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ENERGY

How much will Spain’s gas VAT cut save me per month?

The Spanish government's slashing of VAT on gas will lower monthly bills for most households in Spain, but how much could you save?

How much will Spain's gas VAT cut save me per month?
Photo: Pixabay.

Like many countries the world over, in Spain the cost of living crisis is hitting households hard. With food and fuel prices at eye-watering levels and electricity bills at an all time high, Spaniards are feeling the financial pinch of a volatile energy market and upwards inflationary pressures mean their money doesn’t go as far as it used to.

In response, the Spanish government has put in place a raft of measures aimed to help Spaniards make it through these turbulent economic times, offering free train travel, cutting VAT on electricity bills, and limiting the amount by which landlords can increase rent.

On Tuesday September 20th, the Spanish government approved the reduction of VAT on gas and other biofuel heating products from 21 percent to 5 percent in order to help reduce energy bills heading into the more energy-intensive winter months.

The measure was announced by Prime Minister Pedro Sánchez, and will come into force from October and last until December, although it could be extended into the new year.

“The government of Spain is proposing a reduction in VAT on gas from 21 to five percent,” Sánchez told Cadena SER in a radio interview on Thursday, adding that the cut “is in line with the economic policy” of his government, something he describes as “selective tax reductions for the benefit of the working middle class.”

“We will do it now in autumn and the winter. It’s reasonable that we try to reduce the heating bills of the citizens of the country,” Sánchez said, adding that although the measure is slated for three months, “we will be open to extending it over the next year as long as this very difficult situation lasts.”

The move comes as part of a series of measures put in place by the Spanish government to try and ease the burden of the cost of living crisis, in particular the rising cost of utilities bills as the more energy intensive winter months approach.

But how much will a VAT cut on gas actually save you on your monthly bill?

Savings

Since Sánchez’s announcement, households and consumer groups across the country have been crunching the numbers and trying to calculate exactly how much the VAT cut could save them.

According to estimates by two of Spain’s main consumer associations in Spain, OCU and Facua, the monthly savings on bills for a normal household will be somewhere between €5 and €19 depending on the type of contract you have.

OCU estimates that an average household with heating and moderate consumption (around 9,000 kwh per year) with a cheaper rate could save as much as €227 per year, which works out to savings of around €18.9 per month.

For households getting their gas on the regulated market, the savings would be around half that amount at €103 per year, with monthly savings of €8.60 per month.

Facua estimates that a household with moderate gas consumption (around 4,800 kWh per year) would save €5 per month, while those with higher consumption (up to 9,600 kWh) would see bills reduced by €9.60 per month. 

A spokesperson for Facua described the VAT cut as “a fair and necessary measure,” but added that “the impact it is going to have on the bill is interesting, but it is small.”

READ MORE: Sánchez visits Germany and Scholz renews backing for Iberian gas link

It is worth noting that VAT has not been cut on butane or propane and will remain at 21 percent, but in May the Spanish government froze the price of bottles of butane, which will stay at €19.55 until at least the end of the year. Many Spanish households rely on bottled gas.

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For members

ELECTRICITY

The cheapest rates Spain’s electricity companies don’t want you to know about

Finding a cheaper tariff is one of the best ways to counteract skyrocketing electricity bills, but a leading consumer watchdog has warned Spain’s electricity providers are not always open to telling customers about the best deal they can get.

The cheapest rates Spain's electricity companies don't want you to know about

Like in many parts of the world, inflation triggered by the war in Ukraine has made the energy market incredibly volatile and sent household electricity bills soaring in Spain. The average bill reached €158 in August, an eye-watering increase of over 60 percent compared to 2021.

To give you some idea of just how much prices have risen in Spain, in August of 2020 the average electricity bill was €64, in 2021 it was €93, and in August 2022 €158.

According to recent figures from Eurostat, electricity bills in Spain have risen eight times more than in France and four times more than in Germany. Whereas the average Spanish household paid 60 percent more in August compared to 2021, in France it rose by just 7.7 percent and in Germany 16.6 percent.

The Spanish government has tried various methods to ease the burden on households. In June the tax (IVA) on electricity bills was cut from 21 percent to 10 percent, and then it was quickly reduced again from 10 percent to 5. The European Commission agreed to cap gas used for power generation at €40 per megawatt-hour known as the ‘Iberian Exception’, with the price limit projected to average out at €50 over the coming 12 months.

READ MORE: Spain to cut electricity tax by half to ease inflation pain 

The Spanish government predicted the measure — which will be in effect until May 31st 2023 — would lead to a reduction in household energy prices of up to 20 percent, yet it has done little to limit the rise of electricity bills so far.

READ MORE:

Unsurprisingly, many Spaniards are now seeking ways to cut down on their bills, whether it be by using the washing machine at certain times to take advantage of off-peak hours, or limiting their use of air-conditioning.

Another method of saving on electricity costs is finding cheaper tariffs.

Yet finding the more affordable rates can be difficult to do, and often the electricity companies make them deliberately difficult to get hold of. That’s according to Spain’s Organization of Consumers and Users (OCU), which have identified some of the cheapest tariffs on the market today. 

Understanding peak and off-peak

Spanish electricity companies offer different prices depending on the time of day you use your electrical appliances. The tariffs are often broken down into hora punta (peak time), hora llana (flat time), and hora valle (off-peak).

If you live in Spain, this is why you might’ve heard the incessant spinning of washing machines through the night in recent months. Nowadays many people simply wait until the weekend, when the tariffs are always off-peak.

So, if you’re thinking about switching, which are some of the best electricity rates you can find in Spain?

Repsol Tarifa Largo Plazo

According to the OCU, the Repsol Tarifa ‘Largo Plazo’ can only be found via this link, because the offer is actually hidden on the Repsol website. And for good reason, too. The Repsol tariff is among the best offers the  market in terms of price per kWh consumed, although the power for off-peak time is a little more than some of the other offers on the list.

The tariff is non-permanent, with a fixed price rate for 3 years.

kWh Prices

Price per kWh consumed: €0.17/kWh.

Peak hours: €29.90 per kW.
Off-peak hours: €29.90 per kW.

Iberdrola Online Plan

The Iberdrola Online Plan, which you can find here, is only available until September 30th, so be sure to take advantage of it as soon as possible.

Using Iberdrola’s online tool, you can select a kW rate and it will give you price estimates for the different values. If you’re environmentally minded, Iberdrola’s Online Plan claims to use 100 percent green electricity, so you can enjoy renewable energy and reduce your CO2 emissions.

There’s also 14 hours of savings during the night up until mid-morning.

This plan is only for customers who take out the contract online, as the name suggests, and features entirely electronic billing.

kWh Prices

Price per kWh consumed: €0.159353 + metered gas cost (in August €0.161529 /kWh).
Price per kW contracted during peak hours (fixed term): €30.66747.
Price per kW contracted during off-peak hours (fixed term): €4.104338. 

Not the prices will be revised in line with the Consumer Price Index (CPI) on January 1st. 

Octopus Energy

Octopus Energy tariffs are not permanent and is all done online, which allows you the flexibility to move around again in the future if you come across a better offer. Octopus offer two fixed prices:

Octopus 3: price per kWh consumed during peak hours is 0.254 €/kWh; at flat time 0.209 €/kWh; and at off-peak hours 0.185 €/kWh.

Octopus Relax: price per kWh consumed of 0.212 €/kWh.

kWh Prices (both Octopus tariffs) 

Peak hours (fixed term): €32.85.
Off-peak hours (fixed term): €6.57.

Iberdrola Special Plan

The Iberdrola Special Plan offers a 15 percent discount during the first year, and its kWh prices for both on and off-peak are competitive with other cheaper tariffs.

kWh Prices

Price per kWh consumed: €0.178662 (minus the 15 percent extra discount) but plus a gas metering cost (which in August was €0.161529/kWh.)

Peak hours (fixed term): €30.52381
Off-peak hours (fixed term): €3.512901

Endesa ‘One Luz’ Tariff 

Endesa is currently offering the ‘One Luz’ tariff, which offers a 10 percent discount on consumption and an additional 10 percent reduction throughout the first year.

kWh Prices

Price per kWh consumed: €0.189 (plus the 10 percent +10 percent discount) + the metered gas cost (which in August was €0.161529/KWh).

Peak hours (fixed term): €33.86.

Off-peak hours (fixed term): €7.9973

Total Energies

Another interesting option is Total Energies, who offer entirely personalised pricing plans. Basically, Total Energies want to attract your business by outdoing your current rate. In order to receive a quote and see how it stacks up against your current provider, you simply upload a copy of your current bill to the website and Total Energies make an offer, often bettering your current rate.

If they make an offer, Total Energies promise a discount lasting for 4 years, although the price on which the discount is fixed is only valid for 12 months.

READ MORE: 11 ways to cut costs as Spain’s electricity rates beat all-time price records

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