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Spanish Senate backs 7% tax on renewable power production

Spain’s Senate late yesterday approved a reform of its energy sector that includes a 7% across-the-board tax on electricity generation that is likely to cost wind and other power producers hundreds of millions of euros.

The majority Popular Party of Prime Minister Mariano Rajoy pushed through an amendment to the legislation that hikes the levy to 7% from the 6% that had originally been envisaged in the austerity-racked nation.

The reforms approved by the Senate – Spain’s upper house – also include a levy on nuclear, large-scale hydropower and solar-thermal.

Senator Jesús Alique from the opposition Socialists condemned the new tax as "confiscatory".

But the government says the levy is needed to address Spain’s so-called “tariff deficit”. Spain’s energy system has amassed a €25bn ($32.71bn) deficit because the government has not allowed utilities to charge consumers the full price of electricity.

The Spanish wind energy association, AEE, says at the higher rate the new tax would hit the sector by some €300m annually.

Spain’s lower house, its Congress, in a vote next week is likely to give its final approval to the higher rate for the new generation tax, which would kick in on Jan 1, 2013.

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