Spain evaluates measures to cut power bills as prices hit record levels

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The Spanish government is considering additional measures to lower rapidly ballooning electricity bills, Consumer Rights Minister Alberto Garzon said as power prices neared record highs, alarming consumer groups.

A heat wave in the Iberian Peninsula has boosted air conditioning usage, leading to higher electricity consumption and further upward price pressure in an overheated market due to rising prices for natural gas and carbon certificates.

“The line we are following is structural measures that will make electricity prices affordable in the medium and long term and extraordinary measures so that all families in this country can face this situation,” Garzon told reporters, adding that any measures would target families’ and small businesses’ bills.

In a statement, consumer protection group Facua has demanded that the government act swiftly to cut prices through a permanent value-added tax reduction, a 50% subsidy for low-income families and a cap on what utilities can charge.

Last month, the government agreed to cut the value-added tax rate on electricity to 10% from 21% when the average monthly price is above a certain threshold. It also suspended during the third quarter a 7% tax on the value of electricity generation, which utilities ultimately pass on to the retail market.

Average day-ahead electricity price in Spain and Portugal reached a record 106.57 euros per megawatt-hour on Tuesday, according to OMIE, the Iberian electricity market operator.

More than half of the price consumers pay in Spain is made of taxes and mandatory contributions.

The rise in electricity prices has coincided with a new formula for calculating household consumption based on the hours of the day, which has upset many Spaniards who believe it is pushing up rates.