With the electricity price limited, the regulated contract will no longer be so expensive after the massive move to stable prices in 2021
Now that the ‘Iberian exceptionalism’ is about to come out of the Brussels furnace, major changes are looming in the electricity market, going beyond limiting the cost of gas and the price of electricity. The gap between the 10 million consumers who have a regulated tariff and the 19.8 million consumers who have opted for part of the free market offer will widen. In the first case, because they will see moderately the amount of the bill they have paid so far; and in the second case because, as their contracts expire, they will have to absorb the cost of limiting the price of electricity to the other part of the market.
The massive customer movement recorded over the past year as a result of the price crisis may not be slowed down, but even paralyzed. Those who are in the regulated market will stay in it, as the price of kWh they pay will no longer be as high as they have paid in recent months. In this way, a trend that has not diminished in recent months will largely stagnate: the transition from the regulated rate to the free rate.
At least that is the scenario estimated by electricity market sources consulted by this newspaper. In addition, the ‘Iberian exception’ comes after the statements this week by the president of Iberdrola, Ignacio Galán, for the free rate and at the regulated rate. Joaquín Segura, from Selectra, explains that this measure of the fuel cap “will put a brake on that move towards the free market” as we have seen it since last year.
In fact, 1,250,101 households opted for some of the dozens of stable rates offered by marketers last year and decided to leave the PVPC, after recording continuous cost records. This large number of changes from the regulated to the free market means more than doubling the transfer request between both types of tariffs in 2020, when it barely crossed half a million portability. In addition, the figure recorded last year by the National Commission for Markets and Competition (CNMC) shows a record number of tariff transfers, compared to 663,000 in 2019 or 737,000 in 2018.
There were also those who went from regulated to free, although they may have done so in the early part of last year, when pool prices were still relatively low, before starting to rise since June. Some 428,000 households opted for the regulated rate from one of the free ones.
With all this data there are already 19.8 million delivery points on the free market compared to 10 million on the regulated market, the historical minimum. This means that they already represent less than 33% of the total, compared to 40% until a year ago.
The Competition data shows that it was in 2014 that the investment in the market took place: the moment when a larger number of households opted for a stable electricity supply in light of the variability of the PVPC. Since then, the distance between both types of consumers has widened, despite the fact that the rate change can be in either direction.
In the background of this question are the characteristics that determine the regulated tariff in Spain, a unique model in all of Europe. On the one hand, because it is an electricity contract that is directly linked to the wholesale price of electricity. “It works as if the price of the bus ticket is linked to the daily cost of oil,” explains Luis del Barrio of Arthur D. Little. This expert believes that the Spanish regulated interest rate “should have more fixed long-term prices with a basket of futures products.” Although one of its features is that it is the only rate that gives access to the social bonus (the discount of up to 70% for vulnerable households).
In September, the Department for the Ecological Transition launched a public consultation to address the reform of the PVPC. But a few weeks later, it was parked due to the reluctance of several market agents, such as consumer and user associations, who opposed this measure, as it would mean a greater margin for companies. On the other hand, Luis del Barrio emphasizes that the regulated tariff is “too generous” as all consumers (households and companies) with less than 10 kW of contracted power can benefit from it. For a house, the usual power is less than 5 kW. In this way, by having fewer users, “the really vulnerable can be better protected.”
The changes afoot in the electricity pool, which could cause a stagnation in the transition from the regulated to the free market, reveal the energy sector’s insistence on the problems that the PVPC continues to pose in Spain. “It’s a rate that doesn’t include all the costs it should take, such as the need for adequacy,” explains Pedro González, director of regulation at Aelec. The marketing margin of this rate is laid down by law and is lower than that of the free rates. “It also does not include the cost of the social bonus that the reference marketers had to pay, nor the cost of the personal channel,” explains González.
When the limit for gas is in effect, and with the new reference prices for the electricity market, the Ministry of Ecological Transition will reconsider how to adapt the regulated tariff to a new formula for calculating its prices and conditions. This was indicated by Vice President Teresa Ribera in an interview in this newspaper, in which she clarified that for the time being the conditions to do this are not met due to the variability of the pool prices.
In Portugal, for example, it is calculated as an average of the futures market price and a price forecast made by the regulator. In Great Britain it is calculated every six months; and in Italy every quarter to give stability to the receipts accepted, although it is planned to abolish them during the next year.
Source: La Verdad
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
