The high compensation for gas punishes the new clients of the free market | companies

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Paul Monge

The mechanism to limit the impact of gas on the price of the wholesale electricity market has allowed prices to be cut by 20% since mid-June, and the EU is studying allowing it in other markets. Despite this, this system requires compensating natural gas thermal plants, whose offer price in the energy market is intervened. As the price of gas goes up, this compensation grows.

Thus, in the month of June this compensation was, on average, 76 euros per megawatt hour (MWh). At the start of August it exceeded 100 and in the last week, coinciding with gas records, it has reached 250 euros. Since this compensation is not paid by all customers, its increase conditions the retail market. Free market customers with a fixed rate are exempt if they contracted it before April 26. Whoever signed after that date is already seeing the impact of the compensation on their bill, just like customers in the regulated market (who pay the PVPC). The latter, however, are the beneficiaries of the cap on gas and come out ahead compared to the previous situation. In Spain, about three quarters of the electricity market are contracts in the free market.

The variable surcharge began to be applied from June 15 and large companies have adapted to the measure to update the contracts that expire. From Iberdrola they explain that “customers who terminate their contract and are going to make a price adjustment are sent a letter one month in advance.” In it, its new prices are reported and that to these, in addition, the regulated concept of RDL 10/2022 known as the gas cap must be added.

According to market sources, the part corresponding to energy prices in free market tariffs has increased by an average of 20-25% in the last year in Spain, compared to the 75% that energy has risen in the market regulated. Only eight marketers have this option: Iberdrola, Naturgy, Repsol, Baser, CHC COR, Energía Ceuta XXI, Teramelcor or Endesa. For Endesa, 60.4% of customers were in the free market at the end of July and the rest (39.6%) in the regulated market. The vast majority of free market customers (over 90%) have a fixed rate. The company applies the new surcharge as the contracts expire, when their conditions change or if they apply to the regulated market.

Looking ahead, it all depends on gas prices and consumption patterns. If gas remains expensive and a lot is consumed, compensation will remain high and punish new free market customers. In any case, the Government plans to change the conditions of the cap on gas. Now it places the limit at around 40 euros/MWh. This limit will last six months and then it will rise until it reaches 70 euros. However, Manel Sanchez, CEO of the Menta Energía consultancy, assures that it will be a “drama if the gas price containment measure is not extended.”

Experts’ view

Manel Sánchez, CEO of Menta Energía, explains the procedure for controlling the payment at the top of gas: “The companies had to send a list of clients to the National Commission for Markets and Competition (CNMC). This supervised it and with this previous information a sieve is made of how many would benefit”. And how much will the increase in free rates be? Tomás Mata, from the purchasing department of the consulting firm Tempos Energía, points out that it depends on gas: “It is based on the future market. If they offer you a one-year contract, it is because they buy the energy for that time”. In addition, the price of the mechanism is conditioned by the price of fuel, since cogeneration plants and combined cycle plants will have to be compensated.

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