The new formula for calculating the regulated electricity rate is the so-called Voluntary Price for Small Consumers (PVPC) -covering 8.5 million consumers, approximately one-third of all domestic consumers-, It will come into force as of next Monday, January 1.As reported by the Ministry of Ecological Transition and Demographic Challenge.
Unlike the calculation methodology applied so far, introduced by Law 24/2013 on the Electricity Sector and regulated by Royal Decree 216/2014, where the final price is completely indexed to the daily wholesale market, the new formula will partially include long-term price signals. For this purpose, reference marketers have been purchasing in cash a portion of the energy that the PVPC tariff will consume in 2024 since July 1st.
With this reform in PVPC, household bills will benefit from partial indexation of spot markets adding references from futures markets In other words, taking the electricity price into account in purchase and sale contracts made for a future date will provide more stability in the final prices of consumers.
This consolidation of futures will be gradual In 2024, the electricity price will be calculated as 25% of the future price and 75% of the daily price. In 2025, PVPC will be calculated with 40% of the future price and the remaining 60% will be the daily price and finally in 2026, 45% will be the daily market price and the remaining 55% will be the future price. This will never mean a change in price signals, which will continue to drive demand towards lower consumption hours.
This way, Government ends PVPC as it has been known since 2024Due to the problems in the Brave tenders, which have been the cheapest option for small consumers since its establishment, when it was considered as a reform of the electricity tariff, created by the PP Government in 2014 and indexed to the daily prices of the Iberian Electricity Market (Mibel).
The cabinet, led by Teresa Ribera, considered that this change “would mean an increase in the contracting of electricity in the futures markets.” More stability in bills for Spanish households and micro-SMEsAvoiding the strong fluctuations experienced in recent years, especially in the first months of the war in Ukraine.
In addition to encouraging producers and marketers to negotiate energy production on long-term markets to gain greater security about the return on their investment, this change is expected to lead to greater stability in consumers’ electricity bills.
The change will happen automatically, consumers will not need to do anything, and electricity companies will deal with this issue and apply the new energy price formula to their bills starting January 1.
Consumers with PVPC paid 40% less in 2023
Although electricity prices on wholesale markets remain unusually high in 2023, measures introduced to protect consumers after the start of the occupation of Ukraine, including the Iberian Solution, have resulted in a 40.5% year-on-year decline. According to ministry estimates, it is included in the typical consumer’s bill with an annual consumption of 2,400 kilowatt hours (kWh) and 4.11 kW of contracted power.
In this way, the monthly electricity bill in 2022 will be on average 75.58 eurosIn 2023, this amount is reduced to 44.97 euros.
Ensure electricity is contracted in the regulated market andOne of the conditions for benefiting from the electric social bonusIt is a protection measure that currently covers more than 1.5 million households (close to four million people).
The impact of the Ukrainian war on energy prices, traditionally structured into two categories (vulnerable and severely vulnerable), led the Council of Ministers to the following decision: Provisionally approve a third category included in RDL 18/2022Low-income working households can benefit from a 40 percent discount on their electricity bills.
By Royal Decree, both the discount for this group and the extension of discounts for sensitive and severely sensitive consumers (from 25% to 65% and from 40% to 80% respectively) have also been recently extended.8/ 2023′ from to June 30, 2024.