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Electricity bill.
In the first ten days of January, the Small Consumer Voluntary Price (PVPC) is determined, which since this year has been determined using a new formula that includes a basket of prices from the daily or spot market (75%) and the futures or forwards (the remaining 25%) would have been more expensive than if the formula, which expired on December 31, had been retained.
Specifically, when extrapolating the data from the daily rates of the network operator Red Eléctrica (only the energy term, without the electricity term), the average price between January 1st and 10th was 139.294 euros/MWh, compared to 133,767 euros/MWh that would have resulted if the old PVPC had been retained and only linked to the daily market. The largest price difference (14 euros) occurred on January 1st and from January 8th the situation was reversed.
This result is due to the drop in demand after the Christmas period, because with the new system “the price increases when demand is lower than the average, which is reflected in the forward, and vice versa when demand is higher than average.” , the price is falling,” says an analyst. Therefore, the partial result for January is inconclusive since there will be periods when prices fall, although everything indicates that the new PVPC for the full year could be higher than that resulting from applying the old formula, but it avoids compensating for the volatility that consumers have suffered in the last three years of the energy crisis, and that is exactly what the government wants to achieve by applying the new methodology.
Although this came into force in July last year, the reference marketers supplying the regulated market with PVPC (subsidiaries of the major companies in the sector: Endesa, Iberdrola, Naturgy, Repsol, TotalEnergie and CHC COR) have been granted a six-month period to in the term markets (one month, three months and one year, with a respective weighting of 10%, 36% and 54%) to be able to contract the energy to be delivered in 2024 at the percentage that determines the norm (the above-mentioned 25 %).
Forwards are markets in which electric companies contract risk hedging with financial institutions that may be paid by users but avoid the large price spikes that domestic consumers have suffered due to the energy crisis triggered by Russia’s invasion of Ukraine. Should an extraordinary event like this occur again, the price increases would be laminated with the new PVPC, as the part of the price corresponding to the futures is fixed in advance.
gradual change
In the midst of the crisis, when energy prices had skyrocketed, the government, having missed its chance to reform the dangerous PVPC, which was directly connected to the pool (as long as prices remained stable, no one remembered the wolf) , couldn’t handle a change that included a spot-forward mix as that too had skyrocketed. In this sense, the Vice President for the Ecological Transition, Teresa Ribera, has already warned that a more stable system with less volatility would be more expensive because the insurance would have to be paid for. “Something like a fixed-rate mortgage,” they compare in the industry.
The executive therefore waited for a weakening of forward prices in order to tackle the reform of the regulated electricity tariff to which consumers with a lower contracted service are entitled. In order to avoid surprises in the event of a drastic change with a new formula, the standard also provides for a transition period of three years, so that in the mix for determining the PVPC the spot loses weight in favor of the forward. The share of futures products will therefore gradually increase by 15% annually between 2023 and 2025 until it reaches 55% in 2025. Therefore, the daily price signal would ultimately remain at 45% compared to 100%. for the old PVPC and would be adapted to the rest of European electrical systems.
One of the innovations of the Royal Decree (RD446/2023), which introduced the reform of the PVPC in the middle of last year, is that only companies that are considered micro-enterprises according to European regulations may be admitted. To prove this, they had a transition period of six months. Of the total number of regulated tariff contracts (8.6 million), it is estimated that more than 635,000 SMEs are affected by the said decree, which has caused great unrest in this sector.
The tax increase will make the PVPC bill 13% more expensive this year
In addition to the changes in the energy price formula for domestic consumers covered by the PVPC, the bill of all consumers without exception has already changed significantly this year, essentially due to the increases in taxes that are taxed: VAT from 5% to 10% of the whole year round; the special tax on electricity, which increases gradually (0.5% and 2.50% in the first two quarters) and reaches 5.11% from June, and the tax of 7% on income from all types of production, suspended due to the crisis which rose by 3.50% and 5.25%, respectively, to the above-mentioned 7% in the first and second quarters of this year. Therefore, these last two taxes return to their original levels.
According to calculations by the consulting firm NERA, taking into account the recovery of these taxes and the partial increase in VAT (which is still far from the 21% of the pre-crisis period); Since the government has maintained the reduction in billing fees and the CNMC has frozen network fees, the average bill for a typical consumer in January would be 55.97 euros, with taxes applicable until 2023. from 60.81 euros in the financial scenario of the first quarter; of 62.12 euros in the second quarter and 63.47 euros in the second half of the year (5.77 euros plus VAT). The recovery of electricity taxes will increase, according to the study, which includes energy costs on the spot and futures markets as well as other costs, such as that of the social bonus. The typical consumer is the one who has a contracted output of 3 kW, an annual consumption of 3,600 kWh and 300 kWh monthly.
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