PVPC or the free market: which one suits the way you use electricity

It's the question we get asked most and the one that gets explained worst out there: do I stay on the regulated tariff or move to the free market? The answer depends on how you use electricity and on how much stability matters to you, not on which one is "better" in the abstract. Let's look at it without the hot air.

The three options that actually exist

When somebody says "electricity tariff" they could be talking about three very different things:

1. PVPC (Precio Voluntario para el Pequeño Consumidor, the voluntary price for small consumers). The regulated tariff. The energy price is worked out by the system using a public formula, and only reference suppliers (comercializadoras de referencia) are allowed to offer it. There are no offers and no promotions: the price is the price.
2. A fixed free-market price. You sign up to a set number of cents per kWh for a given period. You know what you're paying whatever happens in the market.
3. An indexed free-market price. You pay the wholesale price for each hour plus a margin for the retailer. It's the one that moves most.

You can only be on the PVPC if your contracted power is 15 kW or less, which covers almost every home. If you have more than that, you are required to be on the free market — and that, along with the time periods, is what we explain in 2.0TD vs 3.0TD: which access tariff applies to you.

The PVPC isn't what it used to be

Here's the change a lot of people haven't registered. Until 2023, the PVPC tracked the daily price of the wholesale market almost minute by minute: on a windy, sunny day electricity collapsed; in a cold snap it shot up. It was cheap on average and brutally volatile.

A reform introduced in 2024 splits the calculation between the day-ahead market and the forward markets (the prices agreed months in advance), with a weighting that has been growing every year:

Within that forward portion, the annual product carries slightly more than half the weight, the quarterly one slightly more than a third, and the monthly one the rest.

What that means in practice: today's PVPC is considerably more stable than it was three years ago. The spikes hurt less. But the deal has two sides, and the second one doesn't get talked about as much: when the market is cheap, the PVPC no longer falls as far as it used to. Volatility has been traded for predictability, and that helps some profiles and hurts others.

Who each one suits

The PVPC suits you if:

• You can shift consumption to the cheap hours. The PVPC still has genuine time-of-use pricing: if you run the washing machine, the dishwasher or charge the car overnight or at the weekend, the saving is tangible. We go into the detail in electricity prices by time of day: peak, standard and off-peak.
• You have solar self-consumption. Surplus compensation works well on the PVPC, and hourly pricing rewards using electricity when you're producing it.
• You'd rather not keep track of renewals and offers. The PVPC doesn't expire, has no lock-in period and doesn't "renew" itself at a worse price.

A fixed free-market price suits you if:

• Your consumption is flat. If you're at home all day, or you work from home, you can't shift consumption and time-of-use pricing buys you nothing.
• You need to know exactly what you're going to pay. A tight budget doesn't sit well with a bill that moves around.
• You find an offer that genuinely beats the PVPC. They do exist — but you have to check it against your own numbers, not the ones in the advert.

An indexed price suits you if:

• You have a lot of shiftable consumption and a tolerance for risk. It's where there's most to gain and also most to lose.
• You understand that the retailer's margin and any fixed fees are the small print that decides whether it pays off.

The mistake that keeps coming up: comparing prices without tax

Almost every offer you'll see advertises the energy price excluding tax. Your bill includes it: the electricity tax and VAT (or IGIC in the Canary Islands, or IPSI in Ceuta and Melilla). Comparing a price with tax against one without makes you believe an offer is 25% better than it really is.

A valid comparison puts both figures in the same unit: euros per year, tax included, using your consumption and your contracted power. Everything else is marketing.

And the mistake that costs most: looking only at the kWh

The energy price is half the story. The other half:

• The power term, which is charged 365 days a year whether you use electricity or not. If you have more contracted than you need, no tariff is going to fix that — you fix it by lowering it, and we explain how in how to lower your contracted power.
• Additional services: maintenance plans, insurance, call-out cover. They aren't energy and they add up every month.
• The fixed management fee, common on indexed tariffs and on some fixed offers.

We've seen bills where the kWh price was competitive and the total was inflated by the other three.

How to decide it with your own numbers

You don't have to take any of the above on trust: it's all checkable. Take your latest bill and look at three figures — contracted power, consumption for the period, and what you pay per kWh including tax — and compare them against what you're being offered, in annual cost.

Or upload it and we'll do it. At luzgasia our AI reads the bill in seconds, pulls out those numbers and compares them against the real tariffs we have, with taxes included and with the tax treatment of your own region. If your current tariff is already good, we'll tell you so: it's the only way the figure means anything.

It's free, with no strings attached and no sales calls: you see your analysis first and decide afterwards. Analyse your bill now.