We have analyzed all the proposals on the market: you are probably paying more than you should for the electricity in your home. Changing supplier can save you almost a thousand euros per year.
The year was marked by a considerable rise in the cost of electricity on the Iberian wholesale electricity market (Mibel). On March 8, it even exceeded 570 euros per megawatt hour (€/MWh), five times more than the average price recorded in 2021. Since then, the price has corrected, currently remaining close to the 150 €/MWh barrier.
The price increase felt at Mibel, especially since May 2021, is singled out by the Energy Services Regulatory Entity (ERSE) and by electricity suppliers as the reason for updating energy tariffs, which resulted in an invoice. of the highest light on the household and business budget.
Recently, the National Institute of Statistics (INE) revealed that in July the inflation rate stood at 9.1%, the highest value since 1992, indicating the rise in electricity prices while that one of the main responsible for this record.
So that the rise in the price of electricity does not deal a severe blow to your budget, take the opportunity to consult the market and choose the most economical rate for your consumption. ECO helps you.
Find a needle in a haystack
Competition in the open electricity market is fierce. According to ERSE, 29 providers offer solutions to most domestic consumers. In addition to these, there are 15 suppliers of last resort who supply electricity in areas where there are no open market offers, to economically vulnerable consumers or to customers whose supplier on the open market was prevented from carrying out the activity.
The electricity market supply in Portugal is therefore quite extensive and, according to an analysis by ECO of the tariffs and proposals available in the websites of all the suppliers, it is also marked by a very wide price range between the different offers.
For example, for a subscribed power of 6.9 kilovolt-amperes (kVA) and a consumption of 5000 kilowatt-hours (kWh) per year (typical consumer of a family with two children, according to ERSE), the difference between the highest offer on the market and the cheapest is almost 900 euros per year.
To make life easier for consumers, the ERSE makes available on its website a price simulator Powerful. It’s a good help in finding the cheapest electricity plan, but don’t stop there.
When comparing the different proposals, more important than comparing the prices of individual tariffs, you must analyze them according to your annual consumption.
Pay particular attention to the price of the energy tariff (variable component). The higher the energy consumption, the more this variable is relevant for the final price of the invoice. At current prices, this behavior is particularly noticeable from 2500 kWh per year, the consumption component weighing on average 79% of the final value of the bill.
This is why Endesa, through the e-Light, which assumes a 14% discount on the term of power and energy, if it turns out to be the operator with the most economical proposal currently in force. Although it does not have the lowest price in terms of subscribed power (€0.4285/kWh), it is able to offer the lowest energy tariff (€0.1450/kWh) on the market, without considering offers with associated products and services.
Based on the average consumption profile of a family with two children that we considered for our example, the electricity bill of an Endesa customer translates into an annual bill of 881 euros, plus taxes and fees. This is a price 30% lower than the average free market tariff, 1% lower than the average of what is practiced on the regulated market and 13% lower than the average offer of the indexed market.
Consider switching to the regulated market
The offer on the free market is very varied. There are many choices. This is a good thing for the consumer, who always has the option of changing energy supplier at any time and free of charge.
That’s what they did more than 38,000 families in Mayaccording to the latest data published by ERSE in the Liberalized Electricity Market Bulletin, published on August 1. The change of operator has been a constant this year. According to ERSE data, between January and May, an average of 46,000 customers changed supplier each month in the liberalized market. But did everyone make the right decision?
The free market now has more than 5.47 million consumers (nearly 86% of the market). However, there are few proposals that prove to be more competitive than the regulated market proposal, the price of which is set annually by the ERSE.
To date, the price set by ERSE for the regulated tariff is €0.1542/kWh. On the other hand, on the free market, the average price of the energy tariff is €0.2244/kWh, ie 46% more than the price charged on the regulated market.
The price difference in terms of subscribed power is also noticeable in the portfolio: in the case of a power of 6.9 kVA, the supply on the free market is, on average, 18% more expensive than on the market regulated; and, for a power of 10.35 kVA, the difference is 16%.
In total, and taking the average consumption profile of a typical family with two children (average annual consumption of 5000 kWh), it appears that the offer on the free market is on average up to 42% more expensive than the offer made available on the regulated market.
At the current price of electricity in Portugal, it is difficult not to envisage a tariff change for the regulated market. After all, the prices charged are far below those charged on the open market. Only Endesa’s tariff offers a lower price than that practiced on the regulated market for an average annual consumption of 5000 kWh. However, if the annual electricity consumption is less than 4500 kWh, there is not a single supplier with prices lower than those practiced on the regulated market.
According to the “Bulletin of commercial electricity offers”, referring to the second quarter of the year, ERSE reveals that, according to the average consumption of three typical consumers (1900 kWh, 5000 kWh and 10900 kWh per year), the number of suppliers with electricity offers below the regulated tariff was only two. In the dual offers (contracts including gas and electricity), the number of suppliers with offers lower than the regulated tariff was only one.
About a year ago, in the second quarter of 2021, the ERSE noted that in isolated electricity supply, there were nine proposals on the open market that were more competitive than those offered by the regulated market; and, in the dual offers, the number of suppliers with offers lower than the regulated tariff was five.
From these figures, it can be concluded that what happened last year is clearly a defeat for the free market. Therefore, due to the current price disparities in the tariffs of the two markets, families should consider switching back to the regulated market.
To switch to the regulated market, consumers have two options: they remain customers of the same operator, if the latter offers a regulated tariff offer (apart from Goldenergy, no other company discloses this option on its website); or they switch to one of 10 traders of last resort (CUR), mostly cooperatives. However, it should not be forgotten that the regulated tariff has its days numbered. It will end in 2025, at which time all customers will have to transfer their electricity contract to the open market.
Free market suppliers can, if they wish, offer their customers an offer at regulated price conditions. But few do. Other than Goldenergy, no one else reveals this option on their website. In addition, the persuasion of the sales people so that this step is not taken is also notorious. It will not be difficult to hear arguments from the other side such as “the regulated market is only for those who cannot contract with the operators” or “it is only for people in financial difficulty” . This is what we heard on the phone when we asked to change the tariff to the regulated market.
To switch to the regulated market, consumers have two options: they remain customers of the same operator, if the latter offers a regulated tariff offer (apart from Goldenergy, no other company discloses this option on its website); or switch to one of the 10 traders of last resort (CUR), mainly cooperatives. However, it should not be forgotten that the regulated tariff has its days numbered. It will end in 2025, at which time all customers will have to transfer their electricity contract to the open market.
Indexed pricing is (yet) not a solution
In addition to the fixed tariff, into which most commercial offers on the open market fit, which assumes a fixed price for a period of time (usually one year), there are more and more offers which indicate tariffs indexed. Currently, seven offers are available for domestic consumers.
In these cases, the price of the energy tariff is indexed to the wholesale price of electricity in the Iberian market, which is published daily by the IMOthe operator of the Iberian electricity market (Mibel).
In July, the average price of electricity on this market amounted to 143.23 euros per megawatt hour (€/MWh), i.e. 54% above the average price recorded in July 2021 and 4.2 times higher than the average price recorded during the year 2020.
Considering the average price of electricity at Mibel in July and an average energy consumption of 5000 kWh per year, it appears that the average price of the seven indexed tariffs offered to domestic consumers is 14% higher than the price charged on the market regulated, but 20% below the average price of offers on the fixed market – only a third of the offers on the fixed market are cheaper than the average offer on the indexed market.
Today more than ever, due to average price spikes in the wholesale market, it is crucial that consumers pay attention to their electricity bills. Until wholesale electricity prices stabilize, suppliers are likely to update their rates quarterly, as has often happened to many. Therefore, if today you find a cheaper offer compared to what you pay, change supplier. And, within three months, return to “loading”.