The words of the president of Iberdrola, Ignacio Sánchez Galán, describing consumers as “fools” for staying in the regulated rate and not having switched to the free market have outraged many citizens. Although later the president of the most valuable company on the stock market (68,657 million euros) apologized with a tweet, the outburst is a good reflection of the inequality in information between companies and consumers that characterizes the electricity market.
The deficient information of consumers is a reality confirmed by the National Commission of Competition Markets (CNMC), which indicates that three out of four households are unaware of the difference between contracting electricity in the free market or in the regulated market. And 22% ignore the power included in their electricity contract.
The regulated rate, called the voluntary price for small consumers (PVPC), is the one established by the Government and some 11 million households are covered by it, 38% of the total. According to consumer organizations (OCU and FACUA) it has historically been the cheapest option and is the one that allows poor families to benefit from the social bonus. On the other hand, electricity companies have promoted fixed-price contracts in the liberalized market that are used by 18 million families (62%). The exorbitant increase in gas prices exceptionally increased the price of electricity on the regulated market in 2021. This unusual situation was taken advantage of by companies to win customers for the free market, which is more beneficial to them. Last year, 1.25 million customers (twice as many as in previous years) switched from the regulated market to the free fixed-price market.
The European Union has tried to regulate this sector and protect consumers through directive 20196/944 on the internal electricity market. The European standard establishes that the “Member States shall ensure that final customers are fully informed by suppliers of the opportunities, costs and risks of said contracts with dynamic electricity prices and shall ensure that suppliers are obliged to inform end customers accordingly.
Due to lack of information and other abuses, the CNMC has sanctioned Iberdrola several times. In 2015, the power company was fined 25 million euros “for manipulating the price of electricity, considered very serious conduct.” In June 2021, the company was fined 1.3 million euros for failing to comply with consumer protection measures by automatically changing the rate without informing them that it meant a 14% increase. Last year the Government opened an investigation into Iberdrola for emptying reservoirs in Zamora and Cáceres, which the third vice president, Teresa Ribera, described as “scandalous”. The penalties are ridiculous when compared to the 3,885 million profits made in 2021.
The question is not between stupid consumers and clever executives, with salaries of 13 million euros a year, but rather that companies fulfill their information obligations.
He knows in depth all the sides of the coin.
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