Spain's PVPC reform cushions households from soaring electricity pool prices

The Spanish government’s 2023 overhaul of the regulated electricity tariff (PVPC) introduced a larger share of forward-looking contracts, lowering the tariff’s exposure to volatile hourly pool prices that have surged due to the Iran war and higher gas prices. The market-adjustment term, calculated hourly from the difference between the pool and a basket of OMIP futures, has been negative since summer, delivering an average discount of about -54 €/MWh since September and reaching -68 €/MWh in early October.

This mechanism has trimmed the PVPC cost by close to 30 % in recent months, even as the average PVPC bill climbed sharply compared with the previous year. Experts note that the reform, which now assigns 55 % of the tariff to futures and 45 % to the daily market, mitigates the spike but could reverse if pool prices fall while futures rise. The change replaces the 2014 system that tied the tariff entirely to the pool, a structure that left vulnerable consumers fully exposed to daily market fluctuations.