Spain has realised that the current system of auctioning off electricity every two months is a complicated and monopolistic system which only serves to make the utility companies even richer.
So they’ve replaced it – with a system that is even more complex, expensive and monopolistic.
Under the old system, the generating companies made electricity and sold it off to the highest bidder every two months. Your utility company would buy it a a fixed rate then sell it to you. Since the generating companies and the utility companies all belonged to the same groups (and there are only three big players anyway) the consumer was forced to take it whilst smiling.
Which is why Spain’s electricity costs are a third higher than the UK’s – and probably the most expensive in the EU, according to Brussels.
So the old system has been swept away, to be replaced with a system so complex that I don’t understand it and must be lead by the simplistic explanations of Spanish journalists who don’t understand it either.
In short, the old two month system will be changed by an “on-demand” system, in which the distribution companies buy it at a spot rate and sell it on instantly.
Meaning the price will change hourly if you’re on an intelligent meter (which most people are).
It’s based on the stock market. The utility companies constantly look for the cheapest rates from the generators, buying it as demand requires. If demand goes up, prices will; if demand drops, so does the price. Your utility company adds on the cost of transporting the electricity to your home, a hefty bit for the directors salary and that’s the price you pay when you switch on the light.
(Fine in theory, of course, if we forget the fact that the Spanish electricity market is basically an oligopoly).
Small consumers can take advantage of a “fixed” rate to be set annually. Not only will this rate (no doubt, moan the consumer organisations) be more expensive than the daily spot rate added up, the consumer must also pay for an insurance policy in case the utility company gets it sums wrong and undercharges you. An insurance policy issued by….. the utility company.
In any case, since the bulk of your current electric bill is “fixed costs”, it doesn’t matter too much whether your per kW/h goes up or down. Expansion reckons the average electric bill has doubled in the last year.
The new system will be applied to consumers as from the 1st of May 2014.
El Mundo has a rambling “I don’t really understand nor approve but let’s try to do a Q&A piece” in Spanish. I can’t be bothered to translate it. No doubt we’ll learn more soon.