Power bill prices drop, tariff still an issue

In April the cost of power bills will drop 6.7%. This looks like good news for users, who will benefit from the largest quarterly price reduction in years. Electricity costs have spiked dramatically -- upward of 60% -- in the past five years.

The latest price cut follows a period of heavy rains feeding hydroelectric plants and strong renewable energy production in the first quarter of 2013. Fifty percent of power prices are determined by renewable energy production successes, because some power was sold to other countries, and the other half corresponds to tarriff costs. The government decided to freeze these tariffs in the second quarter, so the lower power costs will be short-lived. Power bills will continue to increase so long as the tariff deficit problem goes unchecked. The EU continues to warn Spain that its 28 billion euros in tariff deficits are too high, yet the Ministry of Industry has yet to find a solution. Energy reforms approved in 2012 resulted in myriad taxes on the country's various power production industries and have kept annual tariff deficit increases to a trim 4 billion euros per year.

But that is not enough. Tax hikes have angered power plants, distributors and end users. Many companies and investment funds are threatening to relocate to countries with fewer energy problems. Recent power sales should not have been used to drop power bills for consumers, but to freeze tariffs and help the sector repay its tariff deficit as it struggles to pay higher energy taxes and deals with labor cutbacks. Smaller power bills are a temporary fix to placate consumers, but consuers will end up paying for the tariff deficit one way or another.