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Competition recommends postponing the reform of the regulated electricity tariff and warns that it will increase the price.

The National Markets and Competition Commission recommends postponing the reform of the regulated electricity tariff and warns that, as proposed, it will increase prices.

According to the competition, although the proposal of the Ministry of Ecological Transition “provides a means to reduce to some extent the variability of consumer taxes”, it includes “a series of costs that may lead to a price increase compared to the existing methodology”.

The reform of the Voluntary Price for Small Consumers (PVPC) to make it more volatile (it is currently indexed to the hourly price of the wholesale market) was a request from Brussels for the so-called To approve the Iberia exception, which the executive is going to. Request for extension beyond May. The government had promised that the new regulatory bill would come into effect from January, but it has been delayed for now.

The CNMC plenary report, approved on January 16, warns that “the proposed methodology increases the cost of providing reference marketers by incorporating a volume risk component” and “adds an additional term to the price target to strengthen the spot market price signal”. .

This “in certain scenarios increases the cost to the consumer of what constitutes a basket of spot market and forward market products.”

The CNMC also advises us to wait for the Iberian exception to take effect, in principle, in May, to analyze whether this new system has been implemented. “It would be convenient to conduct an analysis of the proposed PVPC methodology once the adjustment mechanism is in place” “to assess the need for and proportionality of this reform to the PVPC methodology.”

The agency believes the proposal would “mitigate price increases in rising price scenarios and, in turn, mitigate reductions in falling price scenarios. Given that we are currently mired in a high price cycle, the introduction of forward guidance in PVPC will soften the impact of a price drop when it occurs, compared to the immediate reduction that reflects the price of PVPC. Existing methodology where 100% of the price signal corresponds to the spot market”.

Thus, “in 2021, under the price increase scenario, the new methodology would mean savings for PVPC-covered customers compared to the existing methodology, and in 2022, under the price decrease scenario, the result would be a price increase.” .

The agency also emphasizes that “there was no revision of marketing costs for the periods 2019-2021 and 2022-2024, as a result of which the ones planned for 2019 were used, so it would be appropriate to revise these costs when determining the PVPC.” “.

“It would be worthwhile to analyze the evolution that these costs have undergone since their establishment, taking into account that they could be reduced, for example, by implementing digitization in commercialization activities,” he warns.

Advantages of PVPC

The CNMC recalls that in various reports it has already pointed out “the advantages of the PVPC design and warned that the reform of the PVPC in the current context of the energy crisis, given the high volatility of prices, which has been transferred to larger sections. The price curve may not give the expected results”.

He also points out that in the past he asked himself: “Whether it made sense for the PVPC to be the most appropriate price reference for vulnerable consumers benefiting from the social bonus”. Thus, the Authority notes that “it would be convenient to review the methodology applied to vulnerable customers and, in particular, reflect on the convenience of discounting the social bonus calculated on the PVPC price”, given that these customers “may respond to less than the market price signal”.

As an alternative, it offers guidelines for renewable energy auctions. “This means simplifying the social bonus funding mechanism, the current design of which means it falls cumulatively on the electricity consumer.

Regarding the proposal that only micro-enterprises will be eligible for the PVPC, the CNMC warns that it does not have the means to supervise that these small companies may be admitted through a responsible declaration. “Given the large number of micro-enterprises, 881,360, according to the report accompanying the royal decree, this work could not be carried out by the CNMC due to lack of funds. Additionally, there may be other, more efficient digital options to accomplish this task.”

The government defended a few weeks ago that the government is in an “ideal” position to tackle this reform, but so far it has not been implemented. His proposal is to give more weight to the so-called terminal signals: annual, quarterly and monthly prices, in order to reduce the volatility of this indicator.

Thus, the executive proposed in October that the PVPC be imposed from January through a basket of products in which the daily price of light will be 45% in the pool and 55% in the forward markets, with a progressive application until 2025. This 55% will be split between annual futures (54%), quarterly (36%) and monthly (the remaining 10%).

PVPC is a regulated tariff that can be availed by small domestic consumers with a capacity of less than or equal to 10 kilowatts. Until the current energy crisis, it was always cheaper than what the free market had to offer.

As a price signal to the consumer, PVPC is unbeatable and has always been the most recommended option, despite falling over the years compared to the free market offerings. But the lack of control the pool has suffered since Russia’s invasion of Ukraine has made its design perverse, as it is indexed hourly to a price set by the wholesale electricity market.

PVPC reform has been a demand from Brussels that electricity companies have been calling for for years. The government opened a public consultation on its reform a year ago and suspended the idea due to lack of consensus. It was finally dissolved in May in exchange for European Commission approval of the Iberian solution.

In the decree on the gas cap, the executive initially promised that its proposal would be ready in October. PP has arrived Ask in writing to Congress On October 5, “Why the government does not obey the law” and did not use the reform of the PVPC. On the same day, the Ecological Transition Ministry made its proposal public.

Source: El Diario





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