The Spanish Ministry of Ecological Transition (MAPAMA) has announced the suspension of the 7% tax on power generation activities as part of a set of measures implemented to lower wholesale power prices. This announcement comes as electricity prices have been escalating during the last months and are currently standing at a quite high level (above €70/MWh as of September 2018). These cuts are expected to alleviate power bills by between 2% and 4% for residential customers and between 5% and 5.5% for industrial customers.
The 7% tax on the value of electricity output was set up by the previous government in 2013 and is levied on the revenue obtained by power production facilities, including renewable power producers. It has been lambasted by utilities as it forces power generators to transfer the levy to wholesale prices. The tax was expected to curb the structural deficit caused by the gap between revenues from supply tariffs and costs associated with the system (soaring costs from renewable feed-in tariffs).
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