Energy price cap comes into force this Tuesday 14th June 2022

The cap on the price of energy, that is put into operation this Tuesday 14th June 2022, will have an impact on all consumers in the country.

Today, June 14th 2022, the decree enters into force, by which generation plants that use fossil fuels receive subsidies to reduce the price of the energy market.

Indeed, this change forecasts a positive direct effect regarding the reduction of wholesale electricity price, which is set to be very beneficial for consumers across the country. Some consumers will save much further on their bills (mainly those who have indexed or FLEX price contracts), and others could end up seeing an increase in their bills (mainly those who have signed fixed-price contracts between October 2021 and April 2022).

With the expected gas prices, which on an average stand forecast at €73/MWhg for the next 12 months (a price lower than the previous €96/MWhg), the amount of the reduction or saving for consumers is set to be at an average value of €44/MWh reduction to the electricity market price. Which is great news!

How long will this measure last?

This measure is currently set to run until May 31, 2023, which is great news also as it covers this coming winter, when it is expected that the demand for natural gas will increase throughout the northern hemisphere due to the incidence of the sun in the southern hemisphere. The Ministry for the Ecological Transition calls this measure ‘the firewall‘ since it aims to prevent a negative impact upon consumers.

The Consumer Price Index, also known as the CPI, increases as a result of inflation that exceeds 8%, and this is mainly caused by the price of electricity. Thanks to the gas cap and this new ‘Iberian exception’, this index will tend to fall thanks to the semi-regulated market rate.

Impact on consumers

Taking as a reference those who are going to have an indexed / FLEX price for 12 months and those who are going to have a fixed price (between October 2021 and April 2022) for 12 months.

Consumers with an indexed price will benefit from the reduction in the purchase price of electricity from the market.  In contrast, consumers with a fixed price do not benefit from the reduction in the purchase price of electricity from the market, for these consumers, the impact will depend on how long it takes until said renewal or extension.

The question is, have you switched to FIXED rate/price? If the answer is YES and you want to reconsider your options, contact us to learn more about the FLEX rate or get a free quote on our website.

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