Fri Oct 27th, 2006 at 11:12:59 AM EST
During the last 2 weeks Energy has dominated politics in Portugal.
In line with EU policy, a liberalization of the energy market is in course and among other things, an Independent Tariff Regulator was established in order to, presumably, regulate tariffs.
Last week came the announcement that a raise of 15% on the price of electricity was due to home consumers, industry having its own tariffs also due to raise, but less. This raise was justified by the fact that 10 years ago during the previous Socialist Government lead by António Guterres, a dispatch was made to keep electricity raises no bigger than inflation. Apparently this caused in recent years a serious disconnect between consumer prices and production prices.
So, a raise of 15% was in order to correct the deficit over the next 6 years or so.
From the diaries ~ whataboutbob
Things got interesting when an obviously politically inept Secretary of State of Energy came forward to justify the raise as being the fault of consumers, who for too long were spending too much energy at unduly low prices. This stupid way of explaining an obviously painful raise of the already burdened monthly spending of Portuguese families caused the expected uproar from everyone.
The consequence was that the Socrates Government acted like it was not expecting such a figure and quickly cooked a dispatch that allows them to overrule the Independent Regulator and set a cap of 6% on the raise of tariffs.
The Portuguese market is hardly attractive for any foreign operator at this point, namely Spanish ones, like Iberdrola who were positioning for the opening, due to happen next year.
In the mean time, this started a discussion of Energy policy, which is a good thing. Portugal is highly dependent on imports of oil and coal, but plagued with huge degrees of inefficiency. The energy efficiency of the average home is deplorable due to poor construction standards, it's not infrequent to have a house that is colder than outside in winter, and hotter than outside in summer. I know, as I live in one.
Portugal has an envious amount of resources for renewable energies. Sun exposure is high, expertise in wind and hydroelectric production is in place, the vast coastal line provides opportunities either for offshore wind farms like those presented by Jerome (although im not sure f the sea bottom is as friendly at 25km...) or projects that use tides to produce energy.
Heck, we even have the Azores if we want to try Geothermal...
But the reality now is quite bleak. The fact is that, for example, natural gas for home users has 5% VAT and isolation materials you may want to buy in order to make your home more efficient, get a 21% tax. Fiscal policy is surely sending the wrong message...
PS: Quick addendum: EDP, the current energy monopoly already partly privatised presented consecutive record profits the last 2 years, of respectively 2.481 million euros, in 2005, and 2.997 million euros in 2006. This makes the 15% number a bit hard to swollow... And also the claims of tranparency-