The Key to Lowering Electricity Bills Is in Supplier Change

The Key to Lowering Electricity Bills Is in Supplier Change
The Key to Lowering Electricity Bills Is in Supplier Change

The electricity price hikes at the beginning of the year still keep their place at the top of the country's agenda. While some blame the energy management for the electricity price hikes, others state that the source of the problem is the privatization of electricity companies. However, competition, which is the most important blessing of privatizations and liberalization of the electricity market, is not well known by consumers. On the other hand, in the electricity market, it is possible to change electricity suppliers like a mobile phone operator, and in this way, it is possible to use electricity with a cheaper price of up to 35 percent. Encazip.com, the electricity suppliers comparison and replacement site, explained the contribution of supplier change and competition to consumers.

Electricity hikes have been on the country's agenda since the beginning of the year. While almost everyone expresses their opinion on the electricity price hikes, which is met with serious public reaction, information pollution about the reasons for the electricity price hikes and the electricity market comes with it. Because before the last price hikes, electricity bills did not attract so much attention and were not talked about in public. The main target of criticism is electricity market authorities and privatizations. However, while the electricity price determination mechanism cannot be conveyed to consumers correctly, many consumers are unaware of their right to change electricity suppliers, such as changing mobile phone operators, which is the main benefit of liberalization of the electricity market. Encazip.com, the electricity supplier comparison and replacement site that wants to inform citizens about this issue, shared the details of the pricing in the electricity market and the ability to save up to 35 percent by changing suppliers as if they carry numbers.

EMRA sets prices only for consumers who have not changed suppliers.

With the liberalization of the electricity market, the way for the change of electricity suppliers was paved, and a mechanism called last resource supply was put into use due to the strategic importance of electrical energy. This mechanism is established to prevent consumers from being without electricity if they do not change their electricity supplier or cannot find a supplier to buy electricity, and the price to be applied to consumers in this situation is determined by the Energy Market Regulatory Authority (EMRA). For the other consumers, the prices are determined by around 50 active free electricity supply companies under free market conditions. However, with the decrease in the number of consumers participating in the free market over time due to the ups and downs in the electricity market, the last resource supply tariffs are the determining factor for the electricity bills of the overwhelming majority of consumers.

What is the reason for the increase in electricity prices?

The electricity costs in the electricity market, which were at the level of 2021 cents in January 40, increased by 296 percent and reached the level of 1,40 TL in the current February. The biggest reason behind this increase was the increase in exchange rates. However, on the other hand, due to the dry season, the electricity production of domestic hydroelectric power plants dropped significantly, and the deficit here began to be met by foreign natural gas and coal power plants. On the other hand, with the addition of the global price increase in energy resources, electricity generation costs have increased significantly. While electricity costs in dollar terms were US$ 2021 per kWh in January 0,055, this cost increased to US$ 2022 in January 0,09. This data shows that the increase in electricity costs is not only due to the increase in the exchange rate, but also due to the combination of various factors, especially drought.

The only way to lower electricity prices is to take advantage of the free market.

Although the free market dynamics in the electricity market do not work well enough, it is possible for consumers to save money by changing their electricity supplier. Electricity supply costs of electricity producers that produce electricity in different ways or electricity suppliers that create a portfolio by purchasing electricity from generators with different methods are also different from each other. In this way, electricity supply companies can supply electricity to consumers at different unit prices. For example, a supplier that has a portfolio with electricity produced from domestic coal and renewable resources can supply electricity much cheaper than a supplier that produces with natural gas. Thus, consumers can use up to 35 percent cheaper electricity by taking advantage of competition and the free market.

How to change electricity supplier

Houses paying an electricity bill of 125 TL or more per month and workplaces paying a monthly electricity bill of more than 250 TL can change their electricity supplier. Since almost all electricity consumers consume electricity above this level, it means that almost all consumers can change electricity suppliers. Changing the electricity supplier is quite easy. Consumers can learn the tariffs of different electricity suppliers by contacting the supplier companies or by using electricity suppliers comparison and exchange sites such as encazip.com. Once the supplier is selected, the transition process is very easy, and the transition processes can be completed quickly, with contracts established over the internet or call centers, without dealing with paperwork or bureaucracy. Consumers who change suppliers can get back the security they paid to their old suppliers, in addition to using cheaper electricity. Making statements on this subject, Minister of Energy and Natural Resources Fatih Dönmez emphasized that the electricity market is a free market and stated that it is possible to change electricity suppliers. For February, it has become possible for workplaces and industrial organizations to save up to 20 percent with the change of suppliers. For the houses, savings are limited due to the change of supplier, but much more attractive prices are expected to occur in the free market in the coming days. It is recommended that both business and home consumers follow the market prices and switch to the most attractive savings tariff.

The supply company changes, not the distribution company

There are two structures in the electricity market, namely grid and supply. While the companies providing network services only deal with technical issues such as cable, transformer and meter operations, electricity generation and supply are the responsibility of the supply companies. Considering that the inside of the electrical cables is empty, the responsibility of these cables falls on the distribution and transmission companies. It is the duty of the supply companies to fill these cables with electricity. Since the system is like this, there is no need to change the technical infrastructure such as cables and meters when changing the electricity supplier, only the company that issues the invoice has changed.

5 million people changed their electricity supplier

Changing electricity suppliers has been technically possible for small consumers since 2013. However, since the consumption limit of consumers who can change suppliers is relatively high, the number of consumers covered was lower. Despite this, approximately 2018 million consumers had changed their electricity suppliers until the beginning of 5, but due to the deterioration of free market dynamics in the electricity market, the number of consumers who changed suppliers dropped significantly and this opportunity was out of the question. With the recent price hikes, the change of suppliers will be on the agenda again, the free market dynamics will work much better with the regulations, so that the most important agenda in electricity bills will be supplier change as of next month.

If the free market is not intervened, electricity prices will decrease.

Evaluating the free market dynamics and competition conditions in the electricity market, energy economist and founder of encazip.com Çağada Kırmızı emphasized the importance of operating the free market dynamics much better and said that the price of the final resource supply tariff should never be determined below the costs. Underlining that if lessons are learned from the mistakes made in the past in the market, the real competition will work and the prices will decrease, Crimea continued as follows:

“Especially since 2017, electricity prices have been kept under pressure and therefore free market dynamics have deteriorated. With what we call cross-subsidy, electricity prices in industry, agriculture and workplaces are kept high, thus subsidizing house prices. The effects of this on the economy are extremely negative and this negative effect can be clearly seen in macroeconomic data. The only solution in electricity bills is to apply the cost-based tariff structure for all subscriber groups, including houses, and not to spoil the competition. However, with this method, a system that has been implemented and proven in all European countries can reduce the electricity prices of final consumers. Otherwise, we would be talking about new levels and new tariffs every month.”

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