Electricity and gas bills such as mortgage payments? Is the fixed cost convenient or should you trust and focus on the variable? Certainly, the recent increase in the price of electricity and gas would lead to the first option: any increases would not affect the bill. The problem is whether the opposite happens, that is, if there is a decrease in costs that places the average of the tariffs below the agreed fixed threshold. A risk, in fact, very similar to that of the fixed rate of the mortgage. However, expecting the price of energy to drop significantly and remain low for a long time is perhaps asking too much. This is why the idea of the electricity and gas bill at a fixed price is making its way. How does it work?
One data above all can be used to understand how convenient this solution has proved to be in recent times, we read on laleggepertutti.it. The soaring costs of electricity and gas bills in 2021, despite the government’s attempts to stop the price rush (attempts at times successful, sometimes not), have meant that those who chose the offer at a fixed price managed to save over € 1,000 in 12 months. Not bad, in a time of pandemic hardship.
Let’s see, then, how the electricity and gas bill at a fixed price works and what advantages it offers the consumer.
Free or more protected market: what difference?
The first aspect to see before talking about how the electricity and gas bill at a fixed price works is the difference between the free market and the more protected one. Only the former, in fact, can guarantee the possibility of choosing a fixed offer that does not take into account the variations in the cost of energy: in the free market, in fact, it is the companies that set their tariffs, while for the protected one it is necessary to refer to the Authority that regulates the sector, namely the Arera. The greater protection, in fact, only allows you to choose between a single-hour rate (it remains the same all day) and a two-hourly rate (two different rates in as many time slots of the day), with different prices depending on the type of user (residential or non-residential).
The cost of energy in the bill is determined by the Arera, ie the Regulatory Authority for energy, networks and the environment. This service will be abolished from 1 January 2023. From that date, only the free market will exist. It will therefore be up to the companies to set their own rates and conditions, as is already the case in other sectors (think telephony and telecommunications). The customer will have a range of offers and will be able to choose the one he deems most convenient. Among the various proposals, including that of electricity and gas bills at a fixed price, an option that does not exist in the greater protection.
Fixed or variable price bills: what difference?
The units of measurement of light and gas are, respectively, the kilowatt / hour (kWh) and the standard cubic meter (Smc). When these two values are fixed, it means that the cost of kWh and Smc remain blocked over time for the entire duration of the offer to which the user has subscribed. As a rule, one to three years. This is what is meant by electricity and gas bills at a fixed price, offered only by the free market.
Otherwise, the so-called indexed bill provides that the cost of energy undergoes variations. Index-linked offers are part of both the free market and the higher protection market.
The factors that affect the cost of the bill are basically four:
expenditure on raw materials (electricity and gas);
the costs of transport and management of the meter;
system charges;
the cup.
It is the first factor, that is the cost of the raw material, that has the greatest influence on the amount of the bill. According to Arera, it weighs about 54% on the electricity bill and 45% on the gas bill. And that’s where the game is played between the fixed or variable price.
If a user chooses to block the cost of the bill, he will always pay the same even if the price of the raw material rises or falls with respect to the threshold set by the offer. Basically, if the consumer agrees to pay 100, it may happen that he earns it if the value of the raw material rises to 120 or that he loses it if it drops to 80. If he opts for this solution, he will have to guarantee a good margin with respect to the cost of the raw material at that time (just to give an example, to pay 75 instead of 100) so that the choice is convenient in the medium or long term.
As regards the other three factors (transport costs and management of the meter, system charges and taxes), they do not change between the free market and the protected one. Therefore, it is only the cost of the raw material that makes the difference.
Fixed price bills: what are the advantages?
So why choose fixed price electricity and gas bills? As mentioned, there is on paper the risk that the cost of the raw material falls below the level agreed in the offer. But we know that this is a very unlikely hypothesis, given the trend of energy in recent times. The first advantage, therefore, will be to ensure a cost of the raw material that remains the same until the end of the offer and to save in the event that the prices of the sector suffer other increases.
In addition, the fixed price offer of the free market allows you to differentiate consumption rates, choosing between:
single-hour rate, which is applied throughout the day;
bi-hourly rate, which allows you to apply two fixed prices in as many time slots;
multi-hourly rate, which allows you to apply three fixed prices in as many time bands.
At the end of the offer it will be possible to renegotiate the conditions for a subsequent fixed or variable supply contract with the same company or another, depending on the convenience found.