Why Spain has the most expensive electricity bill in Europe. (Part 1)

I am afraid my love for Spanish electricity companies remains at its lowest level. After the new laws on solar cell panels and after increases on our electricity bill of nearly 80% from 2004 to 2014 it is more of a hate relationship.

I decided to do an in-depth research to find out why we have the most expensive electricity bill in Europe so that perhaps I can recuperate my lost affections for Spanish electricity companies. It could well be that to produce one Spanish Kw of electricity is more costly here than anywhere in Europe.

Armed with patience and after a few days of research on the web, I found a few articles written by the journalist David Page Polo which led me to the book called: “The Frankenstein Report” written by Inaki de las Heras, a real bombshell. In fact these coming articles are based basically on the work written by those two extraordinary journalists.

 

The highest bill on electricity of Europe.

 

They actually explain why in Spain consumers support one of the highest bill on electricity of Europe (only behind Cyprus and Ireland), after suffering a dramatic rise in the bill of 72.5% between 2004 and 2014. And yet, we consumers have to absorb a debt that borders the 30,000 million Euros because we do not pay enough to cover all costs. No the actual costs (what it costs to produce electricity and to take it to households), but the costs that regulation has created. And between those costs that are not really costs, but the law says that they are, which cannot be justified, and others which are tremendously over inflated.

 

On how the famous debt of 30,000 million Euros was created.

The book exposes three decades of excesses of all the players in the Spanish electricity sector. And it does so by exposing this charade without dogmatism but with a brutal honesty.

 

It is a system which now has a surplus of about half of the power generation capacity because large investments were made in new facilities with a predicted consumption of unbridled optimism. A system that made Spain for years one of the first world power in renewable energy for instance and now, the government is desperate to prevent a continues grow (in some cases without control), which has led Spain to overtake Venezuela as the country with most demands of international arbitration.

A unique system in the world.

In recent years it has become a habitual public talk subject (and published) the desire to battle among each other to find the culprit of such enormous 30,000 million Euros debt. And each of the protagonists (and their related pressure groups) accused, of course, the other parts.

The traditional electricity companies accuse the renewable of taking millions of Euros in bonuses for years. The main electric companies exploiting wind farms however point out that only the solar energy as the guilty party. Renewable Companies denounce the bonuses received by the traditional nuclear and hydro power generators, as a bastion of waste. An all look at the politicians as responsible and accountable to allow this squandering of public money.

And among so many skewed versions drive by personal interests, this report now pinpoints all the causes of an endemic native electrical system. And it does untethered, but without false equidistance, stoking all without apportioning false blames as do those who do not want to blame anyone.

The journalist Iñaki de las Heras published the “Frankenstein Report. Why when you click the electric switch the electrical system goes crash”.

It draws our attention on how thirty years of regulatory excesses have created a horrific creature.

 

And few scary stories end well.

The case of the electric deficit is an example of how the confusion of public and private interests and an apprehensive double set of regulations, misguided planning and a failed market can produce some disastrous results. Companies benefited at the expense of widespread over remunerations that has had the effect that now consumers have to pay extremely expensive electricity which not so long ago had a reasonable price.

A failure of the Spanish politicians and their obligations not only to pursue the general interest but also to discern which particular interests are hidden behind apparent general interests, and that has been the main theme for decades.

 

The five causes

This fantastic report (harsh report, in addition to a good book, in addition to a great story) identifies five general causes that made possible the creation of the “Spanish electric deficit” as it is known, which it is the debt between income and recognized costs. Five causes are intertwined for decades: the decision to open the door to pay electricity in instalments, accumulating debt rather than pay the recognized price at one time; the enormous costs that were added to the bill, were real, were gratuities or were mere aid under the counter for the electricity companies; the decision of politicians, either by electioneering either by social sensitivity (you decide), to postpone increases prices in electricity and not to address the real causes of increased costs; the collapse of consumption as a result of the economic crisis, plunged the revenue system and made it impossible to cover the recognized costs; and all seasoned with regulatory mistakes that short-circuited the management of the regulated part of the bill and gave birth to a malfunction market.

The result:

 

Almost 30,000 million of Euros of debt that users of electricity have to ultimately pay to the industry (though the debt has been used by the companies that money is now owed to banks and investment funds ... and with interest of course.

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