Yesterday the Government approved a Royal Decree, which reforms the regulated electricity tariff for the domestic consumer from next year onwards, to ensure it is less volatile.
The Government decided to calm the effects of the wholesale market on electricity prices to avoid the soaring and wildly fluctuating prices we saw last year when the war in Ukraine broke out.
The regulated tariff, which from January will cease to be totally linked to the hourly fluctuations of the wholesale market, is reserved for contracts of up to 10 kilowatts of which there are nine million.
From January 2024 a part of the costs of energy of the regulated tariff will no longer be linked to the daily price on the wholesale market but will be indexed with the futures market.
The price will be updated every month and will be made public so that electricity suppliers have to incorporate it in their monthly billing.
According to the Government this indexation with the futures market will “reduce the volatility and bring more stability to consumer´s bills.”
The million dollar question is whether this reform will increase consumer’ bills in exchange for price stability.
However, the Government claims that renewable energies are going to reduce the prices in the future and that the reform is not designed to act on prices but to reduce the volatility of prices.
Furthermore, says the Government, under the new system consumers will be better protected from environmental influences (such as Philomena) or tensions on the gas market, which caused electricity prices to fluctuate wildly in 2022.
“It is more to provide a real insurance against short term price shocks” says the Government.
Editors Note
The electricity market in Spain is confusing. Here are some tips that may help you understand it better. However, if in doubt, contact your supplier.
How do you know whether you are on a regulated tariff or are on the free market?
You need to look at your bills (on the internet if you are paperless) and look on the top of the bill for “Tarifa de acceso,”and at the side of it you will dee 2.0A , 2,1A etc to see your tariff and if it says PVPC you are a regulated market customer.
What is the difference between a regulated and a free market tariff?
The main difference is the way the tariff is set. On the regulated market the price of electricity changes for hours or days whereas on the free market it is the companies which establish the prices and generally it is a fixed price.
Which is better the free market or regulated?
This depends on the type of consumer and the habits of usage.
With the regulated tariff there is always a discrimination in hours in three blocks. While on the free market there is more price/hour variety, discounts and offers.
