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  • Writer's picturePeace of Mind PM

New electricity rates in Spain

Updated: Aug 30, 2021

On June 1st, a new billing system for electricity came into force for consumers covered by the Voluntary Price for the Small Consumers (PVPC) with less than 15 kW contracted power.


Bear in mind that these new rates affect consumers who are in the regulated market under the PVPC rate, not those who are in the free market.


PVPC rates as of June 1st, were automatically updated by adding the cost of energy in the regulated market, which changes every hour of every day.


The electricity market is fully liberalized in Spain, where all customers can choose their supplier.


For the commercialization of electric energy, customers can choose to contract in the open market from one of the more than 300 existing traders, or to make a contract with the Reference Marketer (RM), for supplies with less than 10 kW contracted power, the regulated tariff known as the Small Consumer Voluntary Price (SCVP). Around half of the Spanish households (13 million) are on the free market and the other half on the regulated market.


This are the main advantages and disadvantages according to the type of rate or market contracted:


FREE MARKET



* Prices are set freely by commercializing companies

* Free election of commercializing companies (over 200 in Spain)

* Discounts and offers can be applied

* There are maintenance services that can be added to the electricity rates

* They are usually more stable for the consumer

* There is no limit to the electric power hired



* Users can no apply for the electricity “social bonus”

* It may include a clause of minimum permanence period

* Consumer is required to pay more attention when contracting rates (since each one adapts to a certain type of consumption)



PVPC REGULATED MARKET



* Prices are set by the Government

* The PVPR rate is offered only by some providers (very limited)

* Users can apply for the electricity “social bonus”



* Only for contract power bellow 10 kW

* Price changes every day and hour (depending on what the electricity market dictates)

* Only 3 rates



Consumers on the free market can change to the regulated market, at any time, as long they have a contracted power of less than 10 kW.


Reference Marketer (RM), for supplies with less than 10 kW contracted power, the regulated tariff known as the Small Consumer Voluntary Price (SCVP). Around half of the Spanish households (13 million) are on the free market and the other half on the regulated.


This change in rates aims to improve energy efficiency by encouraging customers to take actions to balance their consumption and to modify their energy usage patterns.


The fixed part of every bill that corresponds to the power capacity will see a price reduction and there is a new option of having 2 power capacity periods (so consumers will be able to one of these powers throughout the day to optimize their personal usage). The vast majority of households with under 15 kW will benefit from this.


With the new rates, the price depends on the time the energy is consumed, user will pay depending on "when" they use the energy and not on "how much" they use.


In addition to the following 3 time periods (split over six-time bands in which the cost of electricity will be different throughout the day) on weekends, national holidays and in the time period from midnight to 8 am, the price for electricity consumption will be cheaper.




· PEAK (PUNTA): the most expensive period. Ranges from 10:00 a.m. to 2:00 p.m. / 6:00 p.m. to 10:00 p.m.

· STANDARD (LLANO): Intermediate price. Ranges from 8:00 a.m. to 10:00 a.m. / 2:00 p.m. to 6:00 p.m. /10:00 p.m. to 00:00.

· OFF-PEAK (VALLE): The cheapest period. Includes the night hours with a lower electricity consumption, from 00:00 to 8:00.


An estimated of over 50% of the annual consumption hours are produced during the off-peak time bands, a period in which the electricity will be, with these new rates, up to 95% cheaper than at peak times


The official rate set by the CNMC and the Ministry of Ecological Transition and the Demographic Challenge is 3-time periods for consumption and 2 different power capacities. If the company with which the consumer has contracted the electricity offers a single price, it may not be the most interesting.


According to the OCU, the off-peak time bands will have a symbolic price (€ 1.42 per contracted kW). The new invoice issued by the traders must detail the type of tariff contracted (free or regulated), the maximum power demanded during the month and inform about the power actually used.



They should also inform on the power peaks of the last year, so consumers can plan in advance and optimize their power to their need in each period. To make this adaptation easier, two power changes can be made during the first year after this new tariff is enforced.

They also suggest to include a QR code to make it easier for consumers to access any comparable of available offers on the market (https://comparador.cnmc.gob.es/) .


In this comparative you can check the electricity offers for low voltage consumers, with and without time discrimination and also tariffs and offers for natural gas. This comparative unifies the rates of different operators by grouping those that apply to domestic consumers, new customers, any type of consumer, etc.


Who will benefit from this?


According to the CNMC, around 19 million consumers, who until now had no type of discount on their rate, will benefit form new tariffs.


According to the sources, “the discount could be quantified between 3.4% and 6.7% thanks to the reduction of the regulated part of the invoice that is destined to finance the fixed costs of the system. However, for the 10 million households that already had some type of hourly discrimination and benefited from cheaper rates, will probably see their bill increase.


Can there be an annual savings with this change?


This will depend on each consumer and how much electricity they use in each time period.

The electricity bill will be lower if the appliances that use the most electricity like dishwasher, dryer or oven are used during off-peak hours or on weekends.


According to the CNMC, the new rates seek to discourage the use of several appliances at the same time, leading to possible savings of 200 to 300€ a year for a consumer with high electrical equipment


Consumption habits will have to be modified, and as far as possible, they will have to program appliances to be used from dusk to dawn and on weekends. But not all households have programmable appliances. Also, currently there are many households with family member working from home and consuming energy during the most expensive peak periods.


The fixed part of the invoice, the power, will decrease while the variable part, the energy, will rise. This drop in the power price is not going to compensate the increase in the price of electricity, in fact, this price has hit record high in the first 3 weeks of June.


According to an ABC digital article last June 16th:The electricity price is completely out of control after months of rising. For the second consecutive day, after reaching €90,95 per megawatt-hour on Tuesday, June 15, the price in the wholesale market registered a new record, reaching € 94,63, very near the € 94.99 reached on the 8th January with the storm Filomena and the fourth highest price in its history, according to data from the Iberian Market Operator (OMIE). It is also the most expensive price in the main European countries, just ahead of the UK at € 94.48”.


Another important tissue is the VAT of electricity. The OCU has already requested the same reduced VAT rate applied to basic services such as transport or water 10% be applied to electricity currently at 21%.


"It is unreasonable to tax at a high rate an essential service that needs an additional protection mechanism, such as the social bonus" they explain from the consumer organization. To have a global idea of ​​the VAT that is applied to electricity in other European countries: 19% in Germany, 13% in Ireland, 10% in Italy, 8% in Luxembourg, 6% in Greece and Portugal and 5.5% in France


The Spanish government will cut VAT on electricity bills from 21% to 10% after the latest update of electricity tariffs, this measure will be applied initially until December 31st 2021


Sources:




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