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Date Published: 06/10/2022

ARCHIVED - New regulated electricity tariff: savings of 300M euros for 9M households in Spain

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It's estimated the new model for calculating the Voluntary Price for Small Consumers (PVPC) in Spain will cut the daily cost of electricity to 17%

<span style='color:#780948'>ARCHIVED</span> - New regulated electricity tariff: savings of 300M euros for 9M households in Spain

The Spanish Government plans to introduce a new regulated electricity tariff that could mean savings of almost 300 million euros for more than nine million households across the country.

Initial estimates suggest the new methodology for calculating the PVPC, the annual volatility of the daily price of electricity, will be reduced to 17%.

Currently, around 40% of Spanish households' bills are determined by the existing tariff which has been soaring over the last 12 months as a result of the energy crisis.

According to an impact report relating to the tariff reform carried out by the Ministry of Ecological Transition, "the regulated tariff varies according to the evolution of prices in the different markets".

It doesn't specify what the average saving on bills could be, but estimates a saving of 297.1 million euros per year, studying the evolution of prices between 2018 and 2022, with the price of electricity reduced by 2.5 euros per MWh.

"Going from the current 100% daily market reference to a 40% daily market and 60% futures market would reduce price volatility from 27% to 17%," the report adds.

In October last year, with electricity prices rising for several consecutive months, the Ministry for Ecological Transition, headed by Teresa Ribera, launched a public consultation to modify the PVPC, but it came to nothing.

Also read: Living the nightmare—an in-depth look at the British expats forced to live without water or electricity in Murcia

Now, it's back on the table again after the European Commission (EC) imposed a review on Spain as a condition for approving the 'Iberian derogation', and the government is confident "a reformulation of the calculation of the cost of electricity production will provide the PVPC with greater stability".

To put this in context, before the energy crisis broke out in the summer of last year – an increase in the price of gas and CO2 emission rights which was aggravated aggravated by Russia's invasion of Ukraine – a customer on the regulated tariff was paying less for their electricity bill than one on the free market.

However, the PVPC is now characterised by offering a price per kilowatt per hour (kWh) for each exact moment of each day, providing a total of 24 daily prices and high volatility.

The government itself points out in the report on the draft Royal Decree that the competitiveness offered by the regulated tariff has been achieved "at the cost of a high exposure of agents to the daily market, undermining the incentives to supply themselves by means of forward hedging instruments".

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