On Tuesday, the Council of Ministers is expected to approve the reform of the regulated electricity tariff – the so-called Voluntary Price for Small Consumers (PVPC) – which will mean a significant reduction in the volatility of electricity bills.
The Ministry of Ecological Transition will thus comply with the conditions imposed by the European Commission to approve the so-called ‘Iberian exception’ almost seven months late.
The Spanish Government agreed with Brussels that it would present a reform of the regulated tariff last autumn so that it could begin to be applied in 2023, but the Government avoided putting the measure into operation because energy futures prices were still at high levels and could be maintained high this year.
Ecological Transition received the go-ahead for its proposal from the National Markets and Competition Commission in mid-December but preferred to continue discussing the proposal with the sector, which it finally sent to the Council of State just 15 days ago to process its report by way of emergency.
According to sources, the proposal of the Ministry of Ecological Transition was approved by this body on April 20 and although it does not presuppose that it has to be taken immediately to the Council of Ministers, it has been the Government itself that has assured that it planned to approve this measure.
The proposal that the Ministry has put on the table provides for a term energy purchase system during the last quarter of the year, but the lack of specification in this measure prevented companies from activating this system with the necessary time at the end of last year to carry out the necessary energy acquisitions. At the moment it is unknown if the Ministry will maintain that same formula or if it will make adjustments to it.
The measure must also become a long-term solution for Spanish consumers who suffer greater price volatility.
The Competition department of the European Commission explained in June in its resolution on the authorisation of the Iberian mechanism that it authorised the exceptional measure until May 31, 2023. “Spain has explained that the objective of the measure is to temporarily relieve consumers of electricity from the Iberian Peninsula and also give the authorities time to reform the PVPC tariff in order to reduce the exposure of vulnerable households and SMEs to the spot market”.
The Government itself went even further and promised to carry out this reform in the text of Royal Decree Law 10/2022 that regulates the Iberian exception and that forced to reform Royal Decree 216/2014 by which the methodology of calculation of the PVPC rate before October 1.
According to the Government itself, “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 it is carried out this reform and it comes into force effectively, but it already warned in June that this change “is not immediate”.
The rise in daily and intraday market prices and their high volatility have especially harmed small domestic consumers with contracted power of less than or equal to 10 kW, who are covered by the PVPC, including vulnerable consumers with the right to application of the social bonus. This direct transfer of volatility and the high price of the daily and intraday market to the PVPC is due to the fact that the methodology to establish the cost of energy uses exclusively the hourly daily and intraday market price.
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