The new regulated electricity rate will come into force from January 1

MADRID, 29 Dic.

The new regulated electricity rate will come into force from January 1


The new formula for calculating the regulated electricity rate, the so-called Voluntary Price for Small Consumers (PVPC) - to which some 8.5 million consumers, around a third of all domestic consumers, are covered - will come into force. effective as of this coming Monday, January 1, as reported by the Ministry for the Ecological Transition and the Demographic Challenge.

Unlike the calculation methodology that was applied until now, introduced by Law 24/2013 of the Electrical Sector and regulated in Royal Decree 216/2014, where the final price was fully indexed to the daily wholesale market, the new formula will partially incorporate long-term price signals. To this end, since last July 1, the reference marketers have been purchasing in advance part of the energy that the PVPC tariff will consume in 2024.

With this reform of the PVPC, the household bill will benefit from the partial deindexation of the spot markets by incorporating references from the futures markets - that is, taking into account the price of electricity in the purchase and sale contracts made for a specific date. future -, which will provide more stability to consumers' final prices.

This incorporation of futures will be gradual and in 2024 the price of electricity will be calculated with 25% of the future price and 75% of the daily price. In 2025 the PVPC would be calculated with 40% of the future price and the remaining 60% will be the daily price and finally in 2026 45% will be considered the daily market price and the remaining 55% will be the future price. At no time will this mean an alteration of the price signals, which will continue to direct demand towards the hours of lower consumption.

In this way, the Government puts an end to the PVPC as it has been known until now, from 2024, which was created in 2014 by the PP Government and which, indexed to the daily prices of the Iberian Electricity Market (Mibel), had been the cheapest option for small consumers since its creation, when it was addressed as a reform of the electricity rate due to the problems of the Cesur auctions.

The cabinet led by Teresa Ribera considered that this modification will mean "a boost to the contracting of electricity in the forward markets, which will translate into greater stability in the bills of Spanish households and micro-SMEs, avoiding episodes of strong volatility, such as the experienced in recent years, especially acute during the first months of the war in Ukraine.

In addition to encouraging generators and marketers to negotiate energy production in long-term markets to obtain greater security regarding the return on their investments, it is expected that this modification will lead to greater stability in consumers' electricity bills.

The change will be automatic -consumers will not have to do anything- and the electricity companies will take care of it, which will apply the new energy price formula in the invoices they issue as of January 1.

Although electricity prices in wholesale markets have continued to be unusually high during 2023, the measures to protect consumers put in place after the start of the invasion of Ukraine, including the Iberian Solution, have resulted in a reduction of 40.5% year-on-year in the bill of the typical consumer with a consumption of 2,400 kilowatt hours (kWh) annually and a contracted power of 4.11 kW, according to Ministry estimates.

In this way, while the monthly electricity bill in 2022 stood, on average, at 75.58 euros, that amount was reduced to 44.97 euros in 2023.

Having electricity contracted in the regulated market is one of the requirements to be a beneficiary of the social electricity bonus, a protection measure currently covered by more than 1.5 million homes (close to four million people).

Traditionally structured in two categories -vulnerable and severely vulnerable-, the impact of the Ukrainian war on energy prices led the Council of Ministers to temporarily approve a third category, included in RDL 18/2022, -working households with low incomes- , which allows you to benefit from a 40% discount on electricity bills.

Both the reduction for this group and the extension of discounts for vulnerable and severely vulnerable consumers - which went from 25% to 65% and from 40% to 80%, respectively - have also just been extended by the Royal Decree-Law. 8/2023, until June 30, 2024.