The government is delaying a reform of the regulated electricity tariff that Brussels demanded in exchange for permission for the Iberian exemption, a change whose timing and implications were recently questioned by the National Market and Competition Commission (CNMC). The regulatory body believes that the new calculation system will increase prices and asks to wait for its use.
The executive authority has not yet sent the text to the State Council, which includes this rate reform, the voluntary price for small consumers (PVPC). Its modification was the EU’s demand in exchange for approval of the Iberian solution. The government confirmed this Monday that it intends to ask the European Commission to extend the gas cap.
In principle, this exceptional intervention is due to expire in May, but the government wants to extend it until the promised reform of the electricity market in the EU is implemented. The aim is to prevent gas prices from contaminating electricity prices, following the good results of this cap on gas.
The Ministry of Ecological Transition and Demographic Challenges, which this Tuesday is going to present to the Council of Ministers a proposal for the reform of the European electricity market that Spain intends to propose to the EU, has promised that the reform will be ready. for the month of PVPC this January. After this deadline, government sources indicate that the project still has to go through the State Council.
The proposal was warmly received by the CNMC. The “super regulator” has asked that the “need” to implement this reform be not assessed while the Iberian exemption is in force. And, as executive sources confirm, the project has not yet been sent to this advisory body. “The CNMC proposals are being worked on before being sent to the State Council,” these sources explain.
The Royal Decree-Law, which in May approved the Iberian exemption to allow this extraordinary intervention in the electricity market, recognized that “one of the conditions for the approval of the mechanism by the European Commission was the reform of the existing voluntary price for small consumers”. .
And that text called for “by October 1, 2022” to make the necessary regulatory changes to make the PVPC less volatile, which 8.8 million domestic consumers and small and medium-sized businesses are subject to, according to the latest data from the CNMC (July).
In October, with some delay in this calendar, Ecological Transition released a draft Royal Decree for consultation. The new rule states that only micro, small and medium-sized businesses could benefit from the PVPC, leaving tens of thousands of companies outside the regulated tariff, as well as hundreds of city halls and other public institutions.
That draft stated that the new PVPC calculation formula would take effect “January 1, 2023,” a term that has already been breached. Later, the government defended in Congress that the wholesale electricity market, despite the biggest energy crisis in decades, is in an “ideal” situation to handle this reform.
But weeks have passed, and in the context of lower-than-expected energy prices in Europe, winter not yet here, and gas stores in the EU not emptying for three weeks, there is still no date. A new PVPC calculation formula will be implemented.
The conclusion of the plenary session of the CNMC, whose observations could already be included in the text sent to the State Council, was approved on December 16, although it has not been disclosed until now. Once accepted, the government’s highest deliberative body will have up to two months to issue a non-binding opinion.
The initial proposal of the executive authority is to give more weight to the so-called term signals: annual, quarterly and monthly prices, in order to reduce the volatility of this indicator. Ecological Transition proposed in October that the PVPC be set through a basket of products in which the daily price of light is the so-called 2025 year. This 55% will be divided into annual futures (54%), quarterly (36%) and monthly (remaining 10%).
According to the competition, this would result in additional cost compared to the current PVPC design. The proposal, he warns, “allows the volatility of consumer bills to be somewhat reduced,” but includes “a series of costs that could result in price increases compared to the current methodology.”
“With the proposed methodology, the cost of providing reference marketers is increased by including a volume risk component” and “a price target term is added to enhance the spot market price signal.”
This “in certain scenarios increases the price for the consumer depending on what the basket of spot and forward market products is,” warns the organization chaired by Cani Fernández.
The CNMC also advises us to wait for the termination of the Iberian exemption, in principle, in May, in order to analyze whether this new system is finally implemented. “It would be useful to conduct an analysis of the proposed PVPC methodology once the adjustment mechanism is in place” to “assess the necessity and proportionality of this reform to the PVPC methodology,” the report warned.
The organization also requested that, among other things, review the remuneration of reference marketers, the only ones who can provide PVPC, whose costs in recent years “could be reduced, for example, by the implementation of digitalization of marketing activity.
It also recommends that the social bonus should not be linked to this tariff (it is necessary to have it for the vulnerable to benefit from this discount) and be linked to renewable auctions.
The PVPC, the rate for “fools”, in the unfortunate expression of Iberdrola’s president Ignacio Sánchez Galán, is the regulated rate that can be enjoyed by small domestic consumers with a capacity of less than or equal to 10 kilowatts.
It is directly related to the hourly price of the wholesale market. The PP government implemented it in 2014 in response to speculation under the previous system of quarterly auctions known as Cesur. Before the current energy crisis, it was always cheaper than the offers on the free market, as evidenced by the consistent reports of the CNMC itself.
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 reforming it at the end of 2021, but shelved the idea due to a lack of consensus. It finally folded in May in exchange for European Commission approval of the Iberian solution.
Market intervention, which the electricity companies tried to overturn in Brussels and which, after good results, the executive authorities are now trying to extend at least until the end of the year, or until the electricity market is at the European level. has been reformed.
Spain, which has been key in adopting measures such as the establishment of a gas price cap at the European level or the joint purchase of fuel, is demanding this in-depth reform of the electricity market in the EU from the fall of 2021. .
Source: El Diario