The ceiling the Government has placed on the price of gas used in the production of electricity has collided with the worst heatwave in Spain for the worst 30 years.
The escalation of electricity prices today, June 16, has reached a whopping maximum of 210.44 euros per kilowatt hour.
Why?
Firstly, because of increased demand as temperatures all over Spain hover around 40C and households have their air conditioning and fans on 24/7.
Secondly, the knock on effect of the heatwave on the price of gas, which now has a ceiling when used in the production of electricity, and the decision that the gas companies will not be out of pocket and that compensation will be paid, by the consumer through their bills, which has backfired as gas prices have soared.
According to the Government´s calculations this “compensation” would have had a minimal effect on bills, however, the unforeseen and substantial increase in gas prices, which in turn has increased the compensation payable, has neutralized the effect of the «ceiling»measure on bills.
Due to this compensation payable by consumers on their bills and the increase in gas prices, bills will rise rather than fall.
Far from the predicted reduction on electricity bills of a possible 70 percent, which was gradually been eroded to a probable 20 percent, and has now been swallowed up by the compensation scheme.
For now at least many consumers will continue to struggle to pay their electricity bills in addition to soaring petrol prices and the increased cost of the average the shopping basket.
The good news?
It is predicted the heatwave will come to an end over the weekend and reduced demand should mean reduced prices.
The Government is examining the possibility of taxing the electricity companies on their exorbitant profits (windfall taxes) in an effort to reduce prices to the consumer.
Watch this space!!
