Electricity and gas in the Spanish market: regulated contracting and free contracting

In the last year, gas and electricity prices have reached heights never seen before. The regulated prices of both markets have given different results for Spanish retail customers

Jose Luis Sancha Gonzalo

JOSE LUIS SANCHA GONZALO Professor of the University Master's Degree in the Electrical Sector. Expert in the Spanish Energy System, Comillas Pontifical University

In line with the rest of the EU countries, activities in the energy sector in Spain are of two types: regulated and free.

Those related to infrastructures operated under a monopoly regime (gas pipelines, electricity grids) are regulated, and those related to electricity generation and marketing of natural gas and electricity are free.

The rates of last resort are maximum prices established by the Administration for certain consumers, for whom the supply is conceived as a universal service.

These rates are offered "by the trading companies to which such an obligation is imposed, who must carry out the activity with separation of accounts, differentiated from the free supply activity."

The Last Resort Rates (TUR) began to be applied on July 1, 2009 and continue to be called that for natural gas. For electricity supply, they changed their name on April 1, 2014 to the Voluntary Price for Small Consumers (PVPC).

The National Markets and Competition Commission (CNMC) is the body in charge of promoting and preserving the proper functioning of energy marketing, in the interest of consumers. In the household survey that the CNMC prepares each semester, the great ignorance of Spanish consumers about the types of energy contracting offered by the market stands out.

Regulated contracting (TUR) of natural gas

There are currently three last-resort rates established, depending on the customer's annual consumption:

-TUR.1 for consumption less than or equal to 5,000 kWh/year. This range of consumption is typical for a home with a kitchen and a natural gas water heater.

-TUR.2 for consumption greater than 5,000 kWh/year and less than or equal to 15,000 kWh/year. This range of consumption is typical in a home with natural gas heating.

-TUR.3 for consumption greater than 15,000 kWh/year and less than or equal to 50,000 kWh/year.

The structure of the invoice is identical in all of them and consists of five terms:

1. Fixed term

2. Variable term

3. Tax on hydrocarbons

4. Meter rental

5. Value Added Tax (VAT)

All prices and tax rates are set by the Administration. Prices for fixed and variable terms are reviewed quarterly; the rest, annually. VAT has been set at 5% from October 1, 2022.

Free contracting of natural gas

The bill of a consumer with a free contract has, initially, the same structure as that of a TUR: the prices of the fixed and variable term are free and the rest are the same regulated values ​​of TUR that correspond to their level of consumption. Additionally, the invoice may have some other term, established by mutual agreement by the parties.

Normally the validity period of free contracts is one year.

The comparison of both types of contracting, regulated and free, can be done directly by the consumer using the CNMC comparator.

Currently, the high price of gas is being reflected in a very high price of the variable term of the free bill, approximately double the regulated price, since the Administration has limited, since January 1, 2022, the maximum increase in cost of the gas in each revision to a maximum of 15%.

Out of a total of just over one hundred marketers, there are four regulated marketers authorized by the Administration, which supply natural gas to 1.5 million customers out of a total of 9 million.

Regulated contracting (PVPC) of electrical energy

To access the PVPC rate, the consumer must be connected to a voltage of no more than 1 kV and have a power of no more than 10 kW.

The structure of the PVPC invoice consists of five terms:

1. Fixed term

2. Variable term

3. Electricity tax

4. Meter rental

5. Value Added Tax (VAT)

The price of the variable term is established by hourly sections, based on the result of the electricity market. The rest of the prices and tax rates are set annually by the Administration. VAT has been set at 5% from July 1, 2022.

Vulnerable consumers can take advantage of the electricity social bonus, which entails a discount on the regulated bill, a possibility that free contracting does not have.

The volatility of the hourly price, accentuated for a year by the lack of control over the price of gas (on the same day in September, the PVPC price in the most expensive hour was more than seven times that of the cheapest hour), uncomfortable for many consumers who prefer more stable, or even fixed, prices.

The Administration has committed to reforming the PVPC as of January 1, 2023, introducing forward price references that moderate its volatility.

Free contracting of electrical energy

The invoice of a consumer with a free contract has, initially, the same structure as that of a PVPC. The prices of the fixed and variable term are free and the rest of the prices and taxes are the same regulated values ​​of the PVPC. Additionally, the invoice may have some other term, established by mutual agreement by the parties.

Normally the validity period of free contracts is one year.

The comparison of both types of contracting is much more complex than in the case of natural gas. Certainly it can be done by the consumer himself using the CNMC comparator (since October 2021 a QR code inserted in the invoice that connects directly with the comparator has been operational). However, the wide variety of free offers and, more recently, the application of the cap on the price of gas in the electricity market, make it difficult for electricity consumers to make a decision.

Out of a total of just over three hundred marketers, there are eight regulated marketers authorized by the Administration, which supply electricity to 9 million customers out of a total of 29 million.

This article has been published in '
The Conversation'.