Since there is the possibility for companies selling electricity on the free market to offer their customers a tariff comparable to the regulated tariff, i.e. to the prices set by the Energy Services Supervisory Authority for the Last Recurrence Supplier, The SU Electricity — although currently only Goldenergy does that — is now claiming the same right for the regulated gas market.
This is what companies like Goldenergy, Plenitude Energia (ENI Group), AXPO Energia, Capwatt (SONAE Group), Audax, Dourogás, Luzboa (NEXUS Group), Muon Electric (Smartenergy Group), Yes Energy (Factor Energia Group), Holaluz, Ecochoice, Simple Energy, Userenergy, Luzigas (Lusíada Energia Group), Coopérnico, Alfa Energia, Portulogos, Alfa Energia, Jafplus, Rolear and ENAT.
In a statement, these members of the Association of Free Market Energy Traders (ACEMEL) are now advocating that they be allowed to apply the regulated natural gas tariff set by the regulator, in order to “make the mass transition of consumers to suppliers of last resort natural gas”. According to the latest figures from the Trader Change Operator, put forward by Negócios, some 90,000 households had already switched to the regulated gas market. To raise awareness of the issue, ACEMEL opted for a written position on the government’s decision to allow the transition to the regulated natural gas market, with lower tariffs, which it sent to the guardianship and other responsible entities. In that letter, the Association warns about the “possible negative effects” of this decision and proposes mitigating measures that “maintain the innovation and competitiveness of the sector”.
What they are asking in practice is that “in the market regime, suppliers will also be given the option to apply the regulated natural gas tariff as defined by the Regulatory Entity for Energy Services (ERSE) prior to the transition of their customers to suppliers of the last resort. “. This is to try to prevent customers from fleeing to the regulated market, where the price of natural gas is currently the cheapest: around 5 cents per kWh.
In its position, ACEMEL recalls that the regulated tariff represents about 20% to 30% of the actual gas costs, so this possibility would depend on compensation to suppliers for supplying below cost, as “everyone is eligible to make offers on the same basis “.
According to the members of the association, suppliers are ultimately “unprepared to suddenly receive hundreds of thousands of consumers who have found a response to the liberalized market and with serious consequences for the level of competition already achieved”.
In other words, they argue that with this massive flight to the regulated market, “the design and balance of the gas sector is suddenly undergoing serious and worrying changes”, which entails “negative and irreversible consequences”, in terms of market concentration and loss of competition, “deterioration in customer service levels, loss of confidence in the functioning of the market, reduced transparency and signs discouraging investment, in addition to potential systemic risks from a less orderly exit of operators”.
In addition, they say, last resort suppliers in the gas sector (private companies with allowable revenues defined by the regulator) are “to a very large extent companies that are part of the incumbent Galp group and that also have the business of natural gas distribution”.
“In addition, the Galp Group’s free-market supplier currently has a market share that would make it eligible as the dominant operator in the Portuguese market, if this concept is legally introduced in Portugal,” according to the ACEMEL document.
ACEMEL also stresses that the government’s decision will lead to a loss of tax revenue in VAT of approximately EUR 60 million in a
scenario in which half of the consumers in the liberalized market (about 600 thousand) move to the regulated market (and 113 million if all 1.3 million consumers in the liberalized market move to the regulated market).
Galp, for his part, classified the government’s decision to open the regulated gas market as “unexpected” and “inappropriate”. For the company, this means diverting a larger volume of gas to its CUR business, which is then sold at lower prices.
According to the CEO, Andy Brown, the government’s decision means that the oil company “must secure gas at very low supply prices, which we do not have”. Still, he assures, “the impact hasn’t been great because there haven’t been many customers to change.”
Galp has already left open the possibility that gas prices on the regulated market will rise in 2023. This is after the government’s decision to allow households to return to the gas tariffs defined by ERSE, as a way to “escape” the 200% price increases announced for the free market from October. . The company warned that it is very likely that there will be a price revision for the supply from Nigeria, which will be reflected in the regulated market. “We are currently in talks with Nigeria LNG about this.”
In Portugal, Galp sells gas on the free market and on the regulated market, where it operates as a Supplier of Last Resort (CUR). The difference is that while CUR gas sells kWh at 5 cents (current data from ERSE) and while it sells on the free market at 20 cents/kWh.