Government aid to millions of households to lower their gas bills shocked and upset the market. The subsidies serve to reduce the purchases of customers with regulated gas rates by 40% and have made a historic commercial comeback, with almost a million customers changing their contracts in recent months. However, they are still in the minority and less than a third of all customers have chosen regulated rates.
Big energy companies have to present different offers regulated fares (tariffs of last resort, called TUR)) are responding to a real shower of demand to jump into the regulated sector, whose price is set by the Government and is currently applying huge discounts, after years when these rates have a dwindling customer base and those using free market rates have increased. – At a price freely determined by the companies.
The four major energy groups with regulated tariffs (Naturgy, Endesa, Iberdrola and Totalenergies) added nearly 900,000 new customers to last resort retailers in just six months. Of the 1.58 million TUR customers found last September, By the end of February, 2.5 million had been reached at adjusted rates.According to data released by the Ministry of Ecological Transition.
Despite the massive transfer, the number of customers purchasing gas tariffs on the free market is still much higher, even though it is more expensive and has seen strong increases in the last winter months. Right now, As many as 5.7 million users remained in the free market. In other words, only 30% of all users have a rate that is protected against strong increases, as confirmed by the National Markets and Competition Commission’s (CNMC) price comparator, which is currently cheaper than any free market rate.
Not knowing what the ratio is
Energy companies themselves are aware that customers’ lack of information about different market options is the main reason why they maintain their prices despite market fluctuations. It is pointed out that the high invoices coming from the sector in the past winter triggered many contract changes.
More than one 62% of customers admit that they don’t know what gas rate they are trying to get. According to the most recent CNMC Household Panel data from mid-2022, when the energy crisis has raged for almost a year, more than 67% admit they do not know the differences between regulated rates and free market rates. .
Free market rates are freely set and periodically reviewed by companies, while regulated business rates are set quarterly by the Government based on the evolution of international hydrocarbon prices, but increases have a maximum cap from last year.
subsidized gas rates
Last October, the Government launched a multimillion-dollar package of measures as part of the Greater Energy Security Plan (the contingency plan that Brussels has requested from member states to tackle the energy crisis). limit by law the increases applicable to customers with a regulated gas rate Establishment of a new type of discounted rate for centrally heated homes by the end of 2023 and in its neighboring communities.
According to the calculations of the government, the ceiling on rate increases and the VAT reduction on natural gas for small consumers, Reducing the invoice amount of TUR 1 customers by 41% (for those consuming less than 5,000 kWh per year) and 37% in the case of TUR 2 (for those consuming between 5,000 and 15,000 kWh).
As part of its contingency plan for energy measures, the Government has also created a new type of regulated gas rate that residents with central heating can take advantage of – so far they have not benefited from exceeding the maximum allowable consumption. In practice, it will serve to reduce the bill of the household that is shrinking it by about 50%. Latest data provided by Teresa Ribera Ministry, however, 5,000 neighborhood communities benefited from the new rate.
500M to close the hole
Assuming the cost of the discount applied to approximately 2.5 million customers, the government is filling the millionaire gap in the accounts of the Spanish gas system by these measures with a public budget. According to incidental calculations from various sources in the energy sector, the public contribution required to subsidize regulated gas tariffs is already just over €500m from October to the end of March.
The Ministry of Ecological Transition, led by Vice President Teresa Ribera, has an exceptional loan of 3 billion euros to cover the cost of these measures during this year, but the Government guarantees that it will allocate all necessary public money to cover the cost.