Consumers will not have to go through any formalities; it will be the companies that apply the new price formula when invoicing.

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The regulated electricity tariff comes into force

The new formula for calculating the Voluntary Price for Small Consumers (PVPC), the regulated electricity tariff to which some 8.5 million consumers, around a third of all domestic consumers, belong, will come into force on Monday 1 January. The change will be automatic – consumers will not have to do anything – and will be carried out by the electricity companies, which will apply the new energy price formula to the bills they issue from 1 January 2024.

Unlike the calculation methodology applied until now, introduced by Law 24/2013 on the Electricity Sector and regulated in Royal Decree 216/2014, where the final price was fully indexed to the daily wholesale market, the new formula will partially incorporate long-term price signals. To this end, since 1 July, the reference retailers have been acquiring part of the energy that the PVPC tariff will consume in 2024 on a forward basis.

This modification will boost electricity trading on forward markets, which will result in greater stability in the bills of Spanish households and micro-SMEs, avoiding episodes of high volatility, such as that experienced in recent years, especially during the first months of the war in Ukraine.

Progressive application of futures markets
With this reform of the PVPC, household bills will benefit from the partial de-indexation of the spot markets by incorporating references from the futures markets, which will bring more stability to consumers’ final prices. This incorporation of futures will be gradual – they will account for 25% in 2024, 40% in 2025 and 55% in 2026 – without, at any time, altering the price signals that will continue to direct demand towards off-peak hours.

In addition to encouraging generators and retailers to trade energy production in long-term markets to obtain greater certainty about the return on their investments, this change will lead to greater stability in consumers’ electricity bills.

PVPC consumers paid 40% less in 2023
Although electricity prices on wholesale markets have remained unusually high in 2023, the measures to protect consumers put in place after the start of the invasion of Ukraine, including the Iberian Solution, have resulted in a 40.5% year-on-year reduction in the bill of the average consumer with a consumption of 2,400 kWh/year and a contracted power of 4.11 kW.

Thus, while the average monthly electricity bill in 2022 was 75.58 euros, this amount was reduced to 44.97 euros in 2023.

PVPC, a prerequisite for accessing the social bonus
Having your electricity contracted on the regulated market is one of the requirements to be eligible for the bono social eléctrico, a protection measure to which more than 1.5 million households (nearly 4 million people) are currently entitled.

Traditionally structured in two categories -vulnerable and severely vulnerable-, the impact of the war in Ukraine on energy prices led the Council of Ministers to temporarily approve a third category, included in RDL 18/2022, -working households with low incomes-, which allows them to benefit from a 40% discount on electricity bills.

Both the reduction for this group and the extension of the discounts for vulnerable and severely vulnerable consumers – which went from 25% to 65% and from 40% to 80%, respectively – have just been extended by Royal Decree-Law 8/2023, until 30 June 2024.