Ever stared at your electricity bill and wondered what a kWh actually is and how much electricity does my A/C actually needs to run? It sounds complicated, but it’s surprisingly simple. Let’s break it down to make sure you end up these lines with no doubts about it. 

Why are we talking about kWh instead of kW. 

When we talk about electricity consumption of a certain appliance, we always talk about how many kW of power does a certain appliance has, which may lead to some misunderstanding about how is the electricity bill calculated. 

Watts (1 kW = 1000 Watts (W)) measure power, which is the total amount of electricity per second needed to make this appliance work. In this cases, it’s useful to use a water analogy to compare. Imagine a water tank which uses a pipe to get filled. The power, measured in watts (W) or kilowatts (kW), would be the section of the pipe. The more section the pipe has, more water per second would flow and the tank would fill faster. In the case of electricity there is no “tank”, but we can imagine the tank as the appliance that needs this amount of power, so the “pipe” (in this case, the power wire) has to allow the flow of this amount of electricity at every moment.  

So then, what are kWh actually used for? 

Knowing about power and how electricity is consumed by home appliances would definitely help, but how fast you use the electricity is not the main component of a common electricity bill in an average household. They bills you for the total amount of electricity you have used over each billing period, so time (and kWh) enters the game. Power and energy (kW and kWh) are very related to each other and energy is in fact really straightforward to understand once you have understood power. 

Watts per hour (Wh) or kilo Watts per hour (kWh) are the energy consumed by any electrical device. It is calculated as the rated power of the appliance (W or kW) multiplied by the number of hours that the appliance has been working. For example: 

If we turn on an A/C system to heat up our living room, which has a rated consumption power of 1200 W and we use it for 2 hours, the total consumption of this scenario would be 1200 W * 2h = 2400 Wh. (or 2,4 kWh, since 1 kWh = 1000 Wh similar to power). 

Thinking in our previous analogy with the water and the pipe representing the power. In this case, the energy or kWh consumed would be similar to the total amount of water located in the tank. If we have a wide pipe (representing a big appliance with huge power consumption), the tank would fill faster, so in 1 hour will be more water in the tank (more energy consumed) than the energy it would be if the pipe was thicker (low consumption appliance). 

Open vs Regulated market

Most of us are familiar with receiving an electricity bill each month, but few truly understand what all the numbers, charges, and terms actually mean. To make sense of your bill, it helps to know not only how electricity tariffs work, but also which type of electricity market you are part of. 

In Spain, electricity is supplied through two main markets: the regulated market and the open (or free) market. Both offer electricity to homes and businesses, but they work in different ways and follow different pricing rules. 

Open vs Regulated market 

As previously stated, in Spain there are two different ways to acquire electricity for our houses and/or commerce. On the one hand, there are some companies allowed to offer a regulated tariff, which price is regulated by the government, widely known as the “regulated market”. On the other hand, since the electricity market is liberalized, electricity suppliers can offer different tariffs. This is better known as “open market”. 

In the open market, companies may offer different kinds of tariffs, such as flat rates, dynamic tariffs or constant price offers. The convenience of choosing one of these offers will depend on the consumption profile of our house. 

On the other hand, in the regulated market electricity price fluctuates every hour following the wholesale electricity market price (for more information about it, you can click here), and some other charges are added depending on each hour itself. Only a few number of electricity suppliers are allowed to offer these services. In addition, these suppliers are also the only ones who offer access to the Spanish government’s “bono social” to offset the cost of the electricity bill, destined to families with low incomes. 

Regulated market energy supplier	Company group
	Endesa
	Iberdrola
	Naturgy
	Total Energies
	Repsol
	CHC Energía
	Gaselec

Also in the regulated market, Spain has experienced several changes in the possibilities of the type of electricity bill they can contract in the last few years. In 2021 all 2.0 and 2.1 market tariffs have been grouped into 2.0TD tariff, which encompasses 3 different energy periods and the possibility of contracting 2 different power periods. 

This 2.0TD consists of peak/flat/valley hours for the energy-related term in the bill, the amount that has to be summed up with the contracted power cost plus the different taxes. 

• Peak hours are hours when most of the buildings demand a huge amount of energy so the price is typically higher. 
• Valley hours are those hours when the system is relaxed, and the consumption in this periods is cheaper than the others. 
• Flat hours are the rest of the hours, with taxes cheaper than peak hours but more expensive than valley hours.

This tariff can be contracted by any customer with a power lower than 10 kW with the PVPC using one of the energy providers above mentioned, whereas people in the range between 10 kW and 15 kW can also contract a 2.0 TD tariff but should go to other energy supplier in the open market, where those three different periods may differ from the stablished in the PVPC, or even a flat hour scheme for the energy consumption can be followed, depending on the specific offer of the energy supplier. 

Also, the Spanish government approved a new template of the electricity bill to be adopted by the different companies. The following items should be present in every bill: 

1. Energy supplier logotype 

2. Brief description of the bill (final amount, bill number, consumption period, payment deadline. 

3. Summary of the different costs of the bill. 

4. Customer identification. 

5. Type of contract. 

6. Consumption information of the taxed period and a summary of the past 12 months. 

7. Cost sharing of the total amount of the bill (which percentage goes to pay the energy, which one represents the meter rent, the power contracted, etc.) 

8. This last section is used to give the end consumer information about claims or inquiries with the supplier. 

Regulated market: How is the PVPC price established? 

PVPC 2.0TD tariff (“Precio Voluntario al Pequeño Consumidor” is  gaining popularity as an electricity tariff in Spain, with more than 11 million of contracts out of the 29 million residential consumers. Any residential customer can choose this scheme with less than 10 kW of power-capacity contracted. One of the more significant characteristics of PVPC tariff is that regardless of the electricity supplier, the price for the customer remains the same since this price is not established by the utility company but by the wholesale electricity market and the different taxes and charges regulated by the Spanish government. 

In PVPC, the hourly price to be paid is directly related to the wholesale electricity market’s price, where the energy suppliers buy the electricity from the energy generators at large scale. This price, in addition to an energy adjustment cost, is considered as the main component of the PVPC price. 

However, there are also other costs we have to pay for in our bills. The cost of ancillary services, as well as other tolls, charges and regulated costs are added to the price depending on the time period in which our consumption takes place (peak, flat or valley). 

Explaining it with an example 

Here, we can see all the information that is given for an electricity supplier offering a PVPC tHere, we can see all the information that is given for an electricity supplier offering a PVPC tariff, similar to the template the Spanish government settled for this kind of bill. Focusing on point 9, we can see the different items we have to pay for. These are the following: 

1. Power capacity: Also known as “fixed term”. We have to pay for the power capacity the distributors save for us to use our home appliances (regardless of whether we use them or not, we pay for the capacity to do it anytime). As we can see in point 5, we have two different power capacities, one for peak hours and the other one for valley hours. This power is the same by default, but we can modify it if we want, allowing us to easily charge our electric vehicle in valley hours, for example. 

This term is also divided into two different costs. First, we pay for the power contracted multiplied by the regulated cost of the tolls, and this also applies to the billing period (in the case of the example, 30 days, which means 30 days of the billing period divided by 365 days of a natural year). This is also divided into both peak and valley power contracted periods. 

Finally, we must add the fixed trading margin, which reflects the costs of the commercialisation of the power contracted. 

2. Energy consumption: This is the variable term, which depends on how much energy has been consumed and when this energy was consumed. In the same way as the power capacity, there are two different costs we have to face. Those are, again, the tolls for the energy used depending on which period we have used hour appliances. In this section, we can also see the real energy consumption we had, used to calculate the final energy consumption term by multiplying it by the average price of the billing period. 

3. Electricity tax: This tax to electric consumption is established by the government, currently 2.5% 

4. Meter renting: Most of the consumers do not own their meter, but they rent one from the distributor. We have to pay a small amount in each bill for the renting of that meter. 

5. VAT 

The final amount to pay for the consumer will be the sum of the different terms previously calculated (point 3 in the previous mock-up bill). 

For more information, you can check the didactic video elaborated by the CNMC (Comisión nacional de los mercados y la competencia) with the information required to be included in every electricity bill. 

How could I know the energy consumption in my house for a specific time range? 

One of the very first steps to take when we are planning to care about the electricity bill and we want to be energy efficient is to know not only the consumption but also the specific hours in which this energy consumption takes place. 

In order to do that, electricity distributors in Spain allow customers to access their databases with this information.  

So the first thing to do is to identify the electricity distributor in our household (NOT the electricity supplier). Electricity distributors are spared in Spanish geography and are responsible for ensuring the reliability of the grid as well as the quality of the electricity we need in our houses.  

Although there are more than a hundred electricity distributors in Spain, there are five of them  in charge of the totality of the electricity distribution grid. Those five are typically located in the following areas: 

One easy way to know the distributor in charge of your household is by looking at the electricity bill. One of the terms included in section e) (point 5 in the example) corresponds to the CUPS number (“Codigo Único de Punto de Suministro” in Spanish). This number is composed of two letters identifying the country (“ES” for those customers in Spain”) followed by 20 digits. Those digits are the identification number of your specific supply, and the first four numbers represent the electricity distributor that is related to your electricity supply. For the biggest distribution companies in Spain, the first four digits of the CUPS will be the following: 

Distribution company CUPS 6 first digits 

Knowing your distribution company is usually even easier since most energy suppliers include this information directly in the electricity bill. Although most of the people will be plugged into one of these five distributors, Spain has 333 different distribution companies. If you identify your distributor company that is not included in the previous list, you can check the complete electricity distributors list in the following link. 

Once you identify your distribution company from the list above, you can access the information regarding your energy consumption by logging into their respective customer website (right column of the list). 

CNMC tariff comparator. 

One of the most interesting tools to use in case you are thinking about changing your electricity tariff or stay updated about the most interesting options for you house is looking at the CNMC’s tariff comparator. 

In this tool, you can access with the information you found in the bill about your energy consumption and you will get in return the different prices you would have got with the other electricity suppliers.  

When into the main page of the comparator, the first thing to do is choose the type of energy supply. In our case, we are going to assess the electricity supplier comparator, but you also have access to a natural gas supply comparator.  

Diving into the electricity tariff comparator, the webpage will require you to provide different inputs regarding energy consumption and geographical location (postal code) to calculate the best option for your house taking into account your consumption prophile, accessibility of the different suppliers among others. 

One of the key things to ensure the accuracy of the tool is to provide the most detailed and reliable information regarding our consumption profile. Checking your consumption of the previous months or, if possible, of the same month another year could be very useful. 

Notice also the possibility to upload a file with your energy consumption (can be downloaded from your distribution company website in .csv format), for more accurate advice. Additionally, you can access this tool by scanning the QR code included in your electricity bill to automatically include your consumption profile. 

Introducing Energy Efficiency (EE) 

Energy efficiency will play a key role to mitigate the effect of fossil fuels in the near future, and each of us is responsible for the correct usage of electricity when consuming. 

The first step to becoming energy efficient is upgrading our consumption to the maximum level of performance. Some tips can help you achieve that goal with no—or low-cost investments. 

• Be aware of the electricity price and adapt your consumption to reduce the cost of the energy you use: for example, joining Demand Response programmes can lead to better energy usage and, hence, a cheaper electricity bill at the end of the month. Also, if you have a dynamic tariff, such as in Spain, modifying our pattern of consumption to adapt it to the cheaper hours is also a good practice. 

• Upgrade your lighting. If your building relies on inefficient lighting, such as incandescent, halogen, HID, or T12 fluorescent, you’re missing out on significant savings. Updating your lighting can be a great first step when it comes to making your building an efficient one. 

• Compare the energy labelling of the different products when buying new home appliances, like a washing machine or a dishwasher. According to the new classification of the EU, upgrading your household appliances from old E-rated to B- or A-rated new ones can lead you to relevant savings in terms of energy consumption at the same time you make better use of electricity. This label has changed recently for a list of appliances and is expected to change for the rest of them in the following years in order to help people understand it. This is the list of the devices that have started changing: 

-Lighting 

– Washing machines 

– Dryers 

– Fridges 

– Dishwashers 

– Televisions 

This relabelling emerges from the need of the end-users for a better understanding of what is represented in these labels. Hence, the EU has created this new range of products going from [A] to [G] devices instead of the past [A+++] to [D], which people found a bit confusing. Also, to be prepared for the coming years and further advances in energy efficiency, all the products were rescaled in the range of [B] (the up-to-now more efficient appliances) to [G] (less efficient), creating a content empty label [A] to be filled, empowering branches to invest into upgrading their current devices. 

This being said, these more efficient appliances are usually way more expensive than others with lower energy efficiency so for an average home, in terms of economical convenience, it may not be worth buying a tier-A appliance. Tier B or C will be cheaper and not much worse in terms of energy efficiency. F and G appliances are not recommended in both efficiency and economic aspects.