Why does the price of kWh keep rising? We’ll explain.
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Want to know why the price of electricity keeps rising? In the following article, we’ll tell you the reasons, the government measures that have been implemented to control prices, and give you tips to keep your bills from getting so high.
Today, the price of electricity continues to rise due to several factors, one of which is the ongoing conflict between Russia and Ukraine. As a result, the price of gas and electricity has skyrocketed alarmingly. Other contributing factors include CO2 emissions and increased consumer demand.
Faced with this worrying situation, the Government has taken some measures to be able to make an accurate calculation of the price of kWh.
Government measures for calculating the price of kWh
In order to deal with the constant rise in the price of kWh , the Government has decided to take the following measures:- More people will benefit from the electricity social bonus: The government will increase the number of beneficiaries to 600,000. This bonus is for low-income individuals. With this bonus, they receive a discount of between 60% and 70% on their electricity bill.
- Gas price cap: The government has set a price based on international market standards. Similarly, a price cap has been established for the regulated tariff.
Reasons why the price of electricity is rising
Definitely, one of the most worrying issues is the excessive increase in the price of electricity. This price is set by the energy companies through a daily auction. In this auction, these companies set the price for each time block for the following day. During this process, there is an interaction between company offers, market demand, and consumers. The different offers are listed from the most economical to the most expensive. The cost of the final bid determines what is known as the marginal price. This is the price that all generating companies must charge and that all consumers assigned to that time slot must pay.
Consumers most affected by the increase
Not all customers are affected equally by the increase in the price of kWh . Those most affected by this increase are those with a regulated market tariff. Conversely, customers in the free market have the freedom to choose their electricity tariff. Depending on their chosen tariff, they may or may not be affected by rising electricity prices.Increase in electricity rates
Compared to 2020, electricity prices increased by 40.56% in 2021. In the first four months of 2022, electricity rates continue to rise, with the increase so far compared to 2021 reaching 41.11%. This year, in particular, there has been a much larger increase due to the war between Russia and Ukraine. Not only have kWh prices skyrocketed, but gas prices have also risen considerably. However, despite this problem, consumers must understand one thing very clearly. The 800% increase in electricity prices for this year is not the percentage they will see reflected on their bill. Regardless of the market each customer belongs to (free or regulated), if they have an indexed tariff, the following should be taken into consideration:- The percentage increase in energy will represent 75% of the electricity bill.
- The other 25% will be reflected in taxes, the contracted power, among other things.