Why Do I Pay More If I Am Already Consuming Less?

The Pérez family members are a family of five who perform daily tasks with equipment that has an average electrical consumption. Their situation is not very different from that of so many other Spanish families that since last June have been forced to change their consumption patterns.

The rates peak and valley neutral have become part of everyday conversation in a short time and electricity bill is a matter of concern , a lot.

Added to this, in recent weeks, a recurring and sustained rise in the auction price of MWh in Spain, which has led to an increase in the amount of the electricity bill in recent months … even consuming less energy. How is this possible?

A standard family with an average consumption
The case of the Pérez family is very similar to that of other families or small businesses with approximate consumption of between 250 and 300 kW per month. They reside in a house of approximately 130 m² that they bought as a new plant, facing west-southwest. This allows them to enjoy movie sunsets, but they do not have special thermal gain through their windows .

Among the benefits of your home is the ducted air conditioning , centralized in the living room, and a normal equipment in which, apart from the more conventional appliances in the kitchen and living room, the recharging of its ten electronic equipment (2 per person in the family) almost daily.

They have taken note of the energy recommendations in the media and their first investment in energy saving has been based on the use of LED bulbs throughout the house. Apart from this, since June 1 they have followed the many recommendations that have come to their hands, optimizing their consumption habits as much as possible.

Despite this, the Pérez family (like so many others) asks themselves every day how to pay less on the electricity bill , without changing their quality of life.

We have become aware and changed habits but we continue to pay more. Why?
The change in the invoice for June 2021 establishes three billing sections and to be able to choose two levels of contracted power. They have chosen to leave it as they had before the tariff change and have the same power factor in all three sections (4.4 kW).

However, the cost of the invoice has gone from € 54.73 in 2020 to € 58.19 in 2021 (6.3% more).

By reviewing the Pérez family’s bill, a series of key factors to take into account can be detected :

Comparative graph of the 2020/2021 cost of the Pérez family.Comparative graph of the 2020/2021 cost of the Pérez family.The Conversation
The price of the power factor has dropped , although the Pérez family has not established a power distinction for each time slot. This decision is subjective and it is up to each family to adapt the contracted power in each section.

If consumption is expected to increase in off-peak hours , the power factor value for peak hours can be reduced and that of off-peak hours increased, or vice versa. This procedure must be managed by modifying the contract with the supplier.

On the other hand, and although VAT has been reduced from 21% to 10% recently , the total amount of the invoice in 2021 is € 4 higher than last year, consuming almost 20% less. A second VAT reduction is not foreseen in the short term, but the tax burden is undoubtedly of paramount importance in the total amount of the invoice.

On the other hand, the price of the MWh is auctioned daily and depends on the macroeconomic factors of the suppliers, which subsequently affect the end customer.

The fact that prices rise is not only due to their tax rate, but may vary due to meteorological circumstances ( danas , Filomenas or similar) or even geopolitical issues (such as the current Morocco-Algeria conflict ).

The reality is that, after several weeks of increases , it is on the end user that this auction price affects.

Currently, more and more families are attentive to the price of MWh every evening, who, based on these data, prepare their consumption and routines for the next day.

But where is the biggest change? What has risen the most?
The electricity bill of the Pérez family does not differ much from the one that can be received monthly in a common home or an SME. The fundamental concepts of any invoice are:

– Days of consumption , between billing periods (between 25 and 30 days) of which some have zero consumption.

– Power contracted at peak and valley (2 of the power factors of the 3 consumption can be modified).

– Total consumption , differentiated by peak, flat and valley periods.

– The price for contracted power .

– The price for energy consumed .

– Taxes derived from electricity, rental of measurement equipment and VAT.

Of these 6 factors, the reality is that the end customer can only intervene in the second of them (contracted power) and the third, from the consumption control and the adaptation of their habits to the billing sections.

The results of direct costs and VAT depend directly on the final value of consumption .

Reducing or adjusting energy consumption can be achieved through guidelines or processes that allow consumption not to skyrocket automatically and to optimize the total expenditure derived from all household appliances.

Differences between 2020 and 2021
If the invoices for the same period of 2020 and 2021 are compared, coinciding with the month of July-August in which the family has gone on vacation for a few days, some important conclusions can be reached :

Comparison of 2020/2021 invoices for the Pérez family.Comparison of 2020/2021 invoices for the Pérez family.The Conversation
The most remarkable thing is the proportion of consumption . Compared to the 301 kWh consumed in 2020, the Pérez family has become aware and has reduced its consumption to 234 kWh, 22% less. However, despite their efforts to adjust their consumption habits, the cost of energy has grown by almost 40% (38.8%), paying approximately € 10 more just for consumption, which is the most important on the bill. .

Regarding the price of the contracted power , consuming all day at a rate of 4.4 kWh, for the three sections, the concept of the contracted power price has decreased by approximately 30% (€ 4.39 less).

This data reflects the way in which the suppliers have tried to adjust to the current situation , reversing the costs of one of the fixed concepts, to continue being competitive and interesting for the consumer.

As for the tax block, putting together the taxes on electricity and equipment rental, the price does not vary much , going from € 2.56 in 2020 to € 2.69 in 2021.

It is the VAT data that stands out the most, since its reduction from 21% to 10% has allowed the Pérez family to save 45.5% (€ 3.44) in this regard. If in 2021 the VAT had remained at 21%, the amount on the 2021 invoice would have been € 8.65, increasing the total cost to € 62.72.

The conclusion is that, consuming 20% ​​less, the Pérez family has seen their bill increase from € 54.73 to € 58.19, 6% more.

So what can we do?
The Pérez family is just one example of the thousands of families and users who, despite their efforts, have seen the price of their bills grow proportionally .

The invoice data reflects the user’s desire to reduce costs , as seen in the data on energy consumed. And even with all the efforts and changes in habits, the macroeconomy prevails and ends up affecting the final consumer.

Issues such as self-consumption and other types of recommendations help reduce electricity consumption and lead to a reduction in the monthly bill.

Decisions such as the reduction of VAT or the possibility of changing the power of the sections favor the reduction of the invoice .

If in 2020 the power consumed represented 52.5% of the total cost of the bill, in 2021 it has risen to 68.6% .

The rise in the price of electricity is a data that changes daily and that depends on multiple factors. All the indicators suggest that over a period of time, and except for unexpected decisions, it will continue to grow gradually .

Predictably, this period will be followed by decreases and reductions , not drastically but sustained for several weeks, until reaching values ​​similar to those of 2018.

In fact, in a recent interview the President of the Government of Spain Pedro Sánchez stated :

The President of the Government, Pedro Sánchez.
Pedro Sánchez: “When the end of 2021, electricity will have been paid the same as in 2018”
“We are working with a plan to reach a concrete commitment, and that is that at the end of 2021 the Spanish look back and see that they have paid a similar amount to the electricity bill and similar to the one they paid in 2018. “

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