Currently electricity is on everyone's lips due to the crazy prices of electricity after the pandemic. If Andorra stands out a lot for something popularly, apart from skiing, it is for the low price of some products such as fuels (gasoline and diesel), alcohol and tobacco. This is due to the fa Contact online >>
Currently electricity is on everyone's lips due to the crazy prices of electricity after the pandemic. If Andorra stands out a lot for something popularly, apart from skiing, it is for the low price of some products such as fuels (gasoline and diesel), alcohol and tobacco. This is due to the fact that, although these products currently do have special taxes due to the homologation that the country had to do, these are substantially lower than those of neighboring countries such as Spain or France.
Electricity, as we will see in this article, is one of those cheap goods since it is also considered a "strategic" good (which translated from politiqués means that it is widely used and therefore must be taxed) and contains special taxes. As in Andorra the special taxes are low compared to other countries, electricity is more affordable and the price of electricity is lower.
We have decided to dedicate an article to the light and its costs because it is very relevant to make an approximation of the cost of living in Andorra, something that many of our clients and people who want to settle in the Principality try to do to make their budget and profitability calculations. This is something that becomes much more apparent in electricity-intensive businesses, such as cryptocurrency mining.
Even more so if we compare it with the price of electricity in Spain, as has soared to all-time highs in 2021. According to the Organization of Consumers and Users (OCU) the average total bill in Spain has been 949 euros, which is 41% more than the 2020 bill (675 euros), and 18% more than the 2018 bill, to which the Government had promised not to exceed. In average monthly terms, the electricity bill in Spain was 62.33 euros in 2019, 56.28 euros in 2020 and 79.11 euros in 2021.
In Andorra, electricity is monopolized by a parastatal company called FEDA (Electric Forces of Andorra). This entity is the responsible for both generating electricity in the country and importing the rest from neighboring countries (Spain and France). This is a reorganization of FHASA (Forces Hidroeléctricas de Andorra) after nationalization, establishing itself as a modern company and expanding its powers and mission to supply the Andorran territory with energy.
In fact and going further, FEDA is the public entity that imports, generates, distributes and sells electricity in the Principality. It manages the Encamp hydroelectric plant, which supplies approximately 20% of the electricity consumed in the country and its two subsidiaries FEDA Ecoterm Y FEDA Solutions, promote projects for heat networks, energy generation and sustainable mobility. Finally they have FEDA Culture who directs the MW Museum of Electricity of Andorra, the didactic path of the Encamp plant and other social and cultural projects.
The costs of electricity in Andorra, in a similar way to other countries, They are difficult to estimate since they follow a complex pattern according to consumption, power and the time zones used. In addition there are several rates. You can consult everything in the sections of FEDA for individuals Y FEDA for companies.
As we can see in the link, for companies there are three different tariffs: blue (up to 20 kWh of power), red (between 20kWh and 250 kWh) and green (more than 250 kWh). Each of them with their corresponding minimum costs, flat rate and hourly discrimination rate that we are not going to reproduce here because it exceeds the objective of this article. If you want to obtain clearer information and advice in this regard, we recommend that you contact FEDA's customer service, or you can also get some info here. As for the initial costs, remain:
On FEDA's own website it is indicated that at the time of formalizing the supply contract, the client will communicate the number of the IBAN account where he wants to direct the receipt to be charged monthly. If the bank of the domiciliary IBAN provided returns a receipt, the payment can be made:
As due to the exorbitant prices in the surrounding countries, the price of electricity was fashionable, Sílvia Calvó Armengol, who is the Minister of the Environment, Agriculture and Sustainability and the president of FEDA, explained the reasons why the Andorran electricity bill is cheaper than in other European countries such as Spain, France or the United Kingdom.
As we have said before, The Engolasters hydroelectric plant supplies the country with approximately 20% of electricity it consumes. On the other hand, there is a protocol for the sale of photovoltaic energy to those who have these panels, and other mini hydroelectric plants such as Nord Andorrà in Arcalís. But as we will see later, they are irrelevant compared to the total consumption of electricity in Andorra. The 80% of the light that is consumed in Andorra is imported, specifically buying it from France and Spain.
This being the case, why has the increase in electricity prices in neighboring countries not affected the Andorran electricity bill? It is due to a series of factors and commitments carried out by FEDA and the Government of Andorra. First, decided to keep the price of electricity the same than in 2020, and the intention is that it will also be maintained for 2022. Basically to support families and companies that are affected by the economic and social crisis caused by COVID-19.
On the other hand, although Andorra buys its electricity abroad, it is not just any customer due to its size. This allows you negotiate with foreign electricity companies more favorable contracts than a current customer and therefore that price fluctuations do not affect the supply granted so much. In addition, FEDA takes advantage of the hydroelectric plant by producing electricity during the hours when its suppliers have the most expensive electricity, avoiding buying when the price is highest. And therefore the impact of the international rise in the country.
For example, the agreement signed with EDF, the French company, provides that a part of the energy purchased has a previously established fixed price. Regarding electricity of Spanish origin, a similar agreement was also signed with the Spanish electricity company ENDESA in which a fixed purchase price was introduced for part of the electricity.
The result is that, according to the minister herself using data from Eurostat, the statistical office of the European Union, in 2020 the light was a 68% it was cheaper than in Spain and a 43% cheaper than in France. If we compare it with the European average, it was 58% cheaper. However, FEDA will also have to assume a higher cost for imported electricity, which will mean an erosion in profits in the coming years. Something, however, that is acceptable to him thanks to his solvency and his healthy accounts.
So it's like Andorra maintains its commitment to energy users and consumers. An expanded commitment with the desire to increase local production to cover 50% of demand and advance the energy transition towards a more sustainable model with reduced environmental impact. By all the public electric chargers for cars that FEDA installed at this address, for example.
The Andorran electricity company finally raised the price of electricity in 2022. The increase in prices and volatility in the European energy markets as a result of the geopolitical context, have made a rate increase inevitable. The impact of these price increases in neighboring markets had been fully assumed by FEDA until April 2022, which has made a financial effort not to pass on the increase in expenses generated by the purchase of electricity to customers.
Specifically, and according to the Decree of electricity rates of March 2022, Electricity rates increased between 15 and 20% for domestic and family consumption and up to 25% for the highest consumption. Thus, the government intended that the increase in prices would less harm the rates that most families have. In addition, the document says that its objective is also to guarantee the sustainability of the country's energy system.
with the new Decree of electricity rates of November 2022, rates increase again another 10-15% for this year as FEDA can no longer absorb all the costs. The tariff modification, proposed by FEDA and approved by the Executive, is applicable as of December 1, 2022 and is based on:
Thus, the tariff modification contemplates a average impact of less than 9% for most domestic customers, although higher for those with electric heat. Specifically, a greater increase is applied to the power term and to the minimums, which affect second homes and the price of section 1 and section 2 is equalized, reducing the first and increasing the second more moderately.
High consumption will also be more affected by the increase. This is due to the fact that sections 3 and 4, which are the ones with the highest electricity consumption, are penalized much more for promoting energy savings. Secondly, discount rates are maintained without any increase, thus fulfilling the third principle contained in this measure according to the Government and FEDA and protecting those with fewer resources. As for companies and professional clients, the average rate increase will be 17%.
According to the Government itself, the approved text allows both "maintain competitiveness and price differential with respect to neighboring countries". And it is that despite the increases, the rates are still much cheaper than those of France and Spain. This is even more evident in business, because although in company contracts there are no price bands for electricity according to consumption, the price differential with neighboring countries is greater and is maintained despite the price increase.
Finally, a novelty is that exceptionally the common ones will pay the 100% of the electric bill corresponding to the lighting of public roads. All these measures are due to the fact that the purchase of electricity from abroad has increased exponentially. Let's remember that Andorra imports 80% of energy and the purchase prices of electricity in neighboring countries have multiplied. Although at first the blow could be cushioned with contracts and reducing the benefits of FEDA, this option is not feasible in the long term.
As we said earlier, There are consumer users with photovoltaic panels from whom part of the light not used by them is bought. In 2013, the Government of Andorra approved the regulations governing the activity of electricity generation of photovoltaic origin. They establish the procedures established both for the construction of facilities and for the purchase conditions of the generated energy.
It should be noted that, in addition to these users, Andorra is building a solar park in Grau Roig that has already started its works. With more than 2,000 photovoltaic panels, it intends to be active by the fall of 2022 and will use bifacial panels to take advantage of the indirect radiation that is produced by the rebound of the sun's rays on the ground or snow and that they do so more efficiently by occupying the same space. These panels have been chosen that will allow a higher production than was initially planned.
Although Andorra is very dependent on the outside world in terms of energy, its electricity market is quite competitive. With lower special taxes on electricity, quite solvent and committed legal entities and with smart agreements with its suppliers, the Principality manages to protect its citizens from said dependence in an agile way and offer electricity at affordable prices.
The Andorran authorities continue to look to the future in terms of electricity infrastructure and energy independence and transition, something however difficult due to the mountain orography of the country. To give us an idea, the FEDA electrical network has about 700 kilometers of cables and the 84% is buried. A very high value where there are also many difficulties in finding solutions to bury power lines.
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