 2023 and created a discounted rate for centrally heated homes in the neighborhood.
The public budget covers a significant share of the deficit in the Spanish gas system, supporting roughly 2.5 million customers while about 5.7 million consumers remain outside protection under market-based rates. The current public contribution to subsidize regulated gas tariffs stands at just over 500 million euros from October through March, ensuring ongoing relief during periods of price volatility.