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Spain to introduce new regulated electricity tariff in 2024

The Local Spain
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Spain to introduce new regulated electricity tariff in 2024
Spain's Energy Minister Teresa Ribera confirms government will approve new energy tariff. Photo: OSCAR DEL POZO / AFP

The Spanish government on Tuesday was due to approve a new reform of the regulated electricity tariff, during a meeting of the Cabinet.

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The so-called Small Consumer Sale Price (PVPC), will enter into force "at the beginning of 2024" and will seek to avoid price spikes.

It will be fully linked to the electricity market and also rely on longer-term pricing, with the aim of reducing the crazy price hikes, like those that occurred almost daily in 2022.  

The third vice president, Teresa Ribera, confirmed on Monday,  that the "fundamental" purpose is to "reduce volatility", after the National Market and Competition Commission (CNMC) warned a few months ago that the new formulation could lead to a price increase.

No overall economic savings for consumers has been mentioned, however, in the first draft of the proposal, it was estimated to be a total of around €297.1 million per year.

The PVPC tariff, "has been the most convenient since it was introduced, and with the turbulence of last year we realised that it was also unsafe if we had another episode like that of 2022", Ribera added.  

During 2022, the price of electricity escalated on a daily basis and fixed tariffs were more attractive, precisely to avoid these ups and downs.

How will it work?

"What we have done, is to introduce correction factors so that the rate, to a large extent, reflects the daily market price but also the prices that reflect the future markets, three months or one year ahead", explained Ribera. 

She also indicated that the new PVPC rate will not be effective until "early 2024", to give operators time to buy the energy necessary to sign these contracts. 

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Delays

The government will finally approve the reform of the PVPC tariff, more than a year after it promised the European Commission it would do so.  

This was one of the conditions upon obtaining the green light for the Iberian mechanism, Spain brought in with Portugal in June 2022. By the beginning of 2024, it will be one year after the scheduled deadline, which was due to be the beginning of 2023.

From 2024 onwards, the price of electricity for consumers who have the PVPC rate (around eight million) Ribera explained, will no longer depend on the daily electricity auctions, which at the end of a two-year transition will determine only the 45 percent of the price. The rest will be set based on longer-term contracts.

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