The Government has presented a proposal so that the bills of consumers who benefit from the Voluntary Price for Small Consumers (PVPC) are not so linked to the daily price of electricity in the wholesale market.

These are some of the keys to the measure.

That changes?

Broadly speaking, the bill will no longer be indexed to the price at which electricity is sold in the wholesale market each day and although this figure continues to have weight, it is lower and is gradually being reduced.

Instead, the price will be indexed to a basket of medium and long-term prices: monthly, quarterly and an annual average.

In this way, if electricity were to set a record price again, as has happened so many times in recent months, it would not necessarily mean that consumers would pay more for electricity than ever (although they would still be affected by the rise, of course).

In other words, the aim is to reduce the volatility of the system and benefit both consumers and marketers without abandoning the benefits of the system (which, until the energy crisis, offered a cheaper bill, although subject to these fluctuations).

By changing the linkage of the PVPC to incorporate the forward markets of the Iberian Electricity Market (MIBEL), the price will be stabilized, which will not fluctuate as much with the fluctuations of the market.

How will it work?

Instead of the price marked by the MIBEL assuming 100% of the reference for the invoice - that is, if it is triggered, it also triggers - what the Ministry of Ecological Transition proposes is that references to futures be incorporated gradually.

In 2023 they will represent 25%, in 2024 they will increase to 40% and in 2025 they will already account for 55% of the total.

The remaining 45% will continue to be provided by the daily price of electricity, so that marketers will be able to adjust the offer to real consumption needs.

The Government calculates that the oscillation will be reduced by a third, while demand will be encouraged to move to cheaper hours.

Why is the change made?

Because the system was not designed for a crisis situation like the current one.

Until now, it had been the cheapest option for small consumers - with its drawbacks, such as an energy cap or the aforementioned oscillations - but the rules of the game had changed long ago.

As the Ministry explains in the draft Royal Decree, "the escalation in electricity prices that has been observed since the second half of 2021 has called into question some of the regulatory pillars on which the regulations of the electric sector".

In addition, the document also includes another consequence of this situation: those who take advantage of the social bond did not have the alternative of leaving the regulated market and switching to the more stable free market, which establishes a price for electricity that is paid during the duration of the contract. .

Consumers in a situation of vulnerability must have one of these contracts as a precondition to access the discounts of the social bond.

When will it come into effect?

At the moment, the Government launches its proposal for public information until November 7.

After that, it should start to apply from January 1, 2023.

Can companies be accommodated?

As of January 1, 2024, only if they are micro-enterprises.

In fact, it is another of the changes that the Executive will introduce, since until now there were no restrictions regarding the size of the companies that could take advantage of the rate, although the power limit, 10 kW, already served in a certain way ribbon.

It will be necessary to prove in a responsible declaration the consideration of a micro-enterprise in the event that one of them wishes to join the PVPC when their current contract expires.

The CNMC will be in charge of supervising the accreditation

Why does gas affect the price of electricity?

It is the fuel used by combined cycle plants -also cogeneration, but this is more efficient- to produce electricity.

They are also the ones that can respond more quickly and unconditionally to energy demand (including hydroelectricity, but not so much in a drought situation).

While wind and photovoltaics rely on wind or sun, these plants can burn gas at any time it is needed.

If the country needs electricity and there is no air or nuclear power is not enough, the cycles enter.

On the other hand, the wholesale market works like a reverse auction: the most expensive source is the one that sets the price at which all technologies sell the 'light'.

In other words, even the inframarginal ones, which have much lower fixed costs, end up selling electricity at a high price.

And, the more power you have to generate with gas, the more expensive it becomes to do so.

In theory, the system - which has gone from seeming immovable to being in the crosshairs of Brussels - helps promote the development of renewables: once the initial investment is amortized, it costs them much less to produce electricity and the auction guarantees that the will sell at the price of their rivals in this market.

It also makes the energy demand to be covered in the first place by green sources.

The problem is that, with the gas fired, the system is far from working optimally.

Those who use it to generate electricity must sell the megawatt hour at least at the price at which they have paid for the hydrocarbon and all other sources follow behind.

Hence, the Government has tried to reduce the impact on the bill with other measures, such as the Iberian exception, which limits the price at which electricity generated with gas can be sold and then pays the electricity companies the difference between the price they offered and the one who paid for the gas.

This compensation comes from the consumer's bill, who pay less for it than they would if the real price of electricity were applied to their rate.

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