The drift of the Government before a wild light: Now the regulated tariff

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The government of Pedro Sanchez he is capable of saying one thing, arguing it, and soon after wielding the opposite in his reasoning, and being surprised and outraged if a politician, association or company questions the new argument. The swings before the rising cost of light They are a paradigm of this and now it is time to reform the regulated tariff.

The Ministry for the Ecological Transition has just opened the public consultation period prior to the modification of the Voluntary Price to Small Consumer (PVPC), known as the regulated electricity tariff, a process that the sector was asking for a long time while the members of the Executive continue to criticize the “very bad and selfish” electricity companies.

It is a single price that can be applied to electricity supplies that meet certain requirements to qualify for it and that is indexed to the wholesale electricity market, thereby incorporating the signal of the hourly price negotiated in this wholesale market , which is managed by the Iberian Electricity Market Operator (OMIE).

Given the current scenario, in which the average daily price of electricity in the wholesale market links historical record after historical record, and is five times more expensive than a year ago, the “star” measures launched by the Government have been sterile and with more noise than crumb. Neither the VAT cuts (which were not for all users), nor the temporary ceases of the generation tax, nor the requests for help to Europe have served to prevent the Spanish from suffering these increases in their electricity bills. To which are added the increases in the prices of gasoline, gas and, for example, food, with a CPI in full escalation and crowning peaks that have not been seen since 2008.

In a new attempt to put out a totally uncontrolled fire, the department of Ribera -minister whose husband and CNMC adviser, Mariano Bacigalupo, describes as “unheard of, unusual and unparalleled in Europe” that “the newscasts open daily with prices of the electricity market »- explains in the text of the consultation that the evolution of electricity prices in recent months has led to the opening of a period of reflection on its current configuration, which may lead to a new regulatory development to modify its structure.

After many months governing and seeing how the price of electricity skyrockets, it seems that now this Executive has realized that with the PVPC all changes to the wholesale price are transferred almost immediately to consumers. In addition, if the increases in wholesale prices in the electricity market are continuous, as is currently the case with gas prices also at highs, this increase in price affects, in the long run, all electricity consumers.

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The ministry is now raising a query to modify the structure and calculation methodology of the PVPC and try to reduce the volatility of the prices of a rate that, in addition, is to be used to request the social bonus.

In the consultation, open until October 22, it is asked whether the structure and calculation methodology of the PVPC should be reformulated and what would be the most appropriate structure.

It also asks to what extent it is considered appropriate to take into account the price signals of the forward markets, in that case what type of contracts and delivery periods would be more successful and if it is convenient to maintain a certain exposure to the daily market.

Consultation is requested on whether the price that takes the PVPC as a reference is based on a basket of prices of different forward energy products, which basket of energy products would be used, how often the PVPC should be updated in case of reference to a basket of forward prices and whether the current option of the PVPC fully indexed to the daily market should be maintained for consumers who want it.

It is assumed that after this period of consultations, the Government of Sánchez will change the price formation of the regulated tariff in Spain at the end of this year with the hope that some clouds will be cleared from a scenario in which energy companies do not understand the recent regulatory changes, the lack of dialogue and measures, more populist than technical, that also scare off foreign investment.

The main international rating agencies have recently published reports criticizing the Sánchez’s “interventionism” in the sector, the millionaire losses that they represent for companies that employ hundreds of thousands of workers and the way in which 2,600 million euros are “confiscated” from electricity companies.

Within these changes, the last decree included capacity auctions for large industrial companies and trading companies, which could translate into 10% of the products that will be used to set the price to be paid by consumers entering the market regulated, since 10% of the new tariff would be decided in the energy auction for industrialists.

Ribera has summoned for next Monday the associations of the industries that consume more energy, since – he argues – he wants to “listen closely to their concerns and recommendations, because we have to be very aware of them.”

Minister Ribera will meet on Monday with the employers of the Anfac motor, the AOP oil companies, Aspapel paper, Feique chemical, Fiab food, Oficemen cement and the steel company Unesid.

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On Tuesday there will be meetings with different consumer and user associations such as Adicae, Auc, Cecu, Facua, Fuci, Hispacoop, OCU or Unae.

Although the minister considers “essential to work with the different sectors, industrial and domestic consumers and the electricity companies themselves in order to be able to rise to the occasion”, her government partner Nadia Calvin He criticized this Friday the “lack of sensitivity to the current situation of some companies”, referring to some electricity companies, when asked about Iberdrola’s decision to paralyze some of its investments in renewable energy.

Calviño came to remember that “they must be very sensitive in their actions, given the impact they can have on their public image and reputation.” Arguments that do not seem to be aligned with Rivera’s willingness to “listen” to his concerns and recommendations.

While the average prices in the wholesale market play with 200 euros / MWh and the futures for next week indicate the way to 250 euros, the measures wielded in recent weeks by Sánchez’s team again seem like a toast to the sun without effect on billions of consumers.

These measures are forcing electricity companies to adapt strategies in the changing scenario and, for example, Iberdrola has announced that it will increase the rates of industrial customers and large companies with long-term contracts affected by the measures approved by the Government of Pedro Sánchez to cushion the rise in light, while it has decided to paralyze new renewable projects due to the decline in its profitability in the business.

This and other decisions come after the large power companies are forced to return extraordinary profits that they obtain by passing on the gas costs they do not bear on the electricity generation plants.

This measure raised criticism from practically the entire sector, considering that it attacks the viability of the bilateral supply contracts closed months ago at fixed prices and much lower than those of the pool, currently at record highs.

In this environment of regulatory changes and unexpected anti-crisis measures, a new renewable auction on October 19 and in the market it is expected that the prices of the previous auction will not improve precisely due to the legal and tax insecurity that is transmitted.

In his speech at the La Toja-Vínculo Atlántico Forum in a debate on environmental commitment, the president of Iberdrola, Ignacio Sánchez Galán, has asked this Friday to Government act “rigorously” and not with “specific warming” in view of the situation caused by the rise in the price of electricity.

A month after the start of the climate summit in Glasgow (Scotland), the president of Iberdrola has urged that it come out clear announcements and concrete financing commitments and has highlighted the role of Europe in achieving the decarbonisation objectives.

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He has also praised the emission rights market that he has set up so that those who pollute pay and that rate helps the most vulnerable who may suffer the consequences of the transition to cleaner energies.

“If at the first storm we have we are questioning it, we are questioning the entire framework of the European decarbonization model,” he warned.

In line with this, he has defended acting at all times with coordinated measures in Europe because “what cannot be – he has specified – is that each country goes its own way and the first small storm that may have, looks for its solutions, because that what it does is destabilize the entire system.

For this reason, and after the initiatives adopted or announced by the Government in the face of the rise in the electricity tariff, it has rejected “any type of unilateral, interventionist or unjustified measure” and to be very careful in the analysis.

“At the moment there is a situation of high short-term energy prices but it is not the fault of carbon dioxide (CO2), which is a mechanism with the principle that the polluter pays,” he added.

The polluter pays and the one who does not pollute pays more

But in the face of this, he pointed out that in Spain “some type of legislation is being mounted so that the polluter pays and the one who does not pollute pays more.”

After insisting that this is not the right direction, he has insisted on asking for “rigor” when analyzing the situation and not acting with “specific warming” because that has “very serious consequences.”

In addition, it has warned that acting in this way scares away investors because it considers that it does not provide legal certainty.

Proof of how investors are reacting has said that it is the destruction of value of energy companies in recent months and that he recalled that it represents more than 3 percent of Spain’s gross domestic product (GDP).

Only Iberdrola has explained that it has left 20,000 million in the Stock Market and that affects 600,000 shareholders, most of them, it has specified, retired.

Currently, the Government faces uncontrolled increases in the price of electricity and an industry that neither understands nor shares many of the unsuccessful measures it is publishing. Time will tell if the reform of the regulated tariff serves to lower electricity bills or to start another new war.

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