ERSE – The Energy Services Regulatory Authority will put changes to its quarterly electricity tariff review mechanism out for public consultation, citing “occasional volatility” in prices recorded last year.
In a document explaining the proposal for exclusive tariff fixing from June, ERSE explained that this “aims to adapt the two main components of consumer bills (electricity tariff and network access tariffs) to current market conditions, avoiding the occurrence of deviations and tariff arrears for paid by all consumers in subsequent years.”
According to the regulator, “the urgency of this exclusive establishment of electricity tariffs is due to the strong volatility of energy prices recorded in the wholesale market,” compared with an average of 44.4 euros per MWh (megawatt-hour) in the first quarter. to the average benchmark value forecast by ERSE for the wholesale market in 2024 (€88.3/MWh).
Thus, “taking into account the recurring price volatility recorded last year, which led to an increase in tariff arrears in 2024, ERSE will improve the quarterly tariff review mechanism to ensure that energy tariffs and network tariffs can be adjusted simultaneously and automatically.” Access tariffs.”
According to the regulator, “a change in the current quarterly review mechanism involves a revision of Tariff Regulation in the electric power industry, which will soon be submitted for public discussion.”
According to ERSE, this volatility is explained by “the abundance of electricity production from renewable sources (hydro, wind and solar), which, according to REN, accounted for 89% of consumption in mainland Portugal.”
The regulator pointed out that “this increase in renewable energy production, which was not accompanied by an identical increase in consumption, caused a strong decline in electricity sales prices on the wholesale market.”
According to him, this reduction leads to two opposite consequences. “On the one hand, this causes a decrease in the energy component of consumers’ bills, since suppliers can buy electricity at lower prices.”
However, “it also increases the grid access tariffs that all consumers pay to use the electricity transmission and distribution network infrastructure, regardless of whether they are in a regulated market or a liberalized market.”
Access tariffs are based not only on “the difference in tariffs for the use of transmission and distribution networks, which are set by ERSE, but also on the so-called global system tariff, which is driven by the political costs of energy, sustainability and general economic interest (CIEG).”
It is “the cost of electricity purchased from producers with guaranteed remuneration, with an emphasis on renewables and cogeneration, that most impacts CIEG,” he explained.
“The guaranteed remuneration is linked to historical contracts whose average value is about 102 euros per MWh and which in 2023 represented about 60% of total renewable energy production and 32.6% of consumption,” he pointed out.
In other words, “if the price on the wholesale market is lower than the value of these contracts, the difference is paid to producers, creating an additional cost to the national electricity system that is paid by all customers, regardless of whether they are in the regulated market.” or a liberalized market through network access fees.”
When prices in the wholesale market “are above guaranteed production prices, there is a surplus that accumulates in consumers through network access tariffs (a situation that occurred in 2022 and 2023), benefiting the final bill.”
This Wednesday, ERSE proposed to reduce electricity prices on the regulated market from June by 0.1% compared to May, despite increasing grid access tariffs.
Author: Lusa
Source: CM Jornal
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