At least three quarters of the electricity demand are freed from the Government’s ‘hack’

The pulse between Government and electricity it has been radically diminished, royal decree by means of. Iberdrola and Endesa They have applauded this Wednesday the regulatory change of the Executive according to which the ‘hack’ to the income of inframarginal plants (nuclear, hydraulic and some renewables) due to the rise in gas will not affect those contracts at a fixed price. The response of the two main electricity companies, Iberdrola and Endesa, has been the same: “We have all energy sold under fixed price contracts”.

Regardless of whether it is exactly all their energy or a cliché, both companies suggest that the impact of the cut, after Tuesday’s change, will be minimal. And in the absence of more data, the truth is that, according to the figures provided by Iberdrola in the presentation of results, the 76% of demand in Spain (190 terawatt hours corresponding to 18 million residential and industrial customers) is protected by fixed price contracts. That is, at least three-quarters of the demand will be exempt from the cut.

Another 10% (25 terawatt-hours belonging to 10 million consumers) are domestic customers with regulated tariff and the remaining 14% (35 terawatts – hours corresponding to 500,000 industrialists and public administration) have indexed contracts to the wholesaler or covered by own decision. These a priori would be affected, but it is possible that a part of them is not covered by infra-marginal technologies (which the Government has penalized because they do not suffer the cost of gas), so it would not suffer the cut either. The unknown about the offer will be resolved in the coming weeks, after the presentation of all information by the electricity companies that will clarify exactly how much energy will be penalized.

The objective The Executive was to cut the income of power plants that did not have to face the cost of gas (they do not use this raw material) but they benefit that the Spanish market is marginal (the latest technology to match supply and demand is the one that sets the price for the rest) and, therefore, they receive the same remuneration. The Government estimated that the cut would rise to about 2.6 billion of euros that would be used to enter the system, replacing the electrical charges which were lowered by 96% to reduce the final bill for consumers, along with taxes (reduction of VAT and Special Tax on Electricity).

Transfer to industry and changes in the PVPC

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The objective of the Government to clarify the decree has been, according to the minister, to provoke a transfer of industrial customers –according to Iberdrola figures, that 14% of demand– towards fixed-price contracts, which would cause these types of users (for whom the electricity bill represents a very high portion of their production costs) had lower prices than the current ones (around 200 euros on average) and at the same time frees the electricity companies from the reduction due to the rise in gas.

To this must be added the “reform & rdquor; of the regulated tariff that the Government has ‘under observation’. The Ministry for the Ecological Transition has opened a public consultation to change the so-called Voluntary Price rate for the Small Consumer (PVPC), which is served by 10.5 million consumers in Spain. Indexed to the wholesale market of electricity, the light giants complain that it is an unusual formula in other countries and is partly to blame for much of the social controversy generated around the rise in electricity, which is why they advocate its elimination. All this despite the fact that the Executive and the regulator (the National Markets and Competition Commission) have argued for years that this was the cheapest and most transparent rate.