Never seen. The average daily price of electricity in the wholesale market will chain its second historical record on Tuesday, up to 130.53 euros per megawatt (MWh), pulverizing the previous record of 124.45 euros / MWh registered this Monday. August thus closes with eight all-time highs in a month, a situation never seen before.
The new record for this Tuesday, 4.9% higher than this Monday, is the eighth all-time high reached in August. It occurs on the eve of Monday that the third vice president and minister for the Ecological Transition and the Demographic Challenge, Teresa Ribera, appears in the Congress of Deputies to account for the rise in the price of electricity, which this month has pulverized one record after another and points to the most expensive bill in history.
The rising cost of the electricity bill is having a full impact on inflation, with the consequent deterioration of the purchasing power of companies and individuals in full recovery. The Consumer Price Index (CPI) rose 0.4% in August compared to the previous month and placed its interannual rate at 3.3%, four tenths above that of July and the highest rate since October of 2012, according to advanced data published this Monday by the National Institute of Statistics (INE).
For this Monday, the price of electricity will mark a maximum of 137.92 euros / MWh -at 22 hours- and a minimum of 123.35 euros / MWh -at 17 hours-, according to data from the Iberian Market Operator of Electricity (OMIE). The average price of this Tuesday more than triples the 42 euros of the last Monday of last year.
That month, with demand still sunk by the pandemic, the average wholesale market price was 36 euros. Now it is going to touch 106 euros, an unprecedented figure. From August 9 to 13, it already had five consecutive highs. Then came last Thursday, with hydroelectric power once again setting prices in the most expensive hours of the day. And now these two in a row to top off the month.
This escalation, which is related to the rising cost of natural gas and CO2, has opened a debate on the need to reform the electricity market, forcing the Government to consider that a public company manage the hydroelectric concessions as they expire. Until now, Teresa Ribera has proposed two “structural” measures to lower the cost of the bill, a fund that assumes the premiums for renewables and the cut for hydroelectric and nuclear plants due to the rise in the carbon market. But it has done so through separate bills that will take months to enter into force.
This context of increases in the so-called pool, in full economic recovery, is marked by the increase in the prices of CO2 and gas rights. CO2 emission rights have become more expensive to touch 59 euros per ton, when at the beginning of the year they were trading around 33 euros. Meanwhile, the price of natural gas exceeds 46 euros per MWh, according to Mibgas data. Russia’s supply problems and strong demand from Asia have been compounded by concerns about supply through the Morocco-Spain gas pipeline as a result of the diplomatic break between Rabat and Algeria.
This upward spiral has caused a political storm and last week Más País, Compromís and Nueva Canarias registered a petition in Congress to open a parliamentary investigation commission. The Government opened the door a few days ago to create a public energy company, as it has been asking for a long time from its partner in the Executive, United We Can, which has made a final proposal to the Government to lower the electricity bill that passes through limit the price of nuclear and hydroelectric energy by decree law. The spokeswoman for the Executive, Isabel Rodríguez, indicated last Tuesday that this proposal is going to be studied.
Before this spectacular spiral of increases, energy weighed on the bill around 24% (now around a third), while around 50-55% corresponded to tolls – the cost of transmission and distribution networks – and charges -the costs associated with the promotion of renewables, extra-peninsular ones and the annuities of the tariff deficit- and the rest, taxes.
The fluctuations in the daily price directly affect consumers covered by the regulated tariff (PVPC), just over 10 million, for which the cost of energy is directly linked to the prices of the so-called pool. The electricity companies have asked to reform this rate, which despite being subject to these ups and downs is the least expensive, according to experts, the National Commission of Markets and Competition (CNMC) and the Government.
On June 24, the Executive approved a Royal Decree-Law as a matter of urgency to reduce the taxes that are applied to the supply of electricity and, with it, the electricity bill of homes, the self-employed, SMEs and the whole of companies, which entail the reduction of VAT on electricity from 21% to 10% until the end of this year and the suspension of the 7% tax on electricity generation for three months. The increases in recent weeks have already eaten the effect of those tax cuts and August will close with the most expensive bill in history.