Monday, August 15

Pedro Sánchez’s commitment implies that the light goes down in the final stretch of the year | Economy

A consumer checks the electricity bill at his home in Madrid.
A consumer checks the electricity bill at his home in Madrid.Victor Sainz

The President of the Government, Pedro Sánchez, has promised in an interview with EL PAÍS that families end up paying in the whole of 2021 approximately the same as in 2018, adjusting the price by the consumer price index (CPI). Compared to the forecasts that were handled until now, this means that in the final stretch of the year the electricity bill loosen the pressure after the highs that it is marking this summer, according to calculations made from data from the Government itself and the Institute National Statistics.

The electricity bill is complex and the comparisons are not linear. To begin with, because there is a difference between free market consumers and those covered by the regulated tariff (PVPC, voluntary price for small consumers). In addition, because the regulated rate has undergone important modifications, the most recent of which is the change to the hourly rate. The way in which record prices from the wholesale market are passed on to the consumer differs depending on the tariff used. Furthermore, each consumer is different and their use of electricity is different.

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Speaking on average, from the point of view of the regulated tariff, the third vice president and Minister of Ecological Transition, Teresa Ribera, pointed out in Congress on August 30 the following: “If we make an analysis of what they have paid on average Consumers who have a PVPC rate in recent years, we see that a consumer in 2018 paid a total of 598 euros throughout the year, that is, slightly less than 50 euros per month; in 2019, 562 euros, it fell; In 2020 we had a record of low prices, we have already commented on it, 512 euros, and in 2021, projecting the high prices that we are experiencing, I insist, aware that we are in the record month of August in our history, we would pay around 644 euros in total in the year, that is to say, something less than 55 euros in monthly average ”.

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In nominal terms, 2018 has so far been the year with the most expensive electricity for consumers, which unleashed a certain social alarm that led to the approval of the thermal social bond and the suspension of the generation tax, but without the price of electricity light reached a prominence like now. Ribera’s projection, however, was an annual bill of 644 euros for this year compared to 598 euros in 2018. A difference of 46 euros (about 4 euros per month). Even if adjusted for inflation, it would still be around 20 or 22 euros more expensive, so to reach prices like those of 2018 it would be necessary for the rate to drop in total in the months between now and the end of the year by the equivalent of around 20 or 25 euros, approximately, with respect to Ribera’s projection.

To do this, the main measure that the Government has implemented is to tax the so-called profits rained from the sky (the overpayment achieved by hydraulic and nuclear power plants, which do not emit CO₂, thanks precisely to the fact that the high prices of CO₂ make the price rise wholesaler) and transfer that amount to consumers, but it is a measure that is pending and it is not known for how many months it will unfold its effects. You can also be confident that wholesale market prices will decline, but there are not many signs pointing in that direction. After the auction on Sunday, today is again Monday with the most expensive wholesale price in history and the fourth in absolute terms, only behind Thursday, Friday and Saturday of last week. For the moment, therefore, September has started with a price level in the wholesale market that is even higher than the average for August, which was an absolute record. The government’s plan in the medium term is that the consumer rate is not so closely linked to the ups and downs of the wholesale market, but that would require a reform that has not yet been designed and that is not expected to bear fruit this year.

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The Government would still have an ace up its sleeve, which would be to lower the VAT on electricity, which it has already reduced from 21% to 10% and pass it to 4%. That would allow the commitment to be fulfilled with a stroke of the pen, but for now the Executive has denied that it is considering doing so.

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If the comparison is to be made with the market as a whole and not only with the PVPC, it becomes even more complicated. The different offers and rates available to companies (which are usually more expensive than PVPC) make it difficult to draw conclusions. One way to approximate it is to take the electricity index within the basket of the consumer price index calculated by the INE with a complex methodology. This index, which measures nominal prices, had so far reached its highest levels in 2018, with a 12-month arithmetic mean of 112.38 points. In 2019 the average fell to 104.85 and in 2020 it fell to 95.41. So far this year, with the seven-month data available, the average is 113.97, but it reached 126.291 in June and, after the VAT cut, 120.03 in July. Knowing that August has been a month of record prices, the conclusion is similar to that reached with the PVPC: only a reduction in prices between now and the end of the year, be it through the market, regulatory or tax, will allow compliance with the commitment stated by Sánchez.

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