A few days ago, several media outlets in the economic press revealed that a large part of the increase in regulated rates was due to additional costs implemented by the system operator, Red Electrica (REE). However, the company that owns Radia has come forward to deny this through a statement on its website where it explains that the increase is due to technical restrictions that the system applies to guarantee its security at the lowest possible cost.
And it is possible that both statements are true at the same time.
What happened? Regulated bills rose 6.5% more in September than in August (even during the heat wave), with PVPC reaching an average price of €148/MWh. In absolute terms, the increase was €15.03/MWh. Of this increase, some media indicate that around 10 euros (€9.86) are due to additional costs of adjustment services implemented by Red Electrica, through “reinforced operations”.
However, the system operator has defended itself by clarifying that it is not in charge of determining this cost, but that it depends on other factors such as the adjustment service, and that, in the last four weeks, “the price of electricity in the wholesale market has increased by 21.4% while the cost of technical limitations has decreased by 8.2%.”
What is this coordination service? Electricity markets work in advance, planning what each technology will produce at all times. When this forecast does not correspond to the electricity generated in real time (because there is less wind than expected, because a plant has to stop or because demand changes from what was predicted), Red Electrica, as the system operator, must “correct” that deviation through adjustments that guarantee supply. You can do this by asking a plant to produce more, by changing production, or by using processes such as advanced operations.
These processes have technical limitations. The market may have assigned a certain combination of exchanges because it is the cheapest option, but that combination is not always physically viable on the network. If this happens, Red Eléctrica needs to change it to avoid safety issues.
Reinforced operation questions. After the blackout on April 28, 2025, Red Electrica took some additional, and somewhat more conservative, measures to prevent such an event from recurring and thus strengthen system security. The company maintains that these measures were taken after detecting regulatory non-compliance and inappropriate behavior by some agents that led to the blackout. One of these measures, as Cinco Dias explained, is the extensive programming of combined cycle gas plants in the so-called restricted market, which operates outside of daily auctions. This means that if these plants are not available in the wholesale market, they will have to be introduced if requested, at a cost. And in the case of gas now it is a lot.
However, Red Electrica clarified that this cost for reinforced operation in September amounted to about 8.8 million euros: a figure that, despite the high noise, represents about 2 cents a day for a user with contracted PVPC, with an average annual consumption of 300 kWh, according to the operator.
So why did the light burn? For two reasons. The first is that, as global conditions are hard to ignore, the wholesale market (a variable in the regulated rate calculation) rose 4% in September, directly impacting PVPC. The second factor is coordination services. According to data collected by Cinco Días, these processes explain the increase in PVPC between August and September between €15.03/MWh to €9.86/MWh: an increase of almost two-thirds.
What Red Electrica defends is that this almost 10 euros is actually due to the set of compatibility services, which are necessary for the combination of generation and consumption to be physically viable, and not just powerful operation, which is only a process to achieve it, as some media indicate. Moreover, it is a price where the operator does not make any decision and it depends entirely on the amount of energy to be assembled and the price offered by the power generator.
Surcharge yes or no? It depends on what we mean by cost overrun. On the one hand, for Red Electrica, these are necessary costs for electricity to reach consumers safely and at the lowest price, so it would be wrong to say so. For consumers, it may look different: there is an additional cost compared to the wholesale market match price, which pays more than the expected price at auction.
And because no one is spared, the big free market power companies have also complained, accusing Red Electrica of a lack of transparency and asking for a regulated charge to be included in certain parts of the bill, so they don’t have to guess the impact temporarily when offering contracts at a fixed price.
Picture | Thomas Despairaux
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