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    What is the regulated electricity tariff? How to switch to a cheaper one

    May 6, 2022 - CE Noticias Financieras


      On Thursday, the president of Iberdrola, Ignacio Sánchez Galán, said that "only fools" continue to pay the regulated electricity tariff, also known as PVPC.

      This outburst by the businessman referred to those Spaniards, some 11 million households, who pay their bill according to the daily price set by the wholesale market, which this Friday stands at 197.63 euros per megawatt consumed.

      There are two types of tariffs in the Spanish electricity market: the regulated market tariff (PVPC) and the free market, and you can switch from one to the other at any time without noticing it. You will not be left without electricity when you move from one company to another.

      In addition, if you have a PVPC tariff, you can switch to a regulated tariff without paying any commission. You can only be charged a fee if you have a fixed tariff and you break your contract and change supplier or tariff before the end of your contract.

      So, what is more interesting for me, a PVPC tariff or the free market? Below we explain how each one works.

      PVPC rate or regulated market

      The PVPC rate (Voluntary Price for Small Consumers) changes every day and every hour according to the price set by the wholesale electricity market (OMIE), so every month your bill will be different. Not only will you pay more if you consume more (or vice versa), but your rate can go up or down due to external factors, such as the price of gas or the weather.

      This Wednesday, for example, the price of MWh fell because Spain produced a lot of solar and wind energy, two very cheap sources of electricity generation.

      However, today, Friday, a lot of power was used from combined cycle power plants, those that run on natural gas, a raw material whose price has skyrocketed after the start of the war in Ukraine.

      The advantage of this bill is that it normally has a lower price than the free market, but this is not the case at the moment, because raw materials have been extremely expensive for months due to the exceptional situation of the war and the pandemic, and the cost of electricity has skyrocketed, at least temporarily.

      The PVPC tariff also allows you to save by using electricity only during the cheapest hours. On the OMIE website you can check the hourly electricity prices one day in advance.

      In addition, the PVPC rate is mandatory if you want to access the social bonus of light. In this link we explain how to do it.

      Fixed or free market tariff

      This is the tariff that establishes a fixed electricity price for 12 months. That is to say, when you sign the contract with the company that sells the electricity, a price per MWh is established that is applied to all the hours of the year, so your monthly bill will be more expensive or cheaper depending on the electricity you consume each month.

      The great advantage of this tariff is the peace of mind it offers, since you will not have to be aware of how much electricity costs each day or if the wind blows or the price of gas rises.

      Why doesn't everyone use this tariff? Because until a few months ago, the fixed tariff used to be more expensive than the PVPC because as the price is the same throughout the year, it takes longer to incorporate the savings provided by renewable energies.

      However, at the moment the free tariff is cheaper than the regulated market because it does not depend on the daily price of electricity. Households that renewed their annual tariff half a year ago, for example, are not affected by the fact that electricity is now much more expensive, since they agreed on a much lower price.

      The problem is among those consumers who are now switching to the regulated bill, because the price of electricity is now extremely expensive and electricity marketers are making the rates they offer to their new customers more expensive. If you are going to enter the free market now, be sure to compare between different companies.

      Remember also that in the free market you can choose a tariff with a price that varies by the hour or that is fixed. In June last year, the new electricity bill came into force, divided into the famous time slots, with cheaper off-peak hours and more expensive peak hours.

      You can also contract a fixed rate that does not work by time slots, and the price of off-peak and peak hours are prorated throughout the day.


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