Explainer: Is the regulated electricity tariff or the free market in Spain best?

After the Council of Ministers approved the new electricity tariff in Spain this Tuesday, June 13, we will try to explain the differences between the two rates that exist.

In Spain, there are two electricity tariffs that users can sign up to. These are the ‘regulated tariff’ and the ‘free tariff’. Each one has its own particular advantages and disadvantages since one or the other is preferable depending on the consumer’s daily habits.

The regulated electricity market

As explained by Selectra, the regulated electricity market is the one that offers the Voluntary Price to the Small Consumer, better known as the PVPC rate.

This rate has its prices regulated by the electricity market and they are controlled by the Ministry of Industry, Energy and Tourism.

It is also known as the hourly electricity rate, as its price varies every hour of every day based on the supply and demand of energy. For this reason, it establishes 24 different hourly prices each day of the week.

Users who contract the PVPC have hourly discrimination in three mandatory periods: peak, flat and valley. As a last characteristic, it is important to note that only the so-called reference marketers can operate in the regulated electricity market.

A maximum limit of up to 10 kW is set for appliances under this scheme.

The free electricity market

According to Selectra, in contrast to the regulated electricity market, the free electricity market has existed since 2009. There are a wide variety of companies that offer electricity, gas and maintenance services in this market, at prices that they set themselves.

Among these suppliers are Energy XXI (Endesa), Curenergy (Iberdrola), Gas Power (Endesa), Baser (Total Energies), Regsiti (Repsol), and CHC Energy.

These companies offer more varied electricity rates: stable prices, hourly discrimination and flat rates. To know which market is cheaper, it is necessary to know the consumption habits of users and the conditions of both options.

Unlike the PVPC tariff, there is no limit on the power available to run appliances.

Conditions and differences

When deciding between PVPC or free market tariffs, users must first take into account two key aspects. In the regulated market, consumption must be adapted to take advantage of the more economical time slots each day.

In the case of not being able to consume energy during off-peak hours, then a stable rate (free market) is recommended.

The second thing to take into account is that the regulated rate gives access to the social bonus. If the established requirements are met, users can obtain a discount on their bill that is difficult to beat with a free market rate.

Users of the regulated market experience price variations every hour of every day. As a result, there will be months that are cheaper and others that are more expensive due to the supply and demand of energy during that period.

Since the conflict in Ukraine broke out, the hourly price of electricity has often skyrocketed. This has not been helped by the rising gas prices. At this moment, the regulated market rate is one of the most expensive.

When opting for hourly rates, it is important to focus consumption on off-peak hours. These would always be on weekends and early mornings, from Monday to Friday. Each month, the users of this market will pay the average price of the kWh established during those 30 days.

Contract prices are generally fixed for 12 months in the free market. Selectra still recommends though to thoroughly read through the contract to understand the conditions in full.