“One of the conditions for the approval of the mechanism by the European Commission is the reform of the current voluntary price for small consumers (PVPC). Thus, the adjustment mechanism is configured as an extraordinary measure while this reform is carried out and this comes into effect effectively, which is not immediate”. This is how the fourth preamble of the Royal Decree approved yesterday by the Government begins, which temporarily establishes a mechanism to intervene in the price of gas used in electricity generation.
The document, to which EL MUNDO had access, reveals that Brussels has forced the Executive to present before October 1 a calculation methodology that partially decouples households from the wholesale electricity market with the aim of reducing the volatility of their bills. and cushion the impact of the war in Ukraine. It is something that the Ministry of Ecological Transition began working on 8 months ago and that it finally decided to leave in the freezer due to the contrary response of consumer associations such as Facua. The electricity companies have been insisting for months that this is the real problem of the sector, but the vice president Teresa Ribera had until now given the matter long to prioritize others such as the market intervention mechanism approved yesterday. The Commission has ordered him to correct this anomaly urgently, since Spain is the only country in Europe with a model so linked to the wholesale market.
The Brussels corrective occurs in the midst of a clash between the Government and the president of Iberdrola, Ignacio Sánchez Galán, precisely on account of the regulated rate. The electricity director pointed out a few days ago that only the “fools” were still covered by the PVPC with the current wholesale market prices, words to which Ribera herself responded yesterday, assuring that they had caused “embarrassment” and defending that the regulated rate has been historically cheaper than offers in the liberalized market.
The modification will mean that the new calculation of the regulated rate for small consumers is marked by a combination between the wholesale price of the daily market -as is currently the case- and a reference to the prices of the forward markets based on a basket of market products. annual, quarterly and monthly. The goal is that, with the model designed before October, the regulated rate can be in force at the beginning of 2023.
What effects will this new change have? The first is that it will add more confusion to the domestic consumer, who does not really know how his tariff is configured after all the regulatory fluctuations approved in the sector in the last decade. And the second is that he will no longer have to be so aware of what time he puts the washing machine on, since the price difference between hours will weigh much less on his final bill. On a political level, the new model provides a break for Ribera and Pedro Sánchez by avoiding the ‘newscast penalty’ of having to face a record price every day in the wholesale market.
The obligation to reform the domestic electricity tariff is just one example of the conditioning that the Brussels evaluation has brought to the used gas price intervention mechanism designed by Spain and Portugal. A measure with which the Government itself had promised a reduction of up to 30% on the domestic electricity bill, but which has been so decaffeinated that yesterday neither Ribera herself nor sources from her ministry wanted to confirm what its impact will finally be.
The measure consists of establishing an average political price of 48 euros per megawatt hour for the gas used by thermal power plants. The difference between this reference and the real cost of this hydrocarbon in the world market -Spain only produces 0.3% of what it consumes- will have to be compensated by the electricity companies.
The final version of the text establishes that this difference will have to be paid by those who will benefit from it, that is, only PVPC customers and others with rates indexed to the market, and not by the demand as a whole as initially proposed by the Government. . Portugal vetoed that it was the set of consumers who paid for the invention, since in its case 95% of families have a fixed electricity price. This means that this compensation -which Endesa estimated at 6,000 million euros- greatly limits the effect of the measure. Ribera and his team continue to assure that “the net effect” will be positive, without quantifying how much, because other technologies such as nuclear or hydraulic will see their remuneration reduced if gas matches its offer at a lower price (being a marginal market, the price at which the last offer enters is the one that pays all the agents).
Finally, the Government still does not clarify when the measure will be applicable 50 days after being announced as a success after the European Council at the end of March. Although both Spain and Portugal approved it yesterday, the text includes a clause that suspends the application of the mechanism until the European Commission gives final approval to the proposal. This can happen in “days, a week or two weeks,” Ribera said yesterday. The Government, in any case, is confident in the support after obtaining the preliminary approval last Monday.
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