The average price of electricity for regulated-rate customers connected to the wholesale market is forecast to fall by 3.08 percent this Thursday, following three consecutive increases. The price is expected to stand at 273.43 euros per megawatt hour, down from the prior level on Wednesday.
For PVPC customers, the price reflects the wholesale market’s average auction price plus the compensation that demand pays to combined-cycle power plants, adjusted under the Iberian mechanism to cap gas costs for electricity generation.
In the auction, the wholesale market price, often called the pool, should average 149.86 euros per MWh this Thursday, a drop of 2.89 euros from today’s 152.75 euros per MWh. This reduction equals about 1.89 percent, according to data from the Iberian Energy Market Operator as reported by Europa Press.
The maximum price for the pool today between 00:00 and 01:00 on 23 June is 186.5 euros per MWh, with the highest access window between 18:00 and 19:00 and a daily minimum of 124.32 euros per MWh.
To the pool price, a compensation of 123.57 euros per MWh was added for gas companies, up from 129.37 euros per MWh on Wednesday. This compensation is payable by consumers who benefit from the measure, including PVPC customers and those in the free market with indexed rates.
5.8% less without action
Without the Iberian mechanism that caps gas prices for electricity generation, Spain’s electricity price would average about 290.26 euros per MWh, which means the compensation would not close the gap fully. On balance, regulated-rate customers are expected to pay approximately 5.8% less.
Compared with a year earlier, the Thursday price for the adjusted PVPC remains markedly higher, by about 204 percent, than the pool price of 89.88 euros per MWh recorded on 23 June 2022.
The government highlights potential savings from the gas cap
The Iberian mechanism, activated on 15 June, limits the natural gas price used for electricity generation to an average of 48.8 euros per MWh for twelve months, providing coverage into the next winter when energy prices tend to rise. Specifically, the Iberian exception sets gas for power generation at 40 euros per MWh during the first six months, followed by a gradual monthly increase of five euros per MWh until the mechanism ends.
Government expects a 15% drop in household bills
Government analyses project that the PVPC average bill reduction will cap at 15.3 percent over the 12 months following the approved cap on gas-generated electricity, with the rate remaining regulated during this period. For industrial users fully exposed to the spot market, estimates suggest an initial decline between 18 and 20 percent in the first month, with subsequent oscillations within a wide range.
Pool prices influence the PVPC, which covers nearly 11 million households, and establish benchmarks for the remaining 17 million customers choosing free-market supply. The National Markets and Competition Commission confirmed that in 2021 around 1.25 million people shifted from PVPC to a fixed-price free-market option within the context of energy price movements.
VAT reduction on electricity
Recent parliamentary discussions included a decree to extend measures mitigating the economic impact of the war in Ukraine, which would also cut VAT on electricity from 10 percent to 5 percent. This follows a prior reduction from 21 to 10 percent a year ago, and the government intends to extend relief to protect families across the country. The government calls on political forces to support the ratification of the new executive order.