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FACTBOX-Spain's plan to tame power bills

MADRID, Sept 14 (Reuters) - The Spanish government approved a package of tough measures on Tuesday to rein in soaring consumer energy bills, the first large European country to take such broad steps to counter the inflationary impact of power prices.

SPILLOVER OF EXTRAORDINARY PROFITS

High natural gas prices on international markets are driving up electricity prices, benefiting gas producers and energy companies that generate power from other sources. The government wants these extraordinary profits - some 2.6 billion euros ($3.1 billion) - to cover systemic costs and reduce consumer bills until next April.

MORE CARBON PERMIT REVENUES INTO THE SYSTEM

In 2021, the government had planned to inject 1.1 billion euros from CO2 permit auctions into the system to compensate costs. That contribution will be increased by another 900 million euros, thanks to an expected increase in revenue from higher permit prices.

FORWARD ENERGY AUCTIONS

By year-end, Spain will launch a new type of energy auction, through which the four dominant operators, Endesa, Iberdrola, Naturgy and EDP, must sell energy through forward contracts to industrial consumers and power distributors.

The aim is to reduce the weight of the wholesale market in price formation.

CAP REGULATED GAS TARIFFS

Price caps will be enforced over the next six months to prevent any increase in natural gas prices from inflating regulated tariffs for domestic consumers.

With the new formula, the average increase in the next quarterly review on Oct. 1 will be 4.4% instead of 28%, according to government calculations.

LIMITS FOR DAM RESERVOIRS

The government suspects some energy providers have drained reservoirs this summer to sell more expensive hydroelectricity. To combat such activity, it will limit how much companies can draw from reservoirs and establish minimum capacities.

TAX REDUCTION

The Special Tax on Electricity will be reduced to 0.5% from 5.1% until Dec. 31. This measure is in addition to the reduction of VAT to 10% from 21% and other taxes that had been reduced in an initial package of measures.

EXTENSION OF MEASURES FOR VULNERABLE GROUPS

A ban on cutting off supply to non-paying consumers who qualify as vulnerable will be extended from four to 10 months. ($1 = 0.8459 euros)

Reporting by Belén Carreño and Nathan Allen, editing by Andrei Khalip and Emelia Sithole-Matarise

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