The government has loaded the attempt of the Popular Party and together to eliminate the 7% tax on electricity generation. The Executive has approved an unusual measure by leaving without effect the bill that regulates the trade regime for greenhouse gases emission while processed in the Congress of Deputies.
The proposal, backed by an amendment for the Popular Party (PP) and Junts, raised the elimination since January 1, 2025, provided that the electrical system did not incur rate deficit. However, the Government had blocked its approval at the Congress table.
The Executive’s decision was already hinted at by the Ecological Transition Vice President, Sara Aagesen, who stressed that suppressing this tax could increase the electrical invoice of consumers and destabilize the system.
The original proposal to eliminate this tax, known as the Tax on the Value of Electric Power Production (IVPEE), emerged as a strategy to reduce electricity costs and improve industry competitiveness. However, Aagesen recently explained in Congress that the electrical system needs to remain financially balanced, since its suppression would imply a reduction in income that would have to be compensated by other roads.
In the words of the vice president: “If these resources do not enter, they have to enter the other hand, and that directly affects the tolls and positions that each of the consumers pays, including households, companies and society as a whole.”
The IVPEE was introduced as an environmental tribute that taxes the generation of electricity. Its reactivation in 2024 was carried out progressively, after having been temporarily suspended between 2021 and 2023 as a measure to relieve the impact of the high cost of electricity. During the first quarter of 2024, a reduced 3.5%rate was applied; In the second quarter, it increased to 5.25%, and since July it returned to its original 7%value. This tax represents a significant load for the electrical system, with income that has exceeded 1,100 million euros per year, and in some periods even 1.6 billion.
Tariff imbalance
In 2023, the Spanish electrical system registered an income surplus of 3,903 million euros. From this amount, part was destined to cover the charges corresponding to 2024, while the remnant will be transferred to 2025. Despite this surplus, sector sources warn that the economic balance of the system is not clear, partly due to decisions taken in recent years that have affected their financial sustainability. These same sources highlight that Ivpee maintenance remains a tool to guarantee stable income that contributes to the balance of the system.
The alliance for the competitiveness of the Spanish industry has questioned the continuity of the IVPEE, arguing that this tax increases by 7% the wholesale price of electricity, a cost that moves to the final consumer, including energy intensive industrial companies. Carlos Reinoso, spokesman for the Alliance, said that this tax negatively affects the competitiveness of the Spanish industry compared to other countries of the European Union, where there is no similar tax.
According to Reinoso, “maintaining this tax is equivalent to subtracting competitiveness from the Spanish industry compared to the rest of the EU member states. Its elimination would contribute to preserving the competitiveness of the intensive manufacturing industry in electricity and would offer a clear and stable signal to investors.”
Despite the arguments in favor of its elimination, the government considers that maintaining the tax is crucial for the sustainability of the system. Vice President Aagesen acknowledged that specific measures could be studied to benefit renewable energies. According to his statements, “exempting the Ivpee payment to renewables is something that we should analyze in reference to the competitiveness of these facilities.”
The measure adopted by the Government occurs ironically the same day in which the European Commission opens the door to the Member States to reduce national taxes and taxes in the electricity bill to the minimum types and eliminate the taxes that are not related to energy and transfer those that finance energy policies to the general budget.
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