Tuesday, July 5

More than ten million families will pay this year for electricity 20% more than in 2018

More than 10.5 million households will pay an electricity bill this year around 40% more expensive than last year and almost 20% more than in 2018 (so far the year with the highest price of the history). They are around four out of ten of all domestic customers in the country and they are those who have contracted the electricity supply with the regulated tariff, which is traditionally cheaper than the free market rates offered by power companies, but it will not be this year.

It is those more than ten million households that will clearly see how the promise of the Prime Minister, Pedro Sánchez, is not fulfilled for them, that it promised that the measures of its shock plan to contain the electricity bill would serve so that all domestic consumers would pay this year a price similar to that of 2018, discounting the effect of inflation.

The price that is paid in the regulated tariff depends directly on the evolution of the electricity wholesale market, which is precisely the one that has not stopped marking all-time highs since the summer. The electricity market, known as pool, continues to set records and this week has approached the psychological level of 400 euros per megawatt (MWh) -this Thursday it stayed at 383 euros-.

With the ‘pool’ unbridled by the increase in the cost of gas markets and CO2 emission rights, what households with PVPC pay continues to grow, even despite the tax cuts and the fixed part of the invoice applied by the Government. The government’s measures were specifically aimed at containing the rise for households with regulated tariffs, but the spiral of increases in the wholesale market is being of such intensity that the effect of the tax and charge cuts was quickly overcome.

A typical client with a regulated tariff -with a contracted power of 4.4 kilowatts and an annual consumption of 3,500 kWh- will pay 936 euros in the whole of this year, according to the calculation of the energy consultant Francisco Valverde, with actual price data so far and an estimate through the end of the year based on the futures market. An annual bill that will be 43% higher than the 653 euros last year and that will be almost 19.5% above the 784 euros that a consumer with the same characteristics paid in 2018.

The Ministry for Ecological Transition and the National Markets and Competition Commission (CNMC) perform their electricity price estimates with a typical customer with inferior characteristics (with 3.45 and 3.8 kilowatts of contracted power and with between 2,300 and 2,500 kWh of annual consumption), with which the final amount of the invoice Estimated annual rate would be lower, but the variation rates between one year and another would maintain very similar proportions.

The measures adopted by the Government have not succeeded in preventing the electricity bill of customers with PVPC from continuing to rise, but the temporary reductions in taxes (VAT, the special electricity tax and the generation tax) and the cut in the charges of the receipt (of 96% until the end of the year) they have prevented it from going up much more. Without these measures, the annual invoice of this type of client with a regulated rate would have risen to 1,042 euros, 11% more than the 936 euros that will finally be paid. Without containment measures, this year’s annual bill would have been almost 60% higher than last year and 33% above 2018.

Sánchez will fulfill his promise

In recent weeks, despite continuing electricity price records, the government has stubbornly and seamlessly defended that the promise to match this year’s electricity bill with that of 2018. Households with PVPC this year they will pay more. The rest of domestic customers that do not have a regulated tariff, the 16.2 million homes with free market tariffs, will pay the price they have signed with their electricity companies. Most have a stable and fixed price, and for the moment they have not been affected by the exorbitant rises in the electricity market (it will foreseeably end up impacting them later, in the next revision of the rates, which is generally annual or biennial).

And it is that the Executive wants to fulfill its promise relying on what the average of the set of Spanish households will pay in its bill throughout the year. All households. This average will finally include both customers with a regulated rate (who will pay more) and consumers in the free market (who will pay less, thanks to the fact that they are not affected by the rise in the wholesale market but have benefited from the reductions in taxes and the reduction of the charges applied by the Government).

“There will be many families that pay less, there will be some families that pay the same and there will be some families that may pay a little more,” the vice president summarized for weeks. Minister for the Ecological Transition, Teresa Ribera. Some will pay more than in 2018 and others will pay less, but the Executive assumes that the average will be at levels similar to those of the bill three years ago. In addition, the effect of the CPI would be discounted, which this year will close with an annual average of around 3%.

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The Ministry for Ecological Transition maintains that prediction “according to the best possible estimates.” The price of the PVPC can be easily calibrated according to the evolution of the wholesale electricity market and the futures market. But there is no prior record of the price of the hundreds of tariffs that electricity companies offer in the free market, it is only publicly reflected in the semi-annual statistics of Eurostat, the statistical service of the European Commission.

The main Spanish electricity marketers are not obliged to send the Ministry the information on the final prices that apply to all their customers until the end of February. It is then when the Government will know for sure if it has managed to fulfill its commitment. These data, however, will not be made public until Eurostat publishes its statistics on electricity prices for all the countries of the European Union for the second half of the year, which does include both regulated and free market rates. The European Commission does not have this publication scheduled until next April.


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