The Council of Ministers of Spain has approved the energy reform, which aims at cutting the €26bn tariff deficit and removing the uncertainties over the power sector.
To eliminate an annual deficit estimated by the government at €4.5bn in 2013, regulated costs, which include the subsidies for the renewable sector and subsidies for renewable electricity, will be reduced by €2.7bn. Network fees will be cut to save about €1bn. Renewable premiums will be removed to save €1.5bn, and electricity from renewable sources will be sold directly at market price; in turn, the government will guarantee a "reasonable return" rate (treasury bonds + 3%, yielding 7.5%), corresponding to the average return for a period of 25 years (from 2001 to 2026).
Moreover, the reform plans a 3.2% increase on the end-customer bills from August 2013 due to a 6.5% increase in the regulated part of the tariff, which accounts for half of the electricity bill. Electricity prices had already increased by 3% in January 2013 and by 1.2% in July 2013. This tariff increase is expected to cut the annual tariff deficit by €900m, with the government budget also taking €900m in its budget.
The €26bn deficit that has built up since 2005 will be gradually wound down over the next 15 years, according to the government estimates.
This reform is obviously opposed by the UNESA, the electricity industrial association in Spain, which estimates that the cost for its members will be as high as €1bn.