Two years ago, Spanish consumers were the first to feel in their pockets the impact of the energy war that Putin was already preparing. Their electricity bills rose as Putin gradually turned off the gas supply and the price soared on international markets. The Spanish one was the only domestic bill in Europe that is 100% linked to the price of energy in the wholesale markets. Until today
On Tuesday, the Council of Ministers approved a new calculation methodology that will leave part of the bill linked to daily prices, with costs that encourage energy savings and that indicate the hours when light will be cheaper and more expensive , as it happens now. For the rest of the invoice, the price will be calculated based on a composite basket with 10% of products that reflect the one-month price quote, 36% based on the quarterly price and 54% of products that mark the price for one year.
The implementation of this new rate will begin in 2024 with an indexation of only 25% in the long-term markets, while 75% will depend on the result of the daily auction in the wholesale market, the current formula.
One year later, on January 1, 2025, 40% of the price will be linked to the forward market and 60% to the daily. Finally, on January 1, 2026, the definitive percentage of 55% linked to the forward market and 45% to the indexed market will be applied.
As is currently the case, the new PVPC will be offered by last-resort retailers, and will be the mandatory contract rate for those who wish to opt for the social bonus and the 40% reduction in prices if they are vulnerable consumers and 80% if they are seriously vulnerable (a total of 1.5 million households).
It can be contracted by domestic consumers and micro-SMEs with an annual expenditure of less than or equal to 10 kilowatts. But large companies are left out. For this reason, the Government will require a responsible voluntary declaration in which it is demonstrated that the company that contracts this rate is a micro-SME and it will be the National Markets and Competition Commission (CNMC) that will supervise the veracity of this declaration. In any case, a transitional regime is established whereby this type of pricing will not affect the contracts that these companies have signed before January 2024.
The reform is the result of the commitment that Spain assumed with Brussels a year ago when it requested authorization to limit the prices of gas used for electricity production and thus avoid the contagion of price increases on international markets to the bills of domestic customers: “The main objective is to detach it from the volatility of the market and give more peace of mind to consumers”, explained yesterday the minister spokesperson, Isabel Rodríguez. “These are technical changes and the final consumer will not have to do anything to see them reflected on their bill”, warned the minister.
This new method of calculation mitigates possible tensions at a specific moment in the market, but also anticipates them in case they are being forged in the long term. For this reason, the Government avoids offering estimates on whether or not it will lead to an increase in what consumers end up paying and if, as was the case before the energy crisis, the regulated tariff remains the cheapest on the market.
At the moment, what is expected is that trading companies must buy energy in the futures markets and this will involve assuming and paying a risk premium that will undoubtedly be passed on to consumers. If so, it would be more expensive than the current calculation. Although it is also possible that the future price in the Spanish market will experience a drop derived from a greater contribution of energy from renewables.
