The energy crisis sparked by geopolitical tensions and the Ukraine conflict pushed electric tariffs higher for hundreds of thousands of households. Between June and December 2021, data from the National Markets and Competition Commission (CNMC) show that the number of users in the regulated market fluctuated wildly, with up to around one million people affected in the following six months. The market share of regulated customers fell from about 40% to roughly 30% as consumers shifted toward other options.
The regulated tariff is designed for small households and small- and medium-sized enterprises with contracted power under 10 kilowatts. Its price track relies on the wholesale electricity market, and the value is derived from the price of the prevailing market plus a margin. In contrast, the free market rate follows the reference PVPC rate (Voluntary Price for Small Consumers) and adds a margin, making it appear more stable yet typically costlier in practice. Regulators have repeatedly highlighted PVPC as the least expensive option.
In recent months, policy shifts and measures—such as reducing aid for sellers asking above certain price thresholds—altered these dynamics. After a surge in electricity prices in spring 2021, many regulated-rate customers paid higher bills, while free-market users enjoyed lower prices thanks to temporary price reductions and tax relief implemented by the government.
The change also involved a notable exodus of customers, driven by the introduction of a new hourly rate in June and aggressive advertising from major providers touting fixed-price plans in the free market. By 2022, CNMC official data show approximately one million people switching away from the regulated market in the first seven months, and around 8.8 million by July, with the total number of free-market customers reaching an all-time peak near 19 million.
Since then, the pattern appears to have stabilized, with quarterly reports from the two leading electricity firms indicating growth in the free market segment. Endesa reported an increase of about 602,000 users, including 139,000 in the nine months leading up to the third quarter. Iberdrola showed a shift from around 395,000 regulated customers to about 94,000 who moved to the free market during the summer. In both cases, the major players gained more customers in the free market than they lost from the regulated segment.
Despite the regulated tariff offering what appears to be more favorable terms for many households, data from CaixaBank Research at the end of October 2022 indicate that the regulated tariff had risen by roughly 14 percent on a year-to-date basis, with some estimates suggesting an even higher increase in real terms.
The ongoing migration from the regulated market is not new and aligns with the broader liberalization goals of the electricity sector. However, concerns persist that competitive pressure may not be fully realized when exchanges occur primarily among vertically integrated groups. In recent months, complaints from small marketers have highlighted concerns that large incumbents can push prices downward, yet regulators have not opened investigations in many of these cases, unlike the more scrutinized situations in the gas sector.
For many large businesses, the free market represents greater profitability because it allows stretched margins and avoids dependence on the regulated price which is tied to production costs and system capacity. Looking ahead, experts anticipate a reform of the PVPC calculation in the coming year to limit benefits from the current method. Proposals suggest restricting certain advantages to households and micro-enterprises with smaller footprints, defined as those with fewer than ten workers or annual turnover under two million euros, in an effort to create a more balanced, fairer pricing framework for all customers. [Attribution: CNMC and regulator summaries on market evolution].