The government of Spain has reportedly enacted emergency measures aimed at lowering immense energy bills by diverting billions of euros in exceptional profits from energy firms to customers and restricting gas price hikes.
According to credible reports, Spain proposes to control the profits that energy firms employing hydropower, and other renewable energy generators, may earn from rising electricity costs. This is the first such comprehensive action in Europe, where wholesale energy rates have doubled in a year.
In the next six months, the government aims to transfer approximately €2.6 billion (£2.2 billion) from businesses to consumers.
Teresa Ribera, Minister for ecological transition for the government of Spain, stated during a press conference that the policy would be in effect until the end of March 2022, when the prices of natural gas are expected to settle as winter usage drops.
Leading utility companies Iberdrola and Endesa are expected to lose approximately €1 billion in revenue as a result of the action, according to analysts at RBC Capital Markets, a global investment bank. Endesa shares dropped 5.2% on Tuesday's (14 Sept) close.
RBC estimates that the impact on EDP and Naturgy would be around €65 million and €200 million, respectively.
Meanwhile, Spain would also utilize an extra €900 million, which it expects to earn this year by auctioning carbon emission permits, to lower bills. The government cited high market prices as the rationale for the extra money.
With natural gas demand accounting for a large portion of recent rises in European power costs, which have fueled inflation, Spain will cap regulated price hikes for the fuel at 4.4% in the second last quarter, contrary to expectations of a 28% hike.
According to Ribera, the "shock plan" measures will reduce the average consumer's monthly power bill by 22% until the end of the year.
Though firms would have to bear the additional expenses while the restrictions are in place, the ministry claims that they will be repaid eventually through higher tariffs, making the net cost to them neutral.