The National Institute of Statistics (INE) is preparing a total change in how it measures the evolution of electricity prices to calculate inflation, with the aim of better adjusting its data to the real consumption of Spanish households. The intention of the agency was to have the change in the measurement of electricity prices ready by this January, but the plan has been postponed while waiting for the electricity companies to send more precise data for the calculation of the consumer price index (CPI) .
Until now, the INE has been using only the price of the regulated electricity rate to calculate inflation, despite the fact that currently this type of rate -called Voluntary Price for the Small Consumer, PVPC– only represents approximately 40% of all small users after years of decline. The objective of the INE was that the new calculation base of the CPI, applicable since January, would already serve to stop measuring only the evolution of the regulated electricity rate and also include the free market rateswhich for years have concentrated the majority of the small consumer market.
the price of the regulated rate It is directly linked to the evolution of the wholesale electricity market, which is the one that has been registering exorbitant increases in recent months and has not stopped marking all-time highs. The ten million customers who have contracted the PVPC paid 40% more than the previous year as a result of these increases in the wholesale market that reflected the increases in gas prices and CO2 emission rights, and despite the measures of the Government to contain the increase with tax reductions and the regulated part of the bill.
The free market rates are traditionally more expensive than the regulated one, but since most have a stable and fixed price set by the electricity company, last year they did not reflect the strong rise in the wholesale market (they will do so in the reviews carried out by the electricity to their customers) and they did benefit from the government rebates.
upward distortion
In the midst of the energy crisis and a spiral of rising electricity prices, the INE used to calculate the CPI only the rates that increased the most, despite already being a minority by number of customers, and not the free market rates, which were the ones that remained stable and even fell due to government measures. The result is that last year’s CPI reflected a strong upward distortion that did not reflect the consumption of all households, only part of it.
“It can be concluded that the CPI has been clearly biased upwards in 2021 due to this omission & rdquor ;, maintains the CaixaBank study service in a recent report, in reference to the fact that the evolution of free market rates has not been taken into account to calculate the evolution of inflation. The estimates of the bank’s analysts suggest that using both the PVPC and the free market in the calculations would have made the annual average of the CPI would have been almost one point lower in 2021 and that in December it would have been 1.8 points below the official data.
If free market prices were incorporated and not only those of the regulated market, December inflation would not have been 6.5%, but would have been 4.7%; and the annual average for 2021 would not have been the 3.1% with which the year was officially closed, but 2.2%, according to the conclusions of CaixaBank. “In fact, even if we assumed that the prices in the free market were stable, we would get an annual average of 2.3% in 2021 & rdquor ;, he clarifies.
A decade ago, more than 90% of all electricity customers benefited from the regulated rate, which is why it was the only measurement carried out by the INE to calculate the evolution of inflation. But in recent years the flight of clients from the PVPC has skyrocketed and the transfer to free market rates -despite being normally more expensive- has been massive and already account for almost 61% of the small consumer market.
When the CPI calculation base is renewed (it is revised every five years and the previous one is from 2016), the data from the previous year are also updated to make them comparable. The INE underlines, however, that the calculation base is changed, but that the variations in the CPI registered during the previous year remain in the historical series, so the modification has no impact on the areas in which the data is used. 2021 inflation for your calculation, such as pensions, housing rental or salary revaluationfor example.
The Government approved last week the revaluation of pensions and compensation for the deviation from inflation in 2021. The increase in contributory pensions was 2.5%, because that was the average inflation between December 2020 and November 2020. 2021; the rpension evaluation non-contributory and the minimum was 3%; and compensatory payment was also approved for the rise in prices by that 2.5%.
In total, the increase due to this revaluation represented a cost for the public coffers of 6,500 million euros. The deviation of the CPI detected by CaixaBank for the whole of 2021 due to the price of electricity cannot be extrapolated for the calculations of the revaluation of pensions, but it suggests that the increase would have been several tenths lower, with a cost of several hundred million below that assumed by Social Security. .
Reform postponed
The INE has worked for months with the large electricity companies to incorporate the free market rates into the CPI calculation this January, but the new data provided by the companies is not precise enough for the INE’s requirements and the modification in the calculation will be postponed a few months Iberdrola, Endesa and Naturgy, which still account for 80% of all customers, sent the data corresponding to all of 2021 and to January with information on the prices paid by all customers with a contracted power of less than 10 kilowatts (kW).
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For weeks, the INE had been warning in its contacts with the electricity companies of a problem with the information sent, and that is that the agency needed the companies to disaggregate the data on household and small business contracts. However, the large electricity companies argue that they cannot further disaggregate the information, and that they have no way of knowing if a flat is occupied by a family or by a business such as a law firm, an agency or a medical center.