The high prices in the wholesale gas and electricity markets are causing energy retailers to increase their rates to end consumers. According to data from the Iberian Gas Market (MIBGAS), the average price a year ago was €20/MWh, in mid-March 2022 it was around €100/MWh. Merely by way of illustration, the price of electricity in the Iberian electricity market was €51.91/MWh. According to data from the Iberian Market Operator, the average rate for March 21 reached €229.71/MWh.
While waiting for the European Commission to reform the energy market, for the time being only protection measures remain in contracts concluded by consumers. In order to apply them and offer price transparency, the National Markets and Competition Commission (CNMC) has approved a guide to strengthen consumer protection in electricity and gas contracts.
Among the main provisions, the obligation to publish the prices of gas and electricity supply offers made by marketers stands out. In addition, companies must provide transparent, comparable, adequate and up-to-date information on the prices applicable to all their offers available through the media in which they are advertised and always on their website.
They also have the obligation to publish the conditions related to the termination of the contracts, as well as information on the additional services that are jointly contracted, such as the repair of breakdowns or the displacement of a professional for DIY tasks.
Report rate change
Rosana Pérez Gurrea, lawyer and member of the Subcommittee on Consumer Rights of the General Council of Spanish Lawyers, positively values this guide because “the criteria it introduces are correct. However, it has to be translated for practical purposes into greater protection for consumers”.
He knows in depth all the sides of the coin.
For his part, Carles Garcia Roqueta, deputy of the Consumption Area of the Barcelona Bar Association, assures that the measures approved in Royal Decree-Law 23/2021 and that are developed in the guide “are insufficient to protect the rights of vulnerable consumers and their families, where there are children”. Pérez goes further and ensures that marketers must inform “if the rate has discounts and for how long they are applied.”
All the offers of the energy marketers are included in a price comparator that the CNMC has made available to consumers. From the Spanish Association of Consumer Law, Raquel Duque, its head of communication, considers that this comparator of offers “does have a high usability”. But from the regulatory body “they must promote that consumers know its existence so that they use it before contracting in the free market.”
As the rise in prices in the wholesale gas and electricity markets will ultimately affect the bill paid by final consumers, it should be noted that price revisions must be communicated at least one month in advance, in a transparent and understandable manner. , to the consumer with a free rate.
Royal Decree-Law 23/2021, approved on October 26, reinforces consumer information. This rule establishes that marketers, when raising or revising their rates, must include a comparison of the prices applied before and after the revision. Likewise, they must contain an estimate of the annual supply cost for said consumer and its comparison with the previous annual cost.
Right of withdrawal
The gas and electricity marketers are also obliged to inform of the consumer’s right to terminate the contract, without cost or penalty, when they are notified of a modification of their contract conditions. It is important to note that the term for the consumer to exercise this right cannot be limited because the law recognizes it to the user without time limits.
In addition, changes in the contract due to changes in the price, its formula or other conditions can only occur prior to the end of its term if it is provided for in the contract in a specific, clear and transparent manner.
When the marketer decides on its own to terminate a contract in accordance with the agreed economic conditions, it should compensate the consumer with, at least, the same penalty criteria as if it had been the consumer who terminated said contract.
In this sense, the changes that occur in the contracts from fixed to indexed or vice versa must be considered a modification of the contract. Therefore, the consumer must have the right to terminate it at no cost, even when this possibility is stipulated in a generic way in the contract.
In the indexed price tariffs, consumers pay for the electricity they consume according to a market price, the same for all marketers, but which is very volatile as it is established for each hour of the day. To this price is added a cost charged by each company for management. These rates, which are the most common, include the fluctuations in the electricity market on your bill.
On the other hand, in fixed rates, the marketing company agrees in advance with its client a price for electricity, which will be applied for a certain period of time, normally one or two years. In exchange for assuming more risk for a lower price, electricity marketers apply premiums to these rates.
In this sense, it is important to know the differences between the free market and the regulated or indexed market, in order to opt for one system or another according to the price of electricity and gas. Both in the free market and in the regulated market, a fixed part is paid, which corresponds to the access tolls to the contracted rate, to which the electricity system charges and taxes must be added. In addition, the regulated market only offers the PVPC (Small Consumer Voluntary Price) rate, while in the free market you can find other offers such as fixed-price rates 24 hours a day or flat electricity rates.
Users who have contracted the regulated rate or PVPC are the most affected by the rise in prices. The price of gas in this tariff is established by the Government and is reviewed quarterly, when the prices in the BOE are updated. Therefore, “we will have to wait for the next update, scheduled for April, to see the real rise that the Russian invasion of Ukraine has brought,” says Rosana Pérez, lawyer and member of the Subcommittee on Consumer Rights of the General Council of Spanish Lawyers
electric social bonus
The social bonus for electricity is configured as a discount on the electricity bill, and is regulated in Royal Decree 897/2017, which establishes the figure of the vulnerable consumer, the social bonus and other protection measures for domestic consumers of electrical energy. Specifically, said discount is 25% and 40% for vulnerable and severely vulnerable consumers, respectively.
Every person, according to article 25 of the Universal Declaration of Human Rights, has the right to an adequate standard of living that ensures health and well-being for himself and his family, as well as housing. Garcia Roqueta, deputy of the Consumption Area of the Barcelona Bar Association, considers that this article entails “a right of access to energy, without the resulting expense not preventing its use, especially for the most vulnerable consumer”
Royal Decree-Law 23/2021 increases, until March 31, 2022, the discounts of the electricity social bonus from 40 to 70% for severely vulnerable consumers and from 25 to 60% for vulnerable consumers. In addition, there are bonuses for large families regardless of their income, although the family income threshold is taken into account to establish the amount of the discount.
There are also bonuses for the unemployed who are considered vulnerable consumers. In addition, as a novelty to the social bonus, the Government has approved a specific category for people with disabilities recognized by Social Security equal to or greater than 33% of any of the members of the family unit.
Experts in consumer law agree that it is foreseeable that the social bond will be extended for as long as necessary given that it is an essential service that reinforces the defense of consumers in situations of vulnerability.
Thermal social bonus
The thermal or gas social bonus is an aid granted by the Government to the most vulnerable consumers so that they can afford to pay their energy bills and which is collected once a year from the general State budget. In 2017, the Parliament admitted the bill to govern the conditions, requirements and regulatory bases of this subsidy, but, as the lawyer Rosana Pérez acknowledges, “the law that regulates it has not yet been approved”.
Raquel Duque, head of Communication at the Spanish Association of Consumer Law, highlights that although this bonus “arrives later in Spain than in other countries of the European Union, it does so more easily” as it is applied to all types of thermal supplies ( butane, gas, propane…) and automatically for the beneficiaries of the electricity social bonus. This consists of a single payment that is determined according to the degree of vulnerability of the beneficiary and the climatic zone in which their habitual residence is located (in cold zones the aid is greater).
In 2019, the aid was between 25 and 123.94 euros. Last October it went from 25 to 35 euros, with immediate application for the 2021 financial year. In the case of a severely vulnerable consumer or at risk of social exclusion, the aid is increased by 60% depending on their climatic zone.