“They have sent me a letter to tell me that they double the price”

The rise in electricity has been primed in recent months with supplies (mostly domestic) in the regulated electricity market, known as the voluntary price for small consumers (PVPC), exposed to the daily fluctuations of the so-called pool. But the escalation is already hitting many SMEs with free market contracts that have begun to be reviewed. In some cases, the update has been made in January, by including automatic revision clauses with the new year.

One example is Obrador Abantos, an artisanal bakery in San Lorenzo de El Escorial (Madrid) that makes bread with sourdough from organic flour. It opened its doors at the end of 2019, shortly before the pandemic, and has nine employees. They had a fixed-price contract with Iberdrola and until now had been spared the effect of the spectacular increases in the pool. In addition, they benefited (like all consumers) from the measures approved by the Government to contain this brutal escalation, such as tax cuts and the drastic cut in charges (regulated part of the receipt) that has declined since the beginning of the year.

"Until now I had not noticed it," says David Solana, owner of the bakery, who received bad news from Iberdrola a few days ago. "They have sent me a letter with an estimate and it is directly double," he assures. "From paying about 550 euros per month we are going to go to about 1,100-1,200."

It is not the only extra cost that affects his business, which requires about 21 kilowatts (kW) of electrical power in order to function and which he distributes at home to many municipalities in the Sierra de Guadarrama. Raw materials such as extra virgin olive oil have also become drastically more expensive, "which has risen by 40%". For now, they have not applied generalized price increases "at the expense of the margin", with occasional increases and decreases in some products.

Far from Madrid, in Buñuel (Navarra), in the heart of the Ebro Valley, is La Noria, "my great-grandmother Eufrasia's farm", as Carlos Álvarez, an industrial engineer who has managed Bio-Trailla, a company family business that sells organic fruit and vegetables at home to different consumer groups throughout Spain. With some 25 employees, a physical store in Zaragoza and plans to open stores in Madrid, a few days ago they informed their customers of the first increase in their baskets in "more than twelve years" due to the increase in market prices.

"Everything has gone up and it has been everything at the same time; we received nothing more than communications throughout December announcing rate increases," summarizes Álvarez's wife, Ana Domínguez, who is in charge of the billing and Human Resources area. They have increased their baskets, on average, 13%, although not in a linear way for all customers, since aspects such as the distance to which the orders have to be carried have a huge influence.

Álvarez calculates that in 2021 the average increase in the cost of electricity compared to 2019, the year before the collapse of pool prices that caused the pandemic, was around 31%. "They are not monthly bills of 200,000 euros", but it is an important cost. The main item in his case is for pumping drip irrigation. They also have cold rooms for the orders they prepare, until the delivery trucks arrive. In them, the surplus of the daily harvest is stored, if any, despite the fact that its policy is to "work with zero stock", trying to collect exactly the amount necessary to serve the orders.

According to Álvarez, lately the strange thing has been not receiving a rate increase from its suppliers. "It's amazing. It's not just electricity. There are the cardboard boxes. In these twelve years they have had the same forty or fifty increases, but this last year, every two or three weeks there has been a price review; then there are the transports that we contracted, for diesel, which penalizes us quite a bit; the bags of biodegradable material that go in the baskets... We are at a point where when I receive an e-mail from a supplier announcing a rise, it no longer attracts my attention".

We return to the Madrid mountains. In Villalba, Roberto Redondo runs Supracolor, one of the many body and paint workshops located in a large industrial estate (P-29) in this town north of the capital. Redondo has become accustomed to the electricity bills that feed part of the workshop machinery, which requires about 13,000 watts, going up to 750-800 euros per month, "double" than a year ago.

"A paste" that is added to the cost of the diesel fuel that feeds the paint booth, which has also skyrocketed. "It works because, thank God, I have a lot of work, but a workshop that is at half gas will be burned," he sums up.

There are also exceptions. Not far from Villalba, in Galapagar, is the Soberanía 19 dry cleaner, in the center of this town of 33,000 inhabitants. It has been open since 1994 and also does clothing alterations, key copies and shoe repairs. Behind the counter, its owner for 10 years, Carmen Canales, assures that they have not been particularly affected so far by the increases.

Carmen attributes it to a contract that, "fed up" with the service that the large electricity companies provided her for years, she signed with the marketer Aldro Energía and that was managed by the Professional Association of Dry Cleaners and Laundries of the Community of Madrid. After years in which the electricity bill for her business "came to 800 euros", she is satisfied: she explains that they did an energy consumption study to implement efficiency measures and, she assures, so far she has been spared a context in which "everything is going up, from the hangers to the plastics".

In Lorquí (Murcia), the Cano family runs an industrial laundry business that in 2022 has had no choice but to raise its rates to pass on part of the rise in electricity, gas and diesel used for delivery. "Since 2020 we have not touched prices due to the pandemic, but this year we have had to do it as a last measure: customers have to assume a part; if not, in the end we will work to pay Cepsa or Iberdrola," says its manager, Mariano Cano .

In electricity, "until now we have noticed an increase, but not especially high", something that he attributes to the fact that they have a rate with hourly discrimination and that, in order to try to mitigate this situation as much as possible, they have taken measures such as advancing the day to take advantage of the cheaper hours. The worst has been the gas: they have a 1,000-liter propane tank that heats the water in the dryers to reduce electricity costs. "We have noticed very significant increases: going from an invoice of 1,000 euros to 1,500 in a few months," explains Cano.

Effect on the CPI

The rise in electricity has so far been reflected especially in the PVPC rate, traditionally the cheapest, and in which prices change every hour depending on what the wholesale market does. Being the only one that the INE takes into account to calculate inflation, the CPI has registered a historical rise and prices closed 2021 at 6.5%, their highest level in 29 yearsdue to the increase in the cost of electricity, food and hotels and restaurants.

But, according to some estimates, average inflation last year It would have been one point lower than what the INE calculates if this body had also taken into account the low voltage contracts that are in the free market and not only the PVPC. The INE is preparing changes to its measurement system, which it has had to postpone because it ensures that the data provided by the electricity companies does not have the necessary quality. And at this rate, when you take into account the free market, it will have already collected the increases that have been postponed until now.

The wholesale electricity market has been above 200 euros per megawatt hour (MWh) for almost two weeks. A level unthinkable six months ago, but less than the nearly 400 euros it reached in December due to the stratospheric rise in natural gas and its effect on the so-called pool. The Government has already warned that this situation may continue beyond the spring. And, if when the energy crisis began in Europe, inflation seemed a transitory phenomenon linked to the geopolitical tension with Russia, key in the supply of gas to the Old Continent, and to the bottlenecks in the supply chain after the coronavirus crisis, now it is not so clear.

The rise in prices It is already a matter of concern for citizens and the core CPI (which excludes the most volatile elements of the CPI, such as energy and fresh food) is already at 2.4%. This confirms that the inflationary escalation is already being transferred to the productive apparatus as a whole. And not only in Spain: in the Eurozone, prices rose a historic 5.1% in January, putting pressure on the low interest rate policy of the European Central Bank (ECB), whose Governing Council meets this Thursday.