The Spanish government is preparing a new tax on the earnings of electrical companies, which have been bolstered by rising energy costs, according to Budget Minister Maria Jesus Montero on Tuesday.

“Since profits of electric utilities have been exorbitant, from the government’s point of view, we want to be able to ask them for a higher contribution,” she said in an interview with public broadcaster TVE.

She refused to provide any specifics or a timetable for the new tax, saying that staff at the ministry are working on the details.

Electricity costs in Spain have grown dramatically over the last year and a half as a result of strong demand generated by the post-pandemic economy’s recovery and, subsequently, the effects of the Ukraine conflict on the worldwide gas price.

With little effectiveness, the government has attempted to reduce the rise in energy prices with value-added tax cuts and a limitation on natural gas used in power production.

It aims to prolong energy-price-cutting measures, including billions of euros in direct assistance and soft loans, by three months before the end of the month.

Montero said that the electric utility tax will be used to cover the high cost of the government’s policies, which she projected to be between 10 billion and 11 billion euros.

On Tuesday morning, shares of the big Spanish power providers Iberdrola (IBE.MC), Endesa (ELE.MC), and Naturgy (NTGY.MC) were down 1.9 percent, 2.4 percent, and 2.4 percent, respectively, while the IBEX-35 blue chip index was nearly unchanged.

The utilities have said that increased wholesale market prices do not help them since they set their rates in advance, and that government action might impede longer-term investment required to drive energy transformation plans.

($1 = 0.9471 euros)

Source: Reuters

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