Yet, one has the impression that it was a veiled threat and that the Government might envisage taking tough measures should these companies fail to keep what they bill their customers in check by giving away profits out of social concern.
Spain, as most European countries, is facing a skyrocketing increase in power generation costs which end up being passed on to consumers. Yet, one fails to understand how empathy could solve this issue. In a tightly regulated market where offer and price mechanisms are highly dependent on authorities’ decisions, co-ordinated underpricing by firms would be tantamount to anti-competitive behaviour. Market discipline requires participants to freely compete, the ensuing result being the best allocation of resources. Giving up remuneration out of empathy is a startling new approach to welfare economics.
It is up to the Government to devise an affordable bill, especially for the most vulnerable households. For instance, by shelving the many taxes included in the electricity bill which were meant to reduce consumption and its related impact on the environment. As market conditions already achieve this goal, doing away with such levies would undoubtedly help.
Enforcing unilateral rebates on all market participants in order to keep price rises in check would be breaking into uncharted territory. Yet, if it works, it might prove a magical recipe for combatting inflation. Central bankers will certainly pay keen attention to it. Who knows? It might provide a miraculous recipe for preserving stability without tightening monetary policy.