Interventionism On Electricity That Damages The Free Market

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The increasing wear and tear caused by the unstoppable rise in electricity prices in the Government, before which it has been completely disarmed by its lack of foresight, has led the Executive to take practically unprecedented measures in this market and that, once again, they strive to put electricity companies in the spotlight.

This is demonstrated by the star chapter of the new shock plan to alleviate the rise in the electricity rate, announced after the Council of Ministers yesterday. Well ahead of the new tax cuts (such as the reduction to 0.5% of the Special Tax on Electricity whose effect on collection will now be neutral), is the so-called “temporary reduction”, by decree-law, of the ” extra benefits “obtained by electricity companies.

This hypothetical surplus is related to the maximums that gas has registered in international markets, which will mean the de facto confiscation of about 2,600 million, 90% of the supposed over-revenues. What the Government calls “extraordinary benefits” derives from the fact that electricity generation using CO2-free sources (especially hydroelectric and nuclear) saw its price increase in the wholesale market.

This is an unavoidable situation from the moment gas became the dominant technology in the poolye imposes its high price on all the others. This phenomenon was not created by the electricity companies; Quite the contrary, it is linked to the very functioning of a marginalist market, such as energy, in accordance with the regulations established for the entire European Union.

It is fully legitimate for companies in the sector to already plan their legal response to future ‘expropriations’

The Government, however, prefers to close its eyes to that reality and chooses to launch another underground accusation against the electricity companies, pointing to them as the main beneficiaries of the maximums of electricity. This attitude has already led them to punish them in June with the sharp, unilateral and unforeseen cut in payments to hydro, nuclear and wind energy , the so-called benefits that have fallen from the sky.

The Government takes an unprecedented step by allowing the confiscation of profits obtained by electricity companies

The hypothetical benefit that the electricity companies obtain from the current maximums of electricity is based on a fallacy. This is evidenced by the profit forecasts of these companies for 2021, which are below the average of their peers in the European Union.

But what is really alarming is that the Government puts the very rules of the free market at serious risk by meddling in the income statements of an entire sector, hiding behind arguments that border on the peregrine and populist, such as ensuring that the electricity companies “can afford “This confiscation, as the Government has come to affirm.It is entirely logical that the electricity companies are now preparing their resources against an interventionist measure that, in addition to being unjustifiable, multiplies legal insecurityin a basic and strategic supply.

In the same way, their protest against an energy policy that intends to put all the efforts on them when responding to the critical situation posed by the all-time highs of electricity is reasonable. It was the excessive confidence of the Government, together with the absence of forecast on the resurgence of prices that was already announced at the beginning of this year, which has led to the difficult situation that companies and families are now going through. High prices constitute a major threat to the recovery, which will also multiply public spending due to the revaluations of pensions and civil servants’ salaries. A situation in which the Government’s responses are increasingly worrying.

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