Power bills will start increasing in 2014 by at least 2% despite the significant jumps that have already hit companies and consumers in 2013. Yesterday the Secretary of State for Energy, Alberto Nadal, told representatives from labor unions and small- and medium-sized companies about the Finance Ministry's decision to not apportion the 3.6 billion euros that were destined to help pay down the power tariff deficit.
Nadal's decision is correct, and he was smart to inform the public, because breaking agreement always ends up putting the bulk of the costs on one of two parties. Despite Spain's struggles to manage its energy reforms, an agreement has been made between industry corporations to divide the overall tariff deficit among customers, the state and the companies themselves.
Both companies and consumers have met their obligations, but the Finance Ministry has failed to uphold its part of the agreement on grounds that it needs to focus first on meeting the national deficit goal. Montoro is struggling to meet the 6.5% target by the end of the year, and because revenues will not increase to offset spending, the budget is set to swell.
Now companies will have to pay this 3.6 billion euros instead of the government. To avoid impacting corporate balance sheets, the Ministry of Finance will provide this amount of funds, although the funds will go directly to paying off tariff debt.
Independent of the mechanism that is used, it is clear that ultimately the costs will fall on consumers trying to make ends meet -- which Nadal had the guts to point out -- and on companies trying to compete. Just because the tariff deficit was not in the national budget does not mean that it will not create a debt that ultimately we will have to pay.
