The CNMC (National Commission on Markets and Competition) published on 17 February 2022 the following interpretative criteria regarding the consumer protection measures established in Royal Decree-Law 23/2021, on urgent energy measures for consumer protection and the introduction of transparency in the wholesale and retail electricity and natural gas markets (“RDL 23/2021”):
1. Obligation to publish offer price information and submission to the CNMC:
RDL 23/2021 introduces into Article 46.1 of the Electricity Sector Law a new paragraph (u), which states that suppliers must:
“(u) Publish transparent, comparable, adequate, and up-to-date information on the prices applicable to all offers available at any given time, and, where applicable, on the conditions relating to contract termination, as well as information on additional services required for contracting. This information must also be submitted to the National Commission on Markets and Competition, according to the criteria it establishes, so that it is available to all consumers through its online Energy Offer Comparison Tool.”
RDL 23/2021 strengthens an existing obligation in the Electricity Sector Law (LSE) already applicable to electricity suppliers. Specifically, Additional Provision Nine of Order ITC/3519/2009, of 28 December, which revised access tariffs effective from 1 January 2010 and the tariffs and premiums for special regime installations, established that the CNMC would manage a comparison system for electricity supply prices based on offers made by suppliers for groups of consumers, and that such a system would be accessible online to consumers. In compliance, the CNMC maintains a web-based offer comparison tool. The offers that, pursuant to said additional provision, must be communicated to the CNMC for inclusion are those aimed at groups of consumers, not those limited by tariff groups. Since suppliers generally offer standardised products for small or medium-sized consumers, the offer comparison tool includes electricity offers for low voltage consumers.
In accordance with the aforementioned additional provision, the submission of information to the CNMC must be made in a standardised format at least ten days prior to the effective date or publication of the relevant offer. Suppliers with electricity offers for end consumers who are not yet registered must register by sending an email to comparadordeofertas@cnmc.es requesting access and providing the required documentation.
As of the date of the CNMC’s Decision, the offer comparison tool only allows for the entry of fixed-price electricity offers in accordance with the structure defined in Circular 3/2020. However, it is noted that the inclusion of flexible and indexed offers is under development.
Under the introduced amendments, suppliers are obliged to publish transparent, comparable, adequate, and up-to-date information on the prices applicable to all available offers at any given time, and, where applicable, on the conditions related to contract termination, as well as information on additional services required for contracting. This information must be made available through all media in which the offers are advertised, and in any case, on their website. All non-personalised offers, which consumers may access based on their consumption characteristics, must be advertised. The type of offer (fixed, flexible, indexed, etc.), any applicable discounts, and their duration must be clearly indicated in the advertising medium.
This publication obligation does not apply to personalised rates, which are those offered to a single consumer, with pricing conditions different from those offered to others. According to the CNMC, the following are not considered personalised rates:
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Offers based on consumption ranges (e.g., a tariff offering 3,000 kWh/year for consumers using between 2,000 and 3,000 kWh is not considered a personalised rate).
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Fixed-price offers provided by suppliers for short-term periods.
The CNMC considers that all offers should be presented using consistent units, recommending that offers display the fixed term in €/kW/year and the variable term in €/kWh. Published prices must include all applicable taxes and charges.
In the case of tariffs with a consumption cap or annual quota (“flat rates”), prices must be published indicating both fixed and variable terms. Prices must be shown in the same format, including the monthly fee as a fixed term. Prices (in €/kWh) for penalties or bonuses in case of exceeding or falling short of the consumption quota must also be published. Additionally, to improve offer comparability, it is considered necessary to provide an equivalent unit price (€/kWh) calculated under at least three consumption scenarios:
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Optimal price: the consumer adjusts their annual consumption exactly to the agreed quota.
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Price with 20% excess: the consumer exceeds the annual quota by 20%.
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Price with 20% deficit: the consumer reaches only 80% of the contracted annual consumption.
2. Consumers’ right to be duly informed of price revisions:
Article 44.1(e) of the Electricity Sector Law (LSE) has been amended to include the following consumer right:
“e) To be duly notified, in a transparent and comprehensible manner, of any intention to modify the contract conditions, and to be informed of their right to terminate the contract without any cost upon receiving such notice.
Likewise, to be directly informed by their supplier of any price revision resulting from the stipulated conditions, at least one month prior to its application, in a transparent and comprehensible manner.
Price revision notifications must include a comparison of the prices applied before and after the revision, as well as an estimate of the annual supply cost for the consumer and a comparison with the previous annual cost.”
The CNMC distinguishes various scenarios regarding the obligation to inform consumers of new supply prices:
A) Price revision resulting from changes to contract conditions, contract renewal (generally annual), or extension of the supply contract:
According to the CNMC, in general, the consumer must be informed of the new price and the estimated annual cost whenever there is a change to the contract conditions, as well as upon renewal (typically annual) or extension of the supply contract. Consumers must be notified at least one month in advance and must be informed of their right to terminate the contract without any cost or penalty.
The consumer’s right to terminate cannot be limited in time, as the law grants this right without time restriction (subject only to general limitation or prescription rules).
Furthermore, according to Royal Decree 1435/2002, of 27 December, regulating the basic conditions of energy supply contracts and access to low voltage networks, consumers may terminate low voltage contracts with fifteen days’ notice, without incurring any termination penalty.
B) Price revision resulting from the application of conditions stipulated in the contract:
As a general rule, whenever possible, the consumer should be notified one month in advance of the price revision, or as soon as the new price becomes known if the one-month notice cannot be met. The CNMC identifies several cases:
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Price revisions due to changes in regulated components (tariffs, charges, or taxes) stipulated in the contract:
When the contract provides for price adjustment based on changes in regulated components, advance notice to the consumer is not required. It suffices to notify the consumer at the time of the update. -
Contracts with annual price revisions (e.g., linked to CPI):
Consumers must be informed of the new price and estimated annual cost with one month’s notice. -
Contracts with price revisions more frequently than annually, based on pre-established objective criteria (e.g., PVPC electricity tariffs):
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If the price is linked to another market price or the wholesale market, varying daily or hourly, consumers must be notified one month in advance only if the pricing formula or any of its elements is modified, as stipulated in the contract.
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If such modifications are not foreseen in the contract, it shall be treated as a contract modification, granting the consumer the right to terminate.
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If the price is indexed to a market reference updated quarterly or semi-annually, no advance notice is required for price changes resulting from such updates. It suffices to communicate the new applicable prices when the update takes place.
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C) Changes from fixed-price to indexed contracts or vice versa are considered by the CNMC as contract modifications under Article 44.1(e) of the LSE. Therefore, consumers shall have the right to terminate the contract without cost.
Such changes to contract conditions are only valid if the price variation, its formula, or other conditions are specifically, clearly, and transparently stipulated in the contract. In any case, the consumer’s right of termination cannot be waived, even if the contract provides that the pricing system may change without specifying the circumstances or details of such changes.
3. Consumers’ right to receive an estimate of the annual supply cost and its comparison with the previous annual cost:
The estimate of the new annual cost must be made using the best available information at the time the price revision is communicated to the consumer. It is recommended to include a simple explanation of the most significant parameters used for the estimate, particularly the estimated annual consumption, as well as the assumptions considered. It may also be indicated, where appropriate, that the estimate could vary if the actual consumption pattern deviates from the forecast.
For contracts with indexed prices, the most suitable method is to use the best available forecast of the evolution of such indices for the following year, based on publicly available futures market quotations. If historical spot market data are used, this must be clearly indicated in the comparison provided.
In the comparison of prices applied before and after the revision, it is preferable to use full VAT and tax values (i.e., without reductions) for the calculation, both before and after the price revision.
If annual consumption data or a customised estimate for the supply point are not available, it is recommended to estimate the annual electricity consumption based on consumption data for the months available, and to distribute it monthly according to the percentages indicated in the CNMC’s Decision, applying the criteria set forth therein.
4. Obligations in the event of contract termination by the supplier:
The CNMC considers that, in cases where the supplier decides to terminate a contract in accordance with the agreed economic conditions, the supplier should compensate the consumer financially, applying at least the same penalty criteria (if provided for in the contract) as would apply if the consumer had terminated the contract.