Please note that the information provided in this article is of a general interest nature and intended as a basic outline only. It is not intended as any substitute for detailed legal or other professional advice specific to the reader’s circumstances. Nothing contained in this article should be seen or taken as the writer or publisher providing legal or financial advice.
As many already know, we at The Rights Group like to find new and interesting ways for you to seek to reduce your costs of living in Spain. Particularly for those of you living on an Urbanisation who are worried about your Community Fees, we believe that our colleague, John Pearce, may have found an answer to those growing electricity bills.
Spain has finally removed the monopoly of electrical supply from the regional companies (such as Endesa-Sevilla) and there are new supply companies who are now able to provide competitive supplies to domestic and commercial clients. These companies have the right to use all the existing distribution cables (for which they are charged) and there is no need for any change to cabling to enable an alternative supplier to be contracted. The change to a new supplier is therefore a paper work change only.
This freeing of the market, allowing competition for alternative suppliers spells the beginning of the end to the fixed tariffs
The process that Spain has used to introduce competition into the electricity market is based on the system that was used in the United Kingdom many years ago and now in the U.K. it is perfectly normal to buy electricity, for example, from a gas supply company. The introduction of choice (i.e. competition) will produce opportunities for reductions in electricity bills, in particular for large users. The common parts supplies to communities of apartments or developments are likely to be in a position to benefit considerably from these changes whilst individual apartments may find that the saving is too small to warrant the change.
COMMUNITY ELECTRICITY BILLS
The general shared costs in a community would include, typically, the street lighting, the garden lighting, water pumping for swimming pools and other elements such as heated pools (indoor or outdoor), lifts, air conditioning to club rooms etc. The costs are appreciable and can be as high as 10% of the total community charges. The charges for electricity have increased by over 20% over the last twelve months during a period when all communities are trying to reduce their costs. Any reductions that can be made, therefore, will be very welcome.
In order to understand why reductions in the costs may be achievable it is first necessary to consider how the electricity supply system works.
The actual operation of the market is very complex; however, the paragraphs below do give a simplified explanation.
There are three essential components:
1. The generation of the electricity in power stations and auxiliary power plants (including windmills and other green systems).
2. The distribution of the electricity throughout the country by means of very high voltage cables (overhead power lines) this is termed “the grid”.
3. The local distribution companies who take the electricity from the very high voltage to deliver finally to individual clients.
All of the above parts are largely unaffected by the changes in the market. 1 and 2 still continue to charge the final distribution companies and 3, the local supplier, is able to charge the independent companies for the use of their cabling installations.
The costs of distribution at both the very high voltage (the grid) and the local distribution are not affected significantly by the time of day or the season of the year, however, the cost of the generation changes vary significantly with both the time of year and the time of day. The reason for this is that, as electricity cannot be stored (like water for example) the generating companies must have sufficient generating capacity to meet the highest instantaneous demand of the year.
The general basic demand can be provided by large power stations operating at low cost but the additional generation required to meet higher demands is by smaller power plants which for much of the year are not required to generate electricity, but must be available. The cost of maintaining these additional plants is very high. Whilst there are many other factors in general during periods when the load can be provided by the big power generators, the costs are low, but they increase as the demand exceeds the capacity of these stations and the less efficient plants have to be used. As a result of these fluctuations the cost of generation varies continuously and the generating companies “sell” electricity in 30 minute packages.
The major factor causing fluctuations in demand in Spain is the weather. During the summer months the use of air conditioning increases the demand generally and the highest peaks occur with the maximum use of air conditioning. The largest peaks will most likely be in the morning when offices, factories and public buildings start their air conditioning plant to prepare for the day. The difference between the charge for a base load 30 minutes and the absolute peak 30 minutes may be as much as 50 times! These peaks can be compared to the morning rush hour of traffic, 30 minutes early, traffic o.k., and 30 minutes after, traffic o.k. but during the peak, grid lock!!
The existing tariffs charged by the supply companies take all these fluctuations in purchase price into account and all consumers are treated the same. Is this fair and what can be done?
Considering the case of a typical community, the use of electricity is by the lighting which is at night during the lowest generating cost period, the pool and irrigations pumping are fairly constant and do not peak and there is normally only a small amount of air conditioning. The demand therefore fits very well with the supply situation. Under the existing standard tariffs the communities are paying an excess to cover the average of all consumers. It would appear, therefore, that there should be opportunities to negotiate reductions in charges to communities.
This should be possible, however, in order to negotiate the best terms, the “profile” of the use of electricity must be established so that the supplier can calculate what the charges for the supply are going to be to him. The lower the risk, the more competitive the final contract! This is part of the service that can be provided by an Energy Manager who acts for the community to negotiate the best terms.
The Energy Manager will be an experienced engineer who can make adjustments to the profile of the energy used to give the optimum profile which can allow the most competitive contract to be negotiated. An experienced Energy Manager can allow the Community to recover his costs many times over.