Spain to cap gas prices, redirect company profits to curb energy bills, PM says

Spain will cap gas prices, cut taxes and redirect energy company profits as part of a package to bring down soaring electricity prices, Prime Minister Pedro Sanchez said in an interview on Monday.

Sanchez told state broadcaster TVE it was unacceptable that energy companies were profiting from elevated market prices for electricity.

"We are going to take away those extraordinary profits that the energy companies are making...and we are going to pass them on to consumers," he said, adding that the special electricity tax would drop to 0.5% from 5.1%.

Sanchez said redirected profits from the utilities would be used to cap gas prices and bring down energy costs for consumers. He did not give any further details on how this would work.

His left-wing coalition had been under pressure from the opposition and civil society organisations to reduce electricity bills.

The cabinet is set to approve the package at its weekly meeting on Tuesday. It will also include an extension of a reduced VAT rate and the suspension of a 7% generation tax until the end of the year.

The measures will reduce government revenues in 2021 by around 1.4 billion euros ($1.65 billion), he said.

"The common good comes above the profit-and-loss accounts of big business," Labour Minister Yolanda Diaz tweeted during the TVE interview.

Elevated demand for natural gas and rising prices for tradable emissions permits have sent power prices surging in many countries, including Spain.

Spot electricity prices, which make up around a third of consumer power bills, have broken records for weeks, reaching an all-time high of 154.16 euros per megawatt-hour on Monday, according to market operator OMIE.

Betting that cheap clean energy will keep down prices in the long term, Spain plans to auction 3,300 megawatts of renewable capacity in October, with nearly a fifth earmarked to come online within a year.