Gas tariffs fall by an average of 7.2% due to the reduction of VAT to 5%

The gas Tariff of Last Resort (TUR), better known as the regulated tariff, will undergo significant price reductions as of this Saturday, October 1, for the last quarter of the year. On average, this tariff will drop by 7.2% due to the reduction of VAT from 21% to 5%.

The regulated tariff is a type of tariff that can be used by any consumer with a natural gas pressure of 4 bar or less and whose annual consumption is less than or equal to 50,000 kWh, and is reviewed quarterly on the first day of January, April, July and October of each year.

In this way, whenever the tariff is updated, the price is readjusted every time the raw material goes up or down by 2% with respect to the tariff or the new charges. On this occasion, the modification of the tariff is based on Royal Decree-Law 17/2021, of September 14.

As detailed by the Ministry of Ecological Transition and Demographic Challenge, the price for TUR 1 tariff customers will drop by an average of 10.02%, which means a saving of 102 euros in their annual bill with taxes. Without the VAT reduction, this bill would have increased by 3.69%.

As for the TUR 2 tariff, it will suffer a 7.74% decrease in its annual bill with a saving of 308 euros per year with taxes. Otherwise, it would have increased by 6.32%. Finally, the TUR 3 tariff will decrease by 6.61% in its annual bill with taxes with a saving of 772 euros. Without the VAT reduction, the increase would have been 7.62%.

To be eligible for the TUR you must consume less than 50,000 kWh of natural gas per year. This is a very high figure for domestic consumers, representing 5 times more than what an average household with gas-powered heat and hot water usually uses.

In general, domestic consumers are connected to a natural gas network with 4-bar pressure, and their consumption is nowhere near 50,000 kWh. To give you an idea: a Spanish household that uses gas for hot water and heating has an annual consumption of around 9,000 kWh. On the other hand, if the heating system is not powered by natural gas, consumption drops to 3,000 or 4,000 kWh per year.

Under TUR1, the fixed component of your bill (what you pay every month regardless of your consumption) is more economical, while the variable component (the gas you consume) is higher. Under TUR2, the fixed component of the bill is higher, but the variable component is more economical. If you consume less than 5,000 kWh in a year, you will be charged TUR1, and if you exceed this figure, you will be bumped up to TUR2.

Due to the progressive increase in gas prices in recent months, the Government has approved some measures such as setting a cap or lowering the VAT. These measures include that the increase of natural gas is limited to 15% until the revision of January 1, 2023.

Written by BayRadio