This Thursday the president of Iberdrola, Ignacio Sánchez Galán, said that “only fools” continue to pay the regulated electricity rate, also called PVPC.
This outburst from the businessman was referring to those Spaniards, some 11 million households, who pay their bill according to the daily price set by the wholesale market, which this Friday marks 197.63 euros per megawatt consumed.
There are two types of tariffs in the Spanish electricity market: the regulated market tariff (PVPC) and the free market, and you can switch from one to the other at any time without noticing. You will not run out of light when you move company.
Also, if you have a PVPC rate you can change to a regulated one without paying any commission. They will only be able to charge you a fee if you have a fixed rate and you change your provider or rate before the end of your contract.
So, what interests me more, a PVPC rate or the free market? Below we explain how each one works.
PVPC rate or regulated market
The PVPC (Small Consumer Voluntary Price) rate changes every day and every hour according to the price set by the wholesale electricity market (OMIE), so your bill will be different every month. Not only will you pay more if you consume more (or vice versa), but your rate can skyrocket or become cheaper due to external factors, such as the price of gas or the weather.
This Wednesday, for example, the price of the MWh fell because a lot of solar and wind energy was produced in Spain, two very cheap sources of electricity generation.
However, today, Friday, a large amount of energy has been used from combined cycle plants, those that work with natural gas, a raw material whose price has skyrocketed after the start of the war in Ukraine.
The advantage of this invoice is that it normally has a lower price than the free market, but at the moment it is not like that, because the raw materials have been extremely expensive for months due to the exceptional situation of the war and the pandemic, and the cost of the light has tripped, at least temporarily.
The PVPC rate also allows you to save by using electricity only at the cheapest hours. On the OMIE website you can check the prices of electricity every hour one day in advance.
In addition, the PVPC rate is mandatory if you want to access the social electricity bonus. In we explain how to do it.
Fixed or free market rate
It is the rate that establishes a fixed electricity price for 12 months. In other words, when you sign the contract with the company that sells electricity, a price is established per MWh that is applied at all hours of the year, so your monthly bill will be more expensive or cheaper depending on the electricity you consume. each month.
The great advantage of this rate is the peace of mind it offers, since you will not have to be aware of how much electricity costs each day or if the wind blows or the price of gas rises.
Why doesn’t everyone use this rate? Because until a few months ago, the fixed rate used to be more expensive than the PVPC because since the price is the same throughout the year, it takes longer to incorporate the savings provided by renewable energies.
However, at this time the free rate is cheaper than the regulated market because it does not depend on the daily price of electricity. Households that renewed their annual rate half a year ago, for example, are not affected by the fact that electricity is now much more expensive, since they agreed on a much lower price.
The problem is among those consumers who now switch to the regulated bill, because the price of electricity is now extremely expensive and the electricity marketers are making the rates they offer to their new customers more expensive. If you are going to enter the free market now, be sure to compare between different companies.
Also remember that in the free market you can choose a rate with a price that varies hourly or is fixed. In June of last year, the new electricity bill divided into the famous hourly sections came into force, with cheaper valley hours and more expensive peak hours.
You can also contract a fixed rate that does not work by hourly sections, and that the price for off-peak and peak hours is prorated throughout the day.
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