Everything you need to know about the new electricity rate and nobody has explained you well

Reading time: 9 minutes

Spending on electricity is one of the inescapable of any family budget. That is why it is important to understand well how the new electricity rate works which has entered into force on June 1, 2021 and thus be able to act accordingly. Especially now that the cost of electricity can change significantly depending on the time and day of the week.

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First of all, how does the new electricity rate affect me?

The great novelty of the electricity bill is that now all users will have a rate with hourly discrimination.

For practical purposes, this means that the price per kWh of electricity will be significantly more expensive (roughly double) during peak hours; a little cheaper (50% less) in off-peak hours; and practically the same in the flat hours.

Light time slots

Slots of the new electricity rate

Rush hours
10am – 2pm
18 – 22h
Hours plain
8 – 10h
14 – 18h
22 – 24h
Valley hours
0 – 8h
Weekend

In this way, if you consume electricity in the valley strip (for example, you configure the thermos to only heat water at night) you will save money on the electricity bill. And if you do it at peak times, your bill will go up.

It is also important to note that these changes affect you differently. depending on who you have contracted the electricity with:

  • If you are in the regulated market (also called PVPC or marketer of last resort) these changes were applied on June 1, 2021.
  • If you are in the free market (that is, you pay a fixed price per kWh) you will still have to wait for your marketer to adapt the rate.

These are the basic changes, but if you are interested, here you can find out everything you need to know about the new electricity rate and no one has explained you well.

First, the basics

The first step is to understand the terminology used when talking about the cost of electricity. These are the basics:

Power consumption Hired potency

It is the maximum amount of electricity that you can consume at any one time. That’s why “the light goes off” if you turn on many things at the same time. The normal thing for a typical house is between 3 and 6 kW, and it can be changed if you wish to adjust it to your needs. The lower it is, the less you will pay, but the fewer appliances you can use simultaneously.

Power consumption Consumption

It is the electricity you use. It is measured in kWh (that is, power per time). For example, 1 kWh is the equivalent of running a 1000W (1kW) stove for one hour.

Access toll Power access toll

It is a fixed amount that is paid for each kW of contracted power. The idea is that you pay to have that energy available at any time, even if you don’t always use it.

Trading margin Marketing margin

It is also a fixed amount that is paid for each KW of contracted power. In this case, it is the margin of the marketer, that is, the company with which you have contracted the electricity.

Daily market The daily and intraday market

Also known as the wholesale market, it determines the price of kWh based on the supply of power generation and demand. Simplifying a lot, it is the price that electricity traders pay to energy producers. This price is set per hour and is used to set the price per kWh for the regulated market.

Second, understand the electricity bill

The second step to understand the new electricity tariff is understand the electricity bill. This is always divided into five sections:

Concept Description
By contracted power It is the fixed amount you pay per year depending on the power you have contracted. It appears on your bill by days and is the sum of the power access toll and the marketing margin.
By energy consumed It is what you pay for each kWh you consume.
Electricity tax It is 5.11% of the sum of the two previous amounts.
Measurement and control equipment rental It is a fixed amount per year for the meter’s rent. It appears on your invoice by days.
VAT * It is 21% of the sum of all the above amounts. *
Reduced VAT until 2022

The government has announced that the VAT on the electricity bill will go from 21% to 10% in all the remainder of 2021 for those consumers who have a contracted power of less than 10 kW.

This change positively affects practically all Spanish households and more than 70% of the self-employed and companies, since for practical purposes they will pay approximately 9% less in the electricity bill.

This reduction is conditional on the average wholesale market price for the previous month having exceeded € 45 / MWh (in June it was € 83 / MWh). However, this condition does not apply to severely vulnerable consumers at risk of social exclusion, some 600,000 households.

Third, know how the price of kWh is calculated in Spain

The third step to understand the new electricity tariff is to know how the price of kWh is calculated in Spain. Basically it is the sum of the following concepts, in order of importance:

  • Daily and intraday market: is the price at which energy producers sell electricity. It has a great weight in the price of the kWh, hence its variations affect the final price you pay so much.
  • Tolls and charges: It is a fixed amount for access tolls to the transmission and distribution networks and charges associated with the costs of the system.
  • Other concepts: OS and OM financing, variable marketing cost, payment for capacity and adjustment services, which together rarely reach € 0.01 of the price of kWH

Fourth, what has changed in the new electricity rate?

Two things have changed in the new electricity tariff:

  • The power access toll: it affects what you pay for contracted power.
  • The “toll and charges” of the kWh price: affects how much you pay for energy consumed.

How the price of the power access toll has changed

The power access toll has dropped with the new electricity tariff. It has gone from € 38.04 / kW per year to € 32.31 / kW. That means a saving of € 5.73 / kW per year or, translated into easy-to-understand numbers, € 1.65 per month less on your bill if you have 3.45 kW of contracted power.

Concept Previous annual price Current annual price
Power access toll € 38.04 / kW € 32.31 / kW
Marketing margin € 4 / kW € 4 / kW
Total € 42.04 / kW € 36.31 / kW

Additionally, it is now allowed have a different contracted power between midnight and 8 in the morning and the rest of the day, at a cost of only € 1.42 per kW / year for the additional kW of power at night. This is perfect for those who have an electric car and need more power at night to charge it.

How the price of the kWh of electricity has changed with the new electricity bill

The system by which the kWh is calculated remains the same with the new tariff: there is still a fixed part (the toll) and a variable part. However, if before the toll was the same for the whole day (unless you had contracted a rate with time difference) now that toll is different depending on the time of day.

It is best to see it in a table:

KWh toll by time of day

Time of the day Previous rate Current rate
Valley hours
0 – 8h
Weekend
€ 0.04403 / kWh € 0.00600 / kWh
Hours plain

8 – 10h
14 – 18h
22 – 24h

€ 0.04403 / kWh € 0.04177 / kWh
Rush hours
10am – 2pm
18 – 22h
€ 0.04403 / kWh € 0.13312 / kWh

It is also important to know the cost of the toll and the hours of the old rate with hourly discrimination.

KWh toll in the old tariff with hourly discrimination

Time of the year € 0.00222 / kWh € 0.06201 / kWh
Winter 22 – 12h 12 -22h
Summer 23 – 13h 13 – 23h

Looking at the data, it is easy to draw the following conclusions:

  • Now everyone has hourly discrimination, with valley, peak and flat hours of 8 hours each in total.
  • The toll price is very high at peak times. In fact, the toll is tripled from the previous rate, which will make the kWh significantly more expensive during those hours. In a very indicative way, double.
  • The off-peak hours are now shorter than in the previous rate with hourly discrimination. Specifically, 8 hours a day compared to 14 hours for the previous rate, but instead includes weekends.

Fifth, how will the new rate affect my electricity bill?

First, it will affect you differently if you are in the regulated market or the free market. If you are in the regulated market, the change was applied on June 1. On the other hand, if you are in the free market, you will have to wait for your marketer to adapt the rate. It may offer you a fixed price for sections or a flat rate similar to the one you already have.

In the case of the regulated market, which has 10 million Spanish households, it is a bit difficult to foresee how the new electricity tariff will affect the whole world. It will depend a lot on the consumption habits of each one, but you can try to make an approximation for different scenarios.

But first, you have to see how the price of kWh has changed depending on the time of day, including all costs (fixed and variable). For the example, the kWh price of May 31, calculated with the old tariff and also with the new one, is compared.

Price per kWh according to time of day

Example calculated from the cost of May 31 *

Time of the day Previous rate Current rate Difference
0 – 8h € 0.164 / kWh € 0.126 / kWh – € 0.038 / kWh
8 – 10h € 0.161 / kWh € 0.159 / kWh – € 0.003 / kWh
10am – 2pm € 0.156 / kWh € 0.245 / kWh + € 0.089 / kWh
14 – 18h € 0.149 / kWh € 0.146 / kWh – € 0.003 / kWh
18 – 22h € 0.156 / kWh € 0.245 / kWh + € 0.089 / kWh
22 – 24h € 0.164 / kWh € 0.161 / kWh – € 0.003 / kWh
* For the calculation, as the price varies from hour to hour depending on the wholesale market, the average has been made for each time zone.

At a quick glance you can see that the price falls in the off-peak hours (4 cents) and rises in the peak hours (9 cents). So your bill will be different depending on how you distribute your consumption. Here are some examples for a monthly consumption of 300 kWh extrapolating the previous data:

Amount of the invoice for energy consumed

Example calculated for a consumption of 300 kWh per month from the cost of energy on May 31 *

Daily consumption distribution **
(valley / plain / tip)
Old rate New rate Difference
40/30/20 € 47.03 € 45.37 -1.66 €
30/40/30 € 46.95 € 47.98 € 1.03
20/40/30 € 42.20 € 45.21 € 3.02
20/40/40 € 46.87 € 50.60 € 3.72
* For the calculation, as the price varies from hour to hour depending on the wholesale market, the average of each band has been made.
** Weekends at the new rate are all valley

With those numbers, and taking into account that you save approximately € 1.65 in the power term, the electricity bill could lower you about € 3 per month or raise € 2 (taxes apart) depending on how you distribute the consumption.

Sixth, what can I do to save on my electricity bill?

That’s the million dollar question: what can you do to save with the new electricity rate. In short, the ideal would be to reduce consumption as much as possible during peak hours, and take advantage of off-peak and flat hours as much as possible.

Nevertheless, you don’t have to go crazy either. According to Eurostat data, the bulk of domestic electricity consumption in Spain is represented by household appliances (55.2%), lighting (11.7%), air conditioning (9.7%), kitchen (9.3%) and hot water sanitary (7.5%). Furthermore, within household appliances, refrigerators and freezers account for 36.7%, while washing machines (11.8%) and dishwashers (6.1%) account for a much lower percentage.

Knowing this, These are the general recommendations to save with the new electricity bill:

Domestic hot water Program the electric water heater to work at night

If you have an electric water heater for hot water, you can use a timer or smart plug so that it only turns on during off-peak hours.

Electric bill washing machine Avoid putting washing machines and dishwashers during peak hours

Especially when it comes to programs with hot water, which is what makes you consume more. Remember, the flat time is very similar to what you already paid, it is not necessary to set it at dawn.

Electric bill iron If you have to iron during the week, better outside of rush hours

Although small, the iron consumes quite a bit of electricity. If you can avoid rush hours or postpone ironing to the weekend, all the better.

Electric bill LED lighting Whenever possible, opt for LED lighting

Its consumption is even lower than energy-saving bulbs, and its useful life is longer.

Refrigerator A +++ The fridge, better A +++

Being always plugged in, the refrigerator is responsible for a good part of the electricity consumption, so its efficiency has a positive impact on the bill.

Energy saving fan One degree of temperature can make a difference

In summer, a temperature of 26º is already pleasant. In winter, 21º is ideal to maintain comfort. Think that each degree can suppose between 4 and 10% more energy.

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