Government fends off massive increases in electricity and gas during the election year
The energy crisis and the shock of record fuel prices helped many people learn to read electricity bills in a new light. They began to understand different tariffs, to gauge consumption in megawatt hours, and to recognize the Iberian market’s quirks. They learned that running the washing machine at certain times can cost more, and that price visibility matters for household budgets.
Fears about rising electricity bills made price information harder to ignore. The market price shifts throughout the day, so bills for millions of households can swing hourly. A European request to refresh prices every 15 minutes rather than each hour sparked a new wave of anticipation. Yet the transition is still taking shape, arriving later than some expected.
Today the wholesale electricity market is a place where generators, distributors, and traders buy and sell the energy planned for the next day, with prices changing by the hour. The system’s operator forecasts generation and hourly consumption, while the market manager in Iberia matches prices based on supply, demand, and the energy mix in each hour.
Problems with the algorithm
The Energy Regulatory Cooperation Agency, ACER, which includes Spain’s CNMC, approved the move to a European wholesale market framework but paused a new price formula due to performance concerns. Recent reports from OMIE, the operator of the Iberian market, describe ongoing work to align the market with a 15-minute cadence within the daily cycle.
Spaniards still have to pay 10,500 million in electricity bills to plug the hole in Zapatero and Aznar
Coordinating the diverse European markets has proven challenging, and officials now expect that determining roughly a hundred distinct daily prices could extend beyond January 2025. The algorithm in use must handle rapid calculations reliably, so a synchronized, large-scale rollout across all markets was chosen, sometimes referred to as a “big-bang” approach.
Across Europe, market operators are designing a new algorithm capable of price alignment every 15 minutes. A testing period was anticipated this year to ensure safety and reliability, though the initial plan was for early 2024 for some steps of the process.
Direct impact on millions of invoices
For the 8.5 million customers who pay the pool or a regulated tariff, the energy price in the pool directly shapes the energy portion of their bill. The government is finalizing a reform to the regulated tariff that should take effect in 2024, hoping to reduce volatility by linking price formation not only to the daily market but also to more stable long-term markets.
About 19.5 million small consumers on free market rates generally see stable prices, adjusting mainly during annual or biennial reviews rather than in step with the market’s daily swings. The pool has long served as a reference point for these households as prices change with demand.
Back in the summer of 2021, as the energy crisis began to bite, the authorities reissued electricity bills for all consumers. Time-based prices were introduced to reflect lower demand at certain hours and higher demand during peak times. The reform, which began mid-year, aimed to shift some consumption away from peak periods and to reduce the need for new investments in infrastructure. While the overall share of regulated pricing has been trimmed, the central hours of the day often show lower market prices rather than higher ones, shaping how households manage energy use.