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Date Published: 21/10/2021
ARCHIVED - Why are Spanish electricity bills skyrocketing while in Portugal they hardly budge?
Both Spain and Portugal share the same electricity wholesale market
While households in Spain have been despairing of the seemingly never-ending rise in the cost of electricity, their Portuguese neighbours have seen their bills barely budge this year, despite the fact that both countries share a wholesale market and therefore should technically have the same costs.
According to data from the Consumer Price Index (CPI), while in Spain electric bills in September were 45% higher than the same month the previous year, in Portugal the increase was barely 2.3%.
Given that Spain and Portugal share a common wholesale market, how is it then that the Portuguese are paying 22 times less for their electricity? The answer lies in the different ways each country passes on the price hikes to the consumer.
In Portugal, the market regulator (ERSE) sets the annual rates at the end of each year, so there will rarely be any changes unless the government for some reason intervenes. In contrast, as has been seen in recent months, the price of electricity bills in Spain is linked directly to the behaviour of the wholesale market, so daily fluctuations can be experienced.
The Spanish way of doing things is rare, with only six other EU countries adopting a dynamic pricing system. Spain now has the second-highest electricity bills in all of Europe, only behind Estonia, which calculates costs in the same way.
Despite the volatility it generates, the pricing system in Spain does sometimes have its advantages, as was seen in April 2020 when wholesale prices plummeted across the globe. Electricity bills of Spanish consumers dropped by 20% overnight, while in Portugal, customers only experienced a 2.3% decrease.
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