A new mechanism from Brussels aims to cap gas-driven costs within the electricity market in Spain through a regulated tariff reform. The draft royal decree approved by the Cabinet outlines the adjustment as an extraordinary measure intended to reduce volatility tied to wholesale market dependencies. Utilities have long pressed for design changes to stabilize prices, and the proposal seeks to deliver that stability while aligning with European expectations.
The proposal references a mechanism that would confirm the reform with the European Commission. It describes a current voluntary price adjustment for small consumers known as PVPC. The draft text, summarized by El Periódico de la Energía, indicates that the adjustment would be configured as a transitional measure and would take effect in practice though not immediately. The reform is presented as a stepping stone toward a more predictable pricing framework.
Last October, amid rising costs, the government attempted to modify the price ratio, but certain elements remained unchanged. Brussels has conditioned the reform on establishing a clearly defined upper limit. The plan foresees changes to be implemented before the 1st of October, with the revised calculation drawing from futures market baskets that contain annual, quarterly, and monthly contracts, alongside the wholesale price observed in the daily market. The aim is for the PVPC to start applying the adjusted energy cost formula by early 2023, thereby shaping how energy costs are passed to consumers.
Ministry sources point out that liquidity in the Spanish market remains a challenge, both on the supply side and the demand side. In this context, the futures market reference for the regulated tariff is expected to guide energy procurement strategies for reference marketers. A greater emphasis on futures trading could push marketers to engage more actively, allowing them to secure energy for their customers within Iberian futures markets and to bolster market liquidity on the buyer side. On the supply side, limited participation in renewable energy facilities, cogeneration, and waste-to-energy projects has reduced liquidity, partly due to the existing compensation framework that covers a broad portion of electricity demand under the RECORE regime. The government intends to foster a pricing model that encourages more RECORE energy integration into these futures markets.
The PVPC framework has become a focal point in political and industry discussions. At a recent event, Iberdrola’s chairman called attention to pricing approaches often described as overly cautious or even unwise for certain customer segments. The energy policy discourse continued with remarks from the vice president and minister for Ecological Transition, who emphasized that vulnerable consumers must have access to cheaper energy through social subsidies, while encouraging industrial customers to consider options that better align with their needs. Critics have challenged the framing of cost-saving arguments for consumers, reminding policymakers that a balance must be struck between affordability and investor confidence. These debates underscore the tension between safeguarding vulnerable households and maintaining a robust, liquid energy market that supports fair competition for all market participants.