What we save on one side, we pay for on the other. The cap on gas has helped lower the price of a megawatt hour of energy, but the additional compensation to gas companies causes many to wonder to what extent the ‘Iberian exception’, which could soon be applied throughout Europe, pays off . Several months have passed since its launch and some conclusions can already be drawn.

Despite the cap, if gas is expensive we end up paying for it. The system places a limit on the price of gas at €40/MWh, but that does not mean that the high price of gas does not affect us. The Royal Decree Law itself establishes compensation for gas companies, the result of subtracting the current reference price of gas from the ceiling. Unfortunately, the price of gas already easily exceeds €200/MWh and this has caused the compensation to be enormous.

In other words, on the one hand there is the cost of a megawatt hour and to this is added a compensation to the gas companies (which can sometimes be even more than the price of energy itself). For PVPC customers, this sum appears combined under the energy cost precept, but for free market customers with an updated rate as of April 26, the compensation is paid separately. An addition that has shot up to 40% the bill of some consumers.

So, has it served to make us pay less?. It is the great paradox, because most analyzes agree that it has helped us pay less. But despite this, this August we have had the most expensive electricity bill in history.

What would it have been like if the gas cap had been applied? The OMIE (Operator of the Iberian Energy Market) publishes the data for each day where you can see the current cost plus compensation and what it would be like without applying the Iberian exception. In these first months, the average price has been around €148/MWh, which, added to the compensation, comes to around €274/MWh, but without it it would have reached around €328/MWh.

In other words, this summer the gas cap has helped to moderate the price by around €50-60/MWh on average, thanks to the fact that the gas cap prevents the impact of gas from spreading to other energies. Approximately 20% as described by El País.

The impact varies greatly depending on the day, reaching a difference of 37.5% on August 18, according to Público. That day the price was €209/MWh compared to €348/MWh without a cap. This difference is also noticeable if we compare ourselves with Europe. Before the gas cap, the price in Spain was very similar to that of our neighboring countries, but this past August it was notably lower.

Source: Ministry for Ecological Transition

Gas has been burned at close range. The gas cap works best when not using much gas. That is his underlying reason in the end. However, despite the fact that Spain has traditionally been a country where gas did not exceed 10%, it has ended up burning gas in industrial quantities such as has not been seen for 10 years.

Part of the sector has taken advantage of the existence of gas compensation to burn more gas and get a slice of its profitability. Spain has gone the opposite way to Europe, while countries like Germany have necessarily rationalized it to expand their reserves, Spain has taken advantage of the occasion as a gas barn.

It has come out worse than the most pessimistic forecasts. The Government calculated the compensation at around 7,500 million euros, but with the high cost of gas, those initial estimates fell short. There are multiple factors that affect the viability of the gas cap and this summer most factors have gone against it.

The heat wave triggered the need for energy and there the gas helps to achieve high production peaks. Wind and solar have had a very bad summer. Gas has risen more than expected and additionally more has had to be produced to help France due to the nuclear break.

The great controversy: compensation is paid by everyone (even those who had fixed prices). The Royal Decree Law of the cap on gas made it clear: the marketers will pay the compensation to the gas and they will pass it on to the electricity bills of the consumers. This should not be surprising since companies always end up passing on prices, but this time it has been applied in a very direct way.

Fixed price tariffs have disappeared. All the new rates already include a small fine print where a variable component is added that varies depending on our consumption and the gas that has been used. In other words, free market consumers who had a fixed rate have seen how a variable component has begun to be applied to them, in the PVPC style.

It was inevitable. The light is expensive. And that had to be paid sooner or later. It is true that many consumers had cheap contracts, but sooner or later they would have to update and adopt a price in line with the new times. Compensation for gas has been the fast track to apply the increase. The marketers could have chosen to raise prices generically, but instead they have divided the bill into several parts. In spite of everything, as we have commented before, analysts calculate that without the cap on gas, the marketers would have raised their rates even more.

Although free market customers have seen their gas compensation bill go up, the truth is that these customers also benefit from the gas cap.

According to market sources consulted by Cinco Días, in the last year free market rates have increased by an average of between 20 and 25%, but the price of energy in the regulated market has risen by 75%. The application of the cap on gas has been an excuse for some marketers to have been encouraged to make hasty increases. An increase in the price that in the end they would have made to balance their accounts.

It’s not the quantity, it’s the lack of transparency. If the marketers want to continue offering fixed rates, they can do so. That gas compensation that is being applied could be hidden directly in the price of your rates. In the end it is a matter of offers and putting a price that suits them. The problem comes when this gas compensation is not described with sufficient transparency.

The free market consumer sees that compensation is being charged, but does not have access to the calculation of this amount. It is complicated, since it is not only the amount of energy, but also when it was used (for example, at night more compensation is usually paid). Two people who have consumed the same amount may be paying different gas compensation.

The problem is that several marketers do not include information on how much savings the compensation entails. Just as Red Eléctrica Española does report this information for PVPC customers, marketers do not always do so. Which raises questions about whether the compensation calculation is done correctly.

Gas compensation will be reduced in the future. If the skyrocketing increase in the price of gas allows it, this gas compensation will be reduced in the coming months. The first reason is that this compensation is divided among all consumers. In other words, as more people renew their electricity contracts, there will be more people to pay compensation.

Image | Sten Ritterfeld