‘Iberian exception’ is now out to refund customers on electricity bills

The Iberian mechanism contemplates the payment of compensation. gas and coal power plants (and now apart from cogeneration) charge for electricity based on the real price of natural gas, with no cap on other generation technologies, so they don’t produce at loss. Compensation stop gas It was marketed almost entirely paid for by Spanish customers, and to a much lesser extent financed by electricity companies at rates paid (and eventually paid by French electricity consumers) for using the interconnection to send electricity to France.

But last month, after seven consecutive months, when the majority of Spanish consumers had to pay additional fees to their bills to finance this adjustment. ‘Iberian exception’ appeared for the first time to return And many customers’ bills are therefore starting to reflect small discounts (just 34 euro cents for the average consumer).

In recent weeks, the decrease in natural gas prices, less use of thermal power plants andElectricity exports to France remained strong It had Spanish customers reimbursed some of the cost because the rates for sales to France were higher than any compensation due to gas utilities.

Reduction in electricity bill

in all, Thermal power plants have already received a total of 6,641 million TL from these compensations. According to the records of OMIE, operator of the wholesale electricity market known as the ‘pool’, between June of last year and February of this year, the euro. This compensation is used to make these power plants operate at the real price of natural gas, while preventing other generation technologies that sell electricity in the wholesale market (renewable, nuclear, hydroelectric…) from charging the same price without incurring costs. from rising gas and thus avoiding possible exceptional benefits.

Spanish customers of this total amount received by gas factories All those with a PVPC tariff and some with a free market contract – paid 5,993 million euros on their electricity bill between June and last January. According to OMIE data, In February, 20.6 million euros were returned to Spanish electricity consumers.

The remaining part of the correction regarding the pricing of thermal power plants, congestion rents (the fees electricity companies have to pay to use international interconnections) €667m between June and February. Since last year, electricity sales to France have skyrocketed, and the balance of interconnections has always been exporters for Spain, so these congestion rents are being paid indirectly by French consumers.

Here’s what happened in February (and is likely to continue in March, according to sources in the electricity sector): amount collected for congestion rents was higher than total compensation taken by gas power plants. Thermal power plants were 25.3 million in compensation in February, while congestion rents from exports to France were 49.3 million. That’s why Spanish clients (those who have updated the terms of their contracts in the past year and have a free market and regulated rate) 20.6 million returns.

cheapest fare

An increasing number of electricity customers are charging surcharges on their bills to compensate gas plants for the Iberian exception. (The government has stated that this cost should be paid equally without the gas cap mechanism and that customers have a approximately 5,000 million net savings Therefore, they did not overpay for the remaining energies, as they lowered the price of the wholesale electricity market.)

For seven months the ‘Iberian exception’ began to pay. For consumers with regulated tariffs, their companies applied a surcharge directly on the energy term portion of their bills, and for customers using free market tariffs, electricity companies applied a differentiated surcharge on their bills. A surcharge, the final amount of which depends on consumption by the customer.

For an average electricity user with an annual contracted power of 4.4 kilowatts (kW) and a consumption of 3,500 kilowatt-hours (kWh), in the months when gas prices are the highest and thermal power plants are used the most, the surcharge represented a cost of 38 euros last August.28 euros in July or 23 euros in September, according to data presented by the rate comparator of the National Markets and Competition Commission (CNMC).

The amount of the surcharge was moderated in the following months, until it reached last January at just 53 euro cents for a typical consumer. However, instead of the extra cost of adjustment included in the gas cap mechanism, in February Yield: 34 cents for the typical consumer.

Depends on how low the gas is

The cost of adjusting to demand in February was negative (-1.42 Euro per megawatt hour, MWh), meaning a return to the customere, because the contribution of the congestion income is higher than the compensation to be paid to the thermal power plants. Although the gas price has fallen, it is still above the ceiling set by the Iberian exception and therefore the mechanism continues to apply.

In case the gas price drops below the fixed limit (which has already happened since last June), Iberian mechanism temporarily suspended and no longer implemented. In this case, the compensation of the thermal power plants becomes zero directly and no corrections are applied to the customers’ invoices.

So there is the paradox that customers can enjoy a refund if the gas price is low but above the fixed limit, as it was in February; but if it goes too low and falls below the limit, there is no going back as the mechanism will be dead.

Who pays for the ‘Iberian exception’?

The big electricity companies admit that the mechanism designed by the Government serves to limit the price of electricity in the wholesale market, but they demand changes in its operation, mainly reforms about who will pay the additional cost of activating the ceiling. compensates for gas price and thermal power plants. Spain and Portugal ask for extension of ‘Iberian exception’ mechanismIt will expire on May 31 and power companies want this extension to be used to implement these reforms.

from the electricity sector The distortion assumed by the “Iberian exception” for the functioning of the retail marketz, given that the millionaire cost of compensating gas plants is also paid by customers contracting at a rate that now becomes variable due to the additional cost charged to them and entitles them to a fixed price.

It is precisely this variable extra cost (depending on the price of gas and how much gas plants are used) by the big utilities to pass on to customers at tariffs that agree on a fixed price, which the big utilities are putting pressure on as an unaffordable trade distortion. When the government removes it..

from the electricity sector they are clearly not getting wet with a clear proposition of who should bear the extra cost of compensating the gas plants. If consumers don’t do this, they will benefit from lower market prices, but point out that in other European countries considering introducing similar mechanisms, transferring the extra cost to or from state budgets is suggested as a possibility. electrical system as a whole.

5,000 million net savings

For over two decades, the wholesale electricity markets in Europe have operated on marginalist systems; this means that the final supply of production that satisfies demand is the supply that determines the price of the others. The final offer is, in most cases, the offer made by gas power plants during the energy crisis. put up with rapidly rising international pricesand this raises the price of all electricity, also renewable or nuclear, which does not support these extra costs due to the increase in gas.

The “Iberian exception” mechanism is a maximum price for gas used to generate electricity (Average 48.8 Euros per MWh for one year) to lower the price of the electricity market as a whole, by ensuring that the price of gas does not affect the price of other generation technologies. However, the electricity produced by the plants continues to be paid at its real price so that they do not produce at a loss, thus receiving some form of compensation paid by customers who benefit from the general decline in the wholesale market price.

Spain and Portugal impose maximum prices on offers that only combined cycle power plants (that burn gas to produce electricity) can submit in the electricity market. With this, the electricity market as a whole decouples from the gas price and includes its price. According to government calculations, Spanish consumers benefited from net savings of 5,000 million Euro for the lowest market-determined price thanks to the cap on gas, including the impact of more than 6,600 million transferred to gas and coal plants as compensation