Bloomberg News

Spain’s Power-Price Ruling Burdens Utilities, Not Just Consumers

March 15, 2012

Spanish Industry Minister Jose Manuel Soria said it would be a “radical mistake” to assume consumers will shoulder the full costs of eliminating the power system’s financial deficit.

While Spain will increase electricity prices in April, it will also cut the regulated fees that suppliers earn to comply with a Supreme Court ruling this month, Soria said today in Madrid. On March 8 the court ordered Soria to raise power tariffs to help cover the cost of supply after utilities challenged his decision to freeze prices for the first quarter.

“If someone thinks that complying with the ruling will mean placing all of the burden on the backs of the consumers, they are making a radical mistake,” Soria said at a televised press conference. “The repercussions won’t just be on prices, but on the costs” borne by utilities, he said.

Spanish consumers were allowed to run up debts of 23 billion euros ($30 billion) as successive administrations agreed that utilities should book more revenue than they were permitted to collect. The gap widened during the past five years, swollen by subsidies added to customer bills to support renewable-power plants, energy-efficiency projects and domestic coal mines.

Last week the energy regulator recommended that the government lower regulated payments to power companies, delay investment in new capacity and use revenue from the sale of carbon-emission permits to cover some of the cost of renewable- energy subsidies.

To contact the reporter on this story: Ben Sills in Madrid at bsills@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net


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