The Government presents the distribution of 7,000 million electricity costs

The Government proposes to reduce the fixed part of the electricity bill of consumers in its proposal to distribute the nearly 7,000 million euros that are paid to renewable energies, the repayment of the electricity debt, generation on the islands and other items. In the case of a household, the fixed part will go down from 59% to 51%. This encourages self-consumption and the penetration of the electric vehicle.

The Ministry for the Ecological Transition (Miteco) has released to public information a proposal for a Royal Decree to distribute the so-called “charges” of the electricity system, that is, items that respond to energy policy measures and not to direct costs of the service -the so-called tolls, which correspond to the networks, basically-, whose distribution structure has already been carried out by the National Commission of Markets and Competition (CNMC).

The delay in the publication of this regulatory proposal and the Covid-19 health crisis forced the CNMC to delay the entry into force of the new electricity tolls by six months and the gas tolls by a whole year; Miteco has also released today to public information its proposal for a decree for gas tolls.

According to the report of the regulatory project, the charges amount to 9,951 million this 2020, but part are covered with 3,183 million contributed by the General State Budget, after collecting them with specific taxes on energy and contributions from _CO2 auctions. In this way, the amount that consumers must pay through the monthly receipt is reduced to 6,775 million this year.

The proposal proposes a methodology for the distribution of these costs, but does not affect their composition or their amount, which depend on other rules and political decisions, such as the level of support for renewables or the amounts allocated to the electricity system of what is obtained from CO auctions.₂, to give a couple of examples.

These 6,755 million are divided between the fixed part of the bill, corresponding to the power term, and the variable part, corresponding to the energy term. Currently, after two increases experienced in 2012 and 2015 to increase collection and tackle the tariff deficit, in the domestic case 40% is charged on the fixed part and 60% on the variable part.

The Miteco has chosen to return to the previous situation and proposes a distribution of the charges in which for consumers with a contracted power of less than 15kW -domestic and small businesses- 25% of them is recovered through the power term and 75% is recovered through the energy term. For those consumers with a contracted power greater than 15 kW, 40% of the charges are recovered through the power term and 60% with the energy term.

The proposal includes a time discrimination that seeks not to distort the price time signals of the wholesale market – there are expensive and cheap hours – and to promote consumption at the cheapest hours and energy efficiency and the intelligent recharging of electric vehicles. The portfolio led by Teresa Ribera has opted for a target of 1 to 4 between the peak bhoras (1), the flat (2) and the valley (3) in the case of domestic invoices, which will have three periods when the system approved by the CNMC enters into force.

When the distribution of tolls approved by the Regulator is also included, a household would see its fixed term reduced from 59% to 51%, while companies, with other rates, can see it reduced from 74% to 52% in the case of 3.0, corresponding to medium voltage.

Broadly speaking, the change would benefit consumers with a lower level of consumption, since it would increase the proportion of fixed costs paid in the variable part of the receipt, that is, the more you save, the less fixed costs are paid. It also encourages self-consumption, since self-generation avoids the payment of the variable part of the receipt, which is the one that becomes more expensive.

Avoid a sudden and “drastic” transformation

According to the report, the different treatment of consumers with less than 15 kW of contracted power is justified because the bill of these consumers has a greater variable weight in relation to that of consumers with greater power. Thus, by limiting to 25% the part of the charges that these consumers pay through the power term, a reduction of the fixed part of the bill is achieved with respect to the current situation, without this change being especially drastic.

This last point is important because the simulations carried out show that for certain consumers, with high consumption, the move to a tariff with a much higher variable component could mean a very notable increase in their electricity costs.

For consumers with more power, and whose current access tolls have a higher fixed part, limiting the power term to 40% can already achieve this moderate reduction of the fixed part of their bill that allows to promote energy savings without jeopardizing other elements of energy policy.

The report indicates that this situation occurs despite the fact that Circular 3/2020 of the CNMC is mostly committed to the fixed term for the distribution of network costs, recovering 75% of the costs of high voltage networks through the power term, and 100% of the costs of the low network, although later this calculation is adjusted so that consumers in the 2.0 TD range do not pay more than 75% of their bill through the power term.

Source: The Economist