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By G. Uth – 15. September 2021 – 

It’s not our fault! 

Although many may take a different view, the reality is that the independent energy providers to the Spanish market are doing important, often unnoticed work in the electricity sector. This applies to us, our colleagues and our competitors. 

Despite huge market pressures forcing prices higher and higher, the focus in several parts of the industry has turned to providing competence, competition, quality and personalized service to customers. 

Electricity prices have risen – and are rising – at lightning speed to levels never seen before, and when we listen to – or read – the media, the entire electricity sector is popularly grouped as “The Electricity Companies” – “Las Electricas”. 

But you can’t just lump everyone who trades in electricity together, because the industry is more nuanced than that, while for consumers it may seem that the independent electricity suppliers are the villains and reap gold on price increases. 

Nothing could be more wrong…. 

The independent electricity company is actually the most challenged party in the crisis: the increase in price is happening at the wholesale level, and those who earn the pennies on the high prices are those who produce electricity, not those who sell to end users. 

The extremely high prices have a massive impact on the financial and liquidity situation of the electricity companies. 

Before electricity reaches your home, independent electricity suppliers must plan and buy and pay for your energy, often up to 7-8 weeks before you have to pay your invoice. It’s a big money bond, but also something that we’ve always known was part of the game, but in recent months that money bond has more than tripled compared to a normal year, and none of us were prepared for that. In addition, more guarantees have to be paid than usual – and this also draws liquidity out of the cash register. 

The effect of this deficit leaves the independent electricity companies with an additional liquidity loss of 11 percent until a settlement can be made with the Treasury.

REDUCTION OF IVA 

The government’s first response, mainly enough to save a little votes, was a reduction in the IVA from 21 percent to 10 percent, which probably had more effect on the government’s popularity than on the purse strings of private consumers (and cheap for the government which, with the sky-high prices, had more than tripled its earnings on both electricity tax and IVA,  but from the point of view of an independent electricity supplier, this is another severe blow to liquidity, as it still has to pay 21% to all suppliers, including OMIE, where the electricity is purchased. 

The impact of this deficit leaves the independent electricity suppliers with an additional liquidity loss of 11 percent until a settlement with the Treasury can be made. 

But here it should be remembered that with a normally efficient customs service, it would of course set off quickly, and you could then start over by losing liquidity, but in Spain it is quite normal that it can take up to half or a full year before you get your VAT money back, while at the same time, in the case of persistent positive VAT adjustments in non-exporting companies,  it is almost certainly safe that you also get a visit from customs, which then has to run through the entire accounts with a close comb. 

Meanwhile, the electricity supplier is being drained of an unimaginable amount of liquidity. And no, there is no help of fetching from the banks or the government without personal guarantees and putting the house, car and the whole family’s future at risk. Even at the very small independent electricity companies, we talk hundreds of thousands of euros in negative liquidity every quarter. It’s going to run out. 

METERS ERROR 

Since the change in tariffs on 1 June, it has become clear that there has been a total lack of preparation and planning among the old major monopolies, resulting in delayed invoicing and, in an increasing number of cases, quite large inaccuracies in customer readings because the meters have not been properly adapted to record the new tariffs. 

The independent electricity suppliers have therefore had to sharpen their ingenuity and systems in order to be able to invoice their customers in a timely manner and with the right amounts. In other words, the electricity company must calculate a realistic estimate of the shortcomings of the large electricity suppliers, which are constantly and with impunity in breach of the guidelines laid down by the supervisory authorities. All other things being equal, invoicing is delayed and thus another attack on the electricity company’s liquidity is added. 

The many regulatory changes that have taken place in recent months and years, many of which come from Covid-19 – paired with the strains that households face in terms of job losses and lower incomes, have placed a heavy burden on the entire sector. In a very short time, independent electricity suppliers have had to make significant adjustments to management systems and billing systems so that customers can get correct invoices and at the same time also have to get used to the fact that the ordinary consumer also waits to pay his electricity bill after a few reminders. 

The effect of this deficit leaves the independent electricity companies with an additional liquidity loss of 11 percent until a settlement can be made with the Treasury.

INCORRECT BILLS 

As a direct result of these new state legislation, bills have now become much more complicated and independent electricity suppliers have had to adapt the contents of their invoices in accordance with the new rules, which in turn has made it more difficult than ever for consumers to understand their electricity bills and, as a consequence, has also led to even more work in customer service. 

There have also been many reports of improperly announced price increases for consumers. This situation is highly undesirable for consumers and, although their financial contribution is microscopic in relation to the huge sums of money processed through these large energy companies, it does little more than sow more and more doubt and increases the growing anger towards the big electricity companies. 

Unfortunately, the behaviour of a few independent electricity suppliers has tarnished the work of many independent electricity suppliers, many of whom are trying to keep their place in the market by offering a different and better customer experience and service in a sector dominated mostly by larger, soulless suppliers who have a long history of mistreating their customers. 

Dumping 

These large electricity suppliers take advantage of the public confusion over the regulated price (PVPC) and their dominant position as electricity producers, since by creating confusion among consumers, they make it much easier to appear as offering favourable discounts and luring them away from independent electricity companies. A practice that can almost be described as dumping. 

And the defaults will start to come, encouraged by a mistemplation of the major suppliers as the culprits of the problem. As if these companies were the initiators of a record level of natural gas and CO2 quotas. 

BUT IT ALL REALLY STARTED WITH THE GOVERNMENT’S COVID 19 AID PACKAGE FOR LARGER COMPANIES 

The first hard hit by the government against the electricity companies’ finances came as early as last year, when the government promised all major businesses by “the big shutdown not to worry about their electricity bills for the next six months, and then had six months to pay the bills in, alongside their normal monthly bills. Without any compensation for electricity suppliers other than access to limited partially state-guaranteed lending, but based on a banking credit rating. 

This generated a huge amount of customers who had not paid their bills for six months and suddenly had to pay double electricity bills every month, because even if they were not shut down, they did not pay their electricity bills, therefore a completely abnormal amount of extremely slow payers are also bothered, where the electricity supplier’s usually best weapon,  a disruption of electricity has been taken from them by the government, just as in the last 18 months it has not been possible to file for bankruptcy. These are conditions that many independent electricity suppliers continue to suffer from. And they didn’t just need the extra liquidity load the higher prices entail. 

It is forgotten in the public debate that independent electricity suppliers are companies, like many others, while they are often lumped together with the old monopolies, which were given millions and millions of customers ‘given’ by the liberalisation of the market and hold financial cash balances that the rest of us do not have the imagination to imagine. 

The independent electricity supplier is struggling with cost increases, just like everyone else. They are struggling with how to transfer these unprecedented costs to their selling price without losing competitiveness, and are suffering from an entirely unlikely liquidity requirement never seen in the sector before.  And at the same time, they must clean up, and compensate for, defects caused by others in the industry. 

It’s a bit uphill right now, and then it’s actually a bit difficult to meet the landlords of our premises and hear them say they’re going to put up the rent because their electricity bill has gone up and we’re now doing the “checkout” on the high prices… 

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