Wednesday, October 4

The rigged game of electricity prices

Energy prices skyrocket and with them inflation skyrockets. Everything goes up and wages are not enough. Energy, which moves everything, is present in the pace of industry production, in commercial exchanges, in electricity bills. Energy prices are skyrocketing and what, until a few months ago, was a piece of knowledge reserved for a few capable of investing time and effort in assimilating a deliberately complex and twisted terrain, is now a topic of conversation in the supermarket line . Energy prices skyrocket, with them soars the indignation and demands of working families and sectors of the economy that see how this escalation impacts their daily lives.

Today it is obvious that this price bubble is exacerbated by the war in Ukraine. Almost from the first moment there were voices that warned us of the effect that a conflict of these characteristics could have on life and the economy in Europe. There was no shortage of people who suggested to us with little sensitivity that we lower the thermostat in our homes. But the truth is that war finds us with previous problems. It is added to an increase in prices that we were already experiencing as a result of a phenomenon associated with the eco-social crisis: the scarcity of fossil energy sources. And to a failed pricing model: the marginal market.

rough way We could say that we are at the mercy of a model that has been designed to guarantee that energy oligopolies make money at the expense of families’ pockets, with a good that should be public since it guarantees a right, all without taking responsibility for their environmental responsibility. A -marginalist- model based on complex formulas, which means that the price of energy is determined by the most expensive technology, that of gas, and that we are charged for any other type of energy at the same price. For this reason, when the price of gas increases, although a good part of our energy comes from solar, wind or hydraulic sources, we will continue to be charged at the most expensive price, the price of gas. Consequently, the debate about less dependence on Russian gas is a tricky debate as long as we do not consider a marginalist market reform: it is our rules that allow Putin to be blackmailed. Without a doubt, those who direct energy policy in the EU know that with a single drop of Russian gas that enters, the entire system is automatically contaminated by the price that Putin sets from his office.

In the same way, the rules of the game imposed by this model have allowed the electricity oligopoly in our country to quadruple its profits in 2021. Other similar ones allow a crazy price of a liter of gasoline even though a barrel of oil has only become more expensive than times precedents. A full-fledged speculative bubble.

Therefore, the problem here is not what to do, but whether there is courage to do what common sense demands in this situation. If we settle for short-term and partial solutions that bear the full weight of the crisis on the state, on what is common, or if in an extraordinary moment like this we bet on limiting the benefit of the large multinationals and in the process change some of the rules of play.

For now, the EU is committed to partial reforms that try to save the profit and loss accounts of multinationals. It will be difficult for prices to fall despite a substitution of part of the Russian gas, let us not forget that the liquefied gas from the fracking besides being very polluting and insufficient, it is very expensive. Other voices speak of capping prices or decoupling gas temporarily. Others insist on lowering taxes, but all of them avoid far-reaching proposals that provide a lasting and fair solution.

That is why from the left we make our own the demands of the affected families and sectors, of those who risk their jobs as a result of this situation. And we point out with humility, but firmly, some immediate measures that can alleviate the situation of families. Reduce taxes on energy (with energy efficiency criteria), but taxing the extraordinary profits of those who have multiplied their profits obscenely at the expense of families’ pockets. Continue betting on a public energy company that can directly manage hydroelectric concessions and establish bilateral energy contracts with large industry, reform the social bonus in our country to provide real coverage to the most vulnerable families. Carry out an audit of energy production costs to find out what is the price manipulation margin of the oligopoly. Intervene in the price of energy, as endorsed by European directives, but not at €180/MWh, but rather at truly affordable prices that, in any case, are adjusted to the real costs of generation and not to the opportunity cost of the owners of production plants. And decouple the price of gas from the pricing system, not only during this episode, but permanently.

While all this happens, reform the marginal market and put a good part of the Recovery Funds to strengthen our energy sovereignty by promoting a decentralized network of renewable energies, which is fair and public.