Electricity prices and bills: what’s changing in the Iberian market and PVPC impact

The average electricity price is set to drop by 10.48% this Tuesday compared with Wednesday, landing at 186.84 euros per megawatt hour (MWh).

As a result, the wholesale market price, known as the pool, will fall below 200 euro/MWh for the first time since last Sunday, according to data published by the Iberian Energy Market Operator (OMIE). It will be about 21.87 euros lower than today. This marks the minimum price level for May 11 between 16:00 and 17:00, with 154.4 euro/MWh as the minimum and a peak of 228.84 euro/MWh occurring between 08:00 and 09:00.

When compared with a year ago, the Wednesday average price is about 245.68% higher than 54.05 euro/MWh on May 11, 2021.

Pool prices influence the regulated tariff, the PVPC, which covers roughly 11 million households in the country and serves as a benchmark for the 17 million others who procure in the free market. In 2021, the National Markets and Competition Commission (CNMC) noted that around 1.25 million people switched from PVPC to a fixed-price free-market rate amid the ongoing energy surge.

BILL IN APRIL 53% HIGHER THAN A YEAR AGO

Facua-Consumers in Action reports that the average electricity bill last April reached 124.90 euros, the fifth-highest figure in history and 53.2% above the 81.55 euros recorded in the same month a year earlier. Yet, April saw a 29.3% drop from March, a month that posted a record wholesale price above 283 euro/MWh.

In April 2021, the price per kilowatt hour (kWh) averaged 17.04 cents (27.19% including indirect taxes).

The best way to save on electricity bill without depriving yourself of anything

“IBERIA EXCEPTION”

This Tuesday, Spain and Portugal reached an agreement with the European Commission to cap gas prices, targeting an average of 50 euros/MWh in the Iberian Peninsula’s wholesale electricity market over the next twelve months. The arrangement ties the gas reference price to about EUR 40/MWh initially, with a 50 euro/MWh average over the year, exceeding the earlier 30 euro/cap set by Spain and Portugal.

Additionally, on March 29, the government approved a national plan to address Ukraine-related impacts. Measures include extending the electricity tax relief until June 30 and expanding the social electricity coupon to reach 1.9 million beneficiary households. An early update to the regulated regime for renewable energy, cogeneration, and waste (Recore) cut 1.8 billion euros from electricity bill fees.

Another measure extended the gas relief to June 30 to curb extraordinary profits in the electricity market, broadening coverage to include energy with futures and fixed-price contracts when the price exceeds 67 euro/MWh.

What does it mean to separate electricity price from gas?

electricity price calculator

Click on any device in the calculator and it will display the price per kWh.

STABILITY IN THE MARKET

On February 24, when the Ukraine conflict began, wholesale prices stood at 205.6 euro/MWh. Since then, a daily rise occurred, with a peak on March 8 at 544.98 euro/MWh. Since March 12, prices have hovered around 250 euro/MWh, gradually easing to below 230 euro in the most recent days.

March became the most expensive month on record, with the wholesale average near 283.30 euro/MWh. By contrast, December 2021 is often cited as a historical high point, with the year’s average price around 111.93 euro/MWh when volatility surged in the second half of 2021.

Here is the new electricity tariff

Wholesalers hold direct influence over the PVPC, the regulated tariff that covers roughly 11 million consumers in Spain and acts as a benchmark for the 17 million others who source energy in the free market. The ongoing conflict between Ukraine and Russia could push energy prices higher in the coming weeks, particularly for gas, as European imports face potential slowdowns due to sanctions. To mitigate the impact on households, the government extended the tax relief on electricity bills until June 30. The rise in prices across Europe is driven in part by higher international gas costs and the price of CO2 emission rights, which influence market prices in most hours.

How to save more than 500 euro per year on the electricity bill?

To soften the impact of rising electricity costs, the government extended the tax relief on electricity bills through the first four months. The European energy market remains sensitive to gas price moves and CO2 credits, which shape hourly prices. The Ukraine-Russia conflict continues to influence gas flows and market dynamics across Europe.

The year 2021 is often remembered as one of the costliest for electricity; the year closed with significant price volatility, though the average price for the daily market in January stood high as well. The government maintained tax relief on electricity for all consumers to cushion the burden of higher prices.

The VAT reduction from 21% to 10% and the electricity tax reduction from 5.11% to 0.5% were extended through April 30. The suspension of the 7% production tax for companies was kept in place through March 31 for now, as policymakers weigh further steps.