MADRID – The average electricity price in Spain did not reach a new record on Wednesday, but it is still sky-high. The price of €472.97 per megawatt, €70 less than the historic high of Tuesday 8 March, is the second-highest price in history.
The escalation of electricity bills in Spain has been going on for months. However, there was a brief respite in February. Meanwhile, all indications are that electricity prices will remain at historically high levels for the next few days. Moreover, this will represent a serious setback for Spanish households.
During the peak hour Wednesday, between 7.00 pm and 8.00 pm, the price is €605/MWh (including taxes). And between 1.00 pm and 2.00 pm, the price is lowest at €356.74/MWh.
Overnight
0h – 1h – €510.26
1h – 2h – €450.01
2h – 3h – €425.00
3h – 4h – €420.03
4h – 5h – €420.03
5h – 6h – €440
Morning
6h – 7h – €523.76
7h – 8h – €579.45
8h – 9h – €554.76
9h – 10h – €504.54
10h – 11h – €439.6
11h – 12h – €398.12
Afternoon
12h – 13h – €359.71
13h – 14h – €356.74
14h – 15h – €368.98
15h – 16h – €393.13
16h – 17h – €425.09
17h – 18h – €518.42
Evening
18h – 19h – €549.73
19h – 20h – €605.00
20h – 21h – €560.00
21h – 22h – €549.73
22h – 23h – €523.76
23h – 24h – €475.44
The more than 10.5 million Spanish households with regulated electricity tariffs that receive their electricity bills for February are once again confronted with the high prices for this basic supply. The average PVPC bill (Precio Voluntario al Pequeño Consumidor, the semi-regulated tariff), which rarely exceeded €60 per month until 2021, has now risen to an average of more than €130. And the price rise will continue, depending on how the wholesale market behaves in this new energy crisis caused by the Russian invasion of Ukraine.
Gas main culprit
Gas, one of the main culprits in Spain’s unprecedented energy crisis, continues to set the tone for electricity prices. The price rise began a year ago, when the pool averaged €28.50/mWh, and peaked in December, at €239/mWh. At the beginning of the year, prices fell slightly (€201/MWh in January), but they are still extremely high. And the worst thing is that the futures market, which anticipates the behaviour of the electricity market in the coming months, still shows no signs of changing until at least the second quarter of 2023.
The regulated tariff, the main affected tariff
The high electricity prices directly affect the users of the regulated tariff, (PVPC). However, consumers in the free market – where a price is agreed with the electricity supplier for a certain period – are also affected by this inflationary spiral when renewing their contracts.
New price structure
The increase in costs on the electricity market began in early 2021, months before the new price structure came into force. This pricing structure established two contracted power periods (peak and off-peak hours) and three energy periods (peak, off-peak, and off-peak hours) for household consumers. The price difference between the different periods lies in the charges, which are higher in the peak period, medium in the off-peak period, and lower in the off-peak period.
These changes were intended to shift consumption to hours when demand for energy is lower, in order to avoid overloading the networks.
Measures
However, rapidly rising prices in the electricity market forced the government to take a series of measures to reduce the cost of electricity bills: a reduction in the cost of levies – which covered both energy prices and contracted power – a reduction in the electricity tax from 5.11% to 0.5% and a reduction in VAT from 21% to 10%. In addition, the suspension of the tax on electricity production (7%) was extended until the end of the year. The government decided to extend the reductions on the two taxes included in the law (VAT and electricity) and the tax on electricity production (the IVPEE) until 30 April this year.
January, second most expensive electricity price in history in Spain
All in all, the measures have not had a positive effect on energy bills: January’s bill was the second most expensive electricity price in Spain ever. According to the Spanish consumer organisation (OCU), the bill for households with a regulated tariff – taking into account a contracted capacity of 4.6 kW and a monthly consumption of 292 kWh – was €111.64 that month. The average price of electricity today, 9 March will not be the record of the historical series, but it is still sky-high. Electricity will cost €472.97 per megawatt, the second-highest price in history and €70 less than the historical maximum reached on Tuesday 8 March.
The price difference between the different price brackets lies in the tolls and charges, which are higher at peak times, intermediate in the lowlands, and more affordable in the off-peak period. On 9 March, the megawatt will be paid at €605/MWh at peak time (including charges and tolls) and €356.74/MWh at off-peak time. The cheapest time will be between 1.00 pm and 2.00 pm.
The escalation in electricity bill prices has been a constant for months, although February brought a respite. The beginning of March has already made it clear that last month’s prices were a mirage and everything suggests that electricity prices will continue at historic levels in the coming days.
More than 10.5 million households affected
The energy market is still at excessively high levels, which is a serious setback for families. The more than 10.5 million households on the regulated electricity tariff that are currently receiving their February electricity bills are once again noticing the high prices at which they are paying for this basic supply. The average PVPC (Voluntary Price for Small Consumers) bill, which until 2021 rarely exceeded €60 per month, has now risen to more than €130, on average, according to calculations by the National Commission for Markets and Competition (CNMC). And the spiral is set to continue, depending on how the wholesale market behaves in this new energy crisis resulting from Russia’s invasion of Ukraine.
Gas one of the main culprits for high electricity price in Spain
Gas, one of the main culprits in Spain’s unprecedented energy crisis, continues to set the tone for electricity prices. It was the main source of generation in the first fortnight of February, thanks to the persistent anticyclonic situation in Spain, which, according to the ASE Group, contributed to a 371% increase in electricity production from combined cycle plants.
Europe has also been affected by price hikes. In the first half of February, only Italy, with €212.66/MWh registered higher prices than Spain. The rise in prices began a year ago, when the pool averaged €28.50/MWh, and reached its peak in December, with €239/MWh. The beginning of the year has moderated prices a little (€201/Mwh in January) but they are still extraordinarily high. And the worst thing is that the futures market, which anticipates the behaviour of the electricity market in the coming months, continues to show no signs of change until at least the second quarter of 2023.
The regulated tariff, the main one affected
The high electricity prices directly affect users of the regulated tariff, the so-called Voluntary Price for Small Consumers (PVPC). This type of supply is configured with wholesale electricity market prices (‘pool’) plus tolls and charges, which represent the regulated bill and are set by the National Commission for Markets and Competition (CNMC) and the Ministry of Ecological Transition respectively.
The former serves to finance the transmission and distribution of electricity. The charges are used to pay for other items such as incentives for renewable energies, part of the costs of bringing energy to the islands, or the amortisation of the tariff deficit. However, consumers in the free market – in which a price is agreed with the electricity supplier for a certain period of time – are also harmed by this inflationary spiral of electricity when it comes to renewing their contracts.
New price structure from 1 June
The increase in the cost of the electricity market began at the beginning of 2021, months before the new tariff structure came into force. This pricing scheme established two contracted power periods (peak and off-peak) and three energy periods (peak, flat and off-peak) for domestic consumers. The difference in prices between the different price brackets lies in the tolls and charges, which are higher at peak, intermediate in the flat period, and more affordable in the off-peak period.
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