Barcelona (Brussels Morning)The most pressing political issues facing Spain’s Prime Minister Pedro Sánchez right now involve tabling a meaningful dialogue with Catalonia, ongoing disputes over transport infrastructure, and the precio de luz—the price of light.
The first two follow the storied political route – orchestrated meetings with all the substance of a flashbulb at a photo op. It is the last mentioned, the precio de luz , that is the most enlightening, turning as it has into a political nightmare for the socialist leader, who governs in a coalition with Podemos, the anti-austerity left-populists mandated to fight for the working class.
Today, electricity costs three times more than a year ago, the highest it has ever been in Spain. Now, with winter fast approaching, and with many less fortunate families forced to use their laundry machines at off-peak, post-midnight hours when electricity charges are cheaper, the socialist coalition is coming increasingly under fire.
On 14 September, the Spanish executive announced its Plan de Choque to lower electricity prices for consumers. They want to reduce prices for consumers by 22% on average until December and claim that by the end of the year Spaniards will be paying the same as they did for electricity in 2018.
The cost per megawatt hour in 2018 was on average €64. Last week, it reached €188 p/MWh.
Electricity – a right, not a luxury
Reasons given for the soaring prices vary, though most attribute it to the rising cost of natural gas on the international market plus charges for CO2 emissions. Prices for natural gas across Europe are almost five times greater than they were in 2019. Gas suppliers are replenishing their reserves, anticipating a cold winter, and have ramped up prices accordingly. Growing pressure from Brussels to cut down emissions from fossil fuels has also been a contributing factor. But even after taking all this into consideration, most Spaniards believe that access to electricity should be a right, not a luxury.
Protesters—from the left and the right—have appealed to the coalition government that the consumer should not be the one burdened with inflated costs. Rather, many believe that the ‘’big three’’ electricity providers—Endesa, Iberdrola and Naturgy—allegedly operating an oligopoly to control the market, should be held accountable.
Spain’s energy sector has a notorious reputation. In 2014, the European Commission declared the Spanish electricity market to be in breach of Article 106, “particularly in relation to competition and market rules, by impeding entry into the renewable energy system.”
“One of the major problems in the Spanish electricity sector is that 80% of electricity generation and 90% of sales are controlled by five major companies …..meaning that the electricity market is an oligopoly”, the Commission declared in a statement at the time.
In vowing to fight the seemingly greedy energy powerhouses by levying their profits and reducing taxes for consumers, this week, Sánchez declared:
“We are going to reverse the extraordinary profits of large companies… in favour of the population, SMEs [small-to-medium-sized enterprises] and the industrial sector as a whole. We always defend the common interest over the individual one”..
Under that government’s proposed plan, 7% of the Electricity Production Tax that had been suspended for the third quarter of 2021 is to remain in place until December 31. Moreover, the specific tax on electricity has been reduced to the minimum rate allowed by the EU – from 5.1% to 0.5% – and an additional 900 million euro is to be injected from income derived from the auction of Community allowances (funds from the “extraordinary” profits of Spain’s energy oligopoly).
Meanwhile, the opposition has termed the plan a “scam” and a “hoax” and is calling for the PM’s resignation. Pablo Casado, leader of the opposition Partido Popular (PP) party, demanded to know, since the PM had called for resignations when electricity prices rose by 8% in the past, “why does he not resign now they have risen 200%” during his administration.
Podemos leader Yolanda Díaz fired back at the conservatives, arguing that they were the ones responsible for the rise in electricity costs.
Regardless of whom the voters decide to blame for the price hike, the negative attention is the last thing PM Sánchez needs ahead of next year’s general elections.
The fact that the coalition government is formed of socialists and left-wing populists looks bad when the working class struggles to afford electricity. The right understands this, and just as the conservatives did when the PM issued political pardons in the aftermath of the Catalonia independence referendum, they are happy to exploit the current situation to demonize the left and present themselves as the enlightened solution.