Electricity prices to increase 26% in 24 hours, yet another all-time high on Thursday

Once again, the price of electricity will see a new all-time high when it reaches €288.53/MWh on Thursday. 

The previous record was seen on Wednesday, days after surpassing €200 for the first time ever on October 1 by skyrocketing to €216.01 per MWh. This was a 14% jump on the previous all-time high, which was seen just two days earlier. 

Costs have increased over the summer by over €100, and this is the 19th time prices have hit new all-time records since mid-July. Before this period of price hikes, the prior all-time high was seen in January 2012 at €103.76 per MWh.

Around 67% of Catalans have said they have modified their behavior at home in the past months as a result of the ever-increasing prices according to a study carried out by the insurer Mutua de Propietarios. 

Five out of ten people believe that the electricity bill has increased with the tariff change and have therefore adopted new habits such as avoiding consumption at rush hour (53% of respondents), changing the hours they use appliances (52%), or use energy-saving modes on their appliances (18%), among others. 

However, only 25% believe that their changes are effective, while 68% believe that they have lowered the electricity bill by "little or not at all."

Electricity bills have risen by an average of €14.77, according to the study.

Meanwhile, authorities are unable to stop the rising trend, as experts say encouraging renewables through legislation would contribute to lowering the bill.

Spain will not regulate market

The Spanish government recently stated that it would not step in to regulate prices. In a four-hour appearance before Congress, Spain's ecological transition minister, Teresa Ribera, said that doing so would be "against EU law."

In late June, Madrid lowered the VAT for electricity from 21% to 10%, while earlier in September, the Spanish government lowered the special tax on electricity from 5.1% to 0.5% and suspended the 7% tax on electricity production until the end of the year. 

Reasons for soaring costs

Attributed to the rising cost of the gas used by combined cycle power plants as well as carbon emission trading and the limited use of renewables, electricity is now much pricier than it was a year ago when prices decreased following a drop in demand during the height of the pandemic.

Experts warn that soaring prices are not going away any time soon. José Bogas, CEO of Endesa, the largest electric utility company in Spain, said in an interview that high prices will remain until the second quarter of 2022.

According to him, this phenomenon is neither the government's nor the companies' or the customers' fault. He argues that the same trend is happening across Europe, but that it is "slightly" greater in Spain due to the use of air conditioning.

Bogas is not alone in believing prices are here to stay, for now. "We have to get used to seeing these prices until the end of the year," Marc Bonet, who is in charge of business development at Barcelona Energia, told the Catalan News Agency.

'Lack of transparency’ from some companies

New tariffs came into force on June 1, with higher, middle, and cheaper rates.

Spain's competition regulation authority (CNMC) expressed concerns that some companies made the most of these changes by raising prices by up to 30% more than what the tariffs allow without warning their customers.

CNMC denounces a "lack of transparency" of several companies – whose names have not been revealed – and calls for those affected to be compensated.

Public electricity company not a short-term solution

Rising electricity prices have reignited the debate about whether a public electricity company would help prevent soaring costs.

Yet, according to the experts the Catalan News Agency spoke with, setting up a public company from scratch would be expensive and complex. This would only work in the long run, according to Rubén Sánchez, who works for the consumer rights group Facua.

Instead, encouraging the generation of renewable energy through legislation is regarded as the best short-term option.

Roger Medina, a researcher at Institut Ostrom, says that an electricity supplier that constantly receives public funding to keep prices low "would go against EU law because that would involve public aid incompatible with the market."

"A public company cannot at the same time act as operator and regulator of the market."

Sources at Barcelona Energia, a public electricity provider that has not been able to escape price hikes despite selling 100% renewable energy, say that "the current electricity trade system means that the global increase affects the purchase of all energy, therefore, of all suppliers, whether they are renewable or not."