Electricity bills: starting from 24 August, households can enter into contracts with dynamic energy pricing. What should consumers know before signing up?
As of 24 August, every electricity supplier serving at least 200 thousand final consumers has been offering a new type of pricing plan addressed to retail consumers, i.e. the dynamic pricing contract. The Energy Regulatory Office explains who is eligible for such an agreement and the underlying conditions: the plan is addressed to consumers who understand the forces at play in the electricity market and have remotely-read meters.
What are the options: electricity supply to households
Currently, the tariff-based plan is the most popular form of power purchase agreement household consumers opt for. In case of this type of contract, the price of electricity is approved by the President of URE on the basis of applications submitted by electricity suppliers, and applies for the duration of the tariff.
In this segment, the single-zone G11 tariff prevails, with a uniform electricity price applying around the clock. There are also multi-zone tariffs, such as G12 or G13, which offer a lower energy price at certain times of the day, such as at night.
In our post of July 2024, we reported on the current tariff levels and the expected level of our electricity bills between 1 July and 31 December.
Now, a market-based contract where the electricity price is linked directly to the seller’s offer, is being offered as another option for household consumers. So far, the electricity price under such contracts has usually been fixed for the entire contract term, or revised e.g. monthly. However, in the case of market-based offers, the supplier has the right to charge, in addition to the standard fees, a so-called commercial fee. The level of this fee is not subject to regulation and its calculation method and amount may vary depending on the supplier.
Figure 1. Currently available pricing plans for the supply of electricity to households
New: Dynamic pricing offer
The obligation to offer contracts with dynamic pricing for residential customers stems from the Directive on common rules for the EU energy market[1], introduced in 2019, and aims to enable households to actively participate in balancing the system by adjusting their consumption levels in line with the current output, which is expected to result in a reduced need for sudden shut-downs of renewable energy sources, mainly solar.
A dynamic tariff is a market-based contract for the supply of electricity to household and micro-enterprise customers with an annual consumption of up to 100 MWh, with a price reflecting price fluctuations in the electricity market, in particular in the day-ahead and intraday markets, at intervals equal to at least the imbalance settlement period (currently 15 minutes)[2].
For the basic type of the dynamic pricing contract, the electricity price is calculated on the basis of current quotations on the day-ahead market of the Polish Power Exchange (TGE). This means that the hourly energy prices for the day will be known to consumers the day before as they are published by TGE in the afternoon. However, the law also allows the calculation of the energy price on the basis of other instruments traded on the TGE’s day-ahead and spot markets.
Importantly, the suppliers are not obliged to rigidly apply the exchange-derived dynamic prices in their tariffs and are free to shape them as they wish, for example by excluding negative prices, applying commercial fees or price caps. However, the supplier’s offer presented to the customer must provide for an accurate pricing formula.
The obligation to offer dynamic price contracts from 24 August applies to each electricity retailer that supplies electricity to at least 200,000 final consumers. Currently in Poland, this requirement applies to six companies (Enea S.A., E.ON Polska S.A., Energa - Obrót S.A., PGE S.A., Tauron Sprzedaż Sp. z o.o., Tauron Sprzedaż GZE Sp. z o.o.), but smaller market participants may also offer this type of contract.
Dynamic pricing contract only for owners of remotely-read meters
The basic precondition to using the dynamic tariff is that the customer has a remotely-read meter. The process of installing so-called smart meters is underway, and 35 per cent of consumers across the country should be equipped with such devices by the end of 2024. In fact, this is already the case for all prosumers, i.e. those people who produce electricity in domestic renewable energy installations.
When the consumer does not have a remotely-read meter but still would like to sign up for the dynamic pricing plan, they have to install one at own expense (prices vary depending on the operator and the type of meter). We recommend checking your power distributor’s website or contacting customer service for details.
Who is likely to benefit from a dynamic tariff?
The dynamic pricing plan is addressed primarily to consumers with good understanding of how the electricity market operates and the ability to pro-actively manage their electricity consumption. This is the case for consumers who, relying on appropriate information, are able to shift their highest energy consumption to the time of day when it is cheapest, such as the morning hours, and reduce their consumption from the grid at times of highest demand, when it is most expensive.
Consumers with dynamic pricing contracts should also be prepared to systematically monitor electricity prices on the exchange market. TGE has made available a website section dedicated to dynamic pricing contracts, which provides, among other things, links to the quotations used for the calculation of electricity prices.
At the same time, it should be noted that entering into a dynamic pricing contract means that the consumer is no longer covered by the electricity price cap set at PLN 500/MWh excl. VAT for individual consumers until the end of 2024, which was introduced by the Energy Voucher Act[3].
Prosumers, on the other hand, need to bear in mind that a dynamic pricing contract is not the basis for accounting for electricity delivered into the grid, but only for that taken from the grid. Charges for energy delivered to the grid are settled on different terms. Also, the electricity market price (RCE) used as the basis for net-billing in respect of PV owners, is not a price that can apply to the dynamic tariff pricing formula.
Importantly, it is a statutory obligation for electricity retailers to inform consumers of the benefits, as well as the risks, associated with the choice of a dynamic pricing plan.
[1] Article 11 of Directive 2019/944 of 5 June 2019 on common rules for the internal market in electricity and amending Directive 2012/27/EU.
[2] Pursuant to Article 3(6d) of the Energy Law Act of 10 April 1997 (Journal of Laws of 2024, item 266, as amended)
[3] Act of 23 May 2024 on the energy voucher and on the amendment of certain acts to reduce the price of electricity, natural gas and system heat (Journal of Laws 2024, item 859).