Javier Uriarte, marketing director of Endesa: “The sensitivity of consumers to the price of energy is extremely high”

Javier Uriarte Monereo, Endesa’s general director of marketing, participated in a conference organized by Abanca on Friday in Santiago.

— Is the 2022 energy price crisis over?

— It is clear that we have overcome that episode, we are in a much more stable situation, which could continue over time, although we are not exempt from new fluctuations in the price of gas. But there is a relevant part, which is the lesson we have learned from this crisis, that Europe must bet on energy independence, on the electrification of demand and, logically, on the promotion of renewable energy sources.

In addition, I’m on the customer side, in marketing, and we realized that the free electricity market helped us get through this crisis, passing on prices to consumers that had nothing to do with the enormous volatility that was happening in the daily market.

— So, how much did Endesa’s rates rise last year, and how much are they falling this year?

—Our free market rate scheme protected customers during the crisis. We do not form prices on the basis of hourly variations of the daily market, as is done by the regulated market, but we close them significantly in advance and with a vision of the term. Since the crisis lasted for months, we had to somewhat influence the part of the supply that was not completely closed, but the increases were very different from the oscillations in the regulated market. In this sense, all customers benefited from this situation. Let’s also not forget that this is a competitive business and that the client is looking for a good price, which means that one of the factors that differentiates us is raising the price, and we systematically fight for that.

— But you don’t have the percentage by which the rates have increased…

— It’s complicated, we have 12.5 million contracts and very different situations stand behind each one. However, during the growth period, we renewed at higher prices, but significantly lower than those on the daily market. If it increased by 150%, for example, we applied an increase of 15% or 20%. We are now adjusting to the signals given by the futures markets and prices are now well below what we offered in the second half of last year.

-For example?

—The prices we propose for employment are among the lowest. We have a very relevant campaign that rewards energy saving and efficiency. In addition to giving a competitive price, for every kilowatt hour of reduced consumption, we deduct an additional kilowatt from your bill.

— There is no fine print.

“There is no fine print. We measure your spending last year and this year and double your savings.

— The government decided to reduce benefits from all signed contracts above 67 euros per megawatt hour, did this measure work to contain prices?

— There were no extraordinary benefits; in fact, in 2022 we have sold all inframarginal energy (hydro, nuclear and renewables) below this cap. So there are no extraordinary profits, there is ordinary profitability.

—On Tuesday, the Council of Ministers will approve the reform of the regulated electricity tariff so that its subscribers are not so exposed to the ups and downs of the daily market. But should it be removed?

—The fact of introducing price signals in the medium and long term will have a positive effect, it will reduce volatility. But I believe that this rate should be kept to protect the most vulnerable consumers, ensuring stability and affordable prices. Other clients should be in the free market, obviously with the necessary safeguards to avoid competitive behaviour.

— Is it increasingly difficult to sell an electricity contract in Spain?

-Not easy. It is a market of enormous dimensions, both in terms of the number of clients and in terms of billing. In addition, the sensitivity of customers to the price of energy is very high, this is something that is well known. The news was systematically opened by the price of electricity, and the truth is that even in this market the intensity of competition is very high. From year to year, more and more customers decide to change because of the price, service… Our basic activity is to keep customers, that is, to make them satisfied with us and not want to change, but also to attract new ones in a competitive market. So, it is not easy, because the other competitors are also doing their commercial action.

— Would you say that some customer acquisition campaigns are aggressive? Especially over the phone.

— We are attracting more and more clients digitally. The client sees the offer, enters and, if it seems suitable, hires or does not hire. There is also a lot of sales in the office, and there is also a telephone option. Aggressiveness levels largely depend on each competitor’s action. We establish quality controls to ensure that the sale is carried out correctly, that it complies with the regulations, that it is transparent for the customer… We are always as clear and transparent as possible about this. Our role is market leadership and, therefore, what we want is to do things right, because if we do them wrong, they turn against us. We must be wrong because client related jobs make hundreds of millions a year, invoicing, contracting, customer service…

— And do they change the contracts without the consent of the clients?

— Last year, companies operating on the free market won one and a half million customers. All our procedures go through rigorous quality controls. But in a massive operation, there may be some error. We try to make sure that they happen as little as possible, and if they do happen and there is a consent issue with the client, it goes back to the original situation and apologizes. In any case, I find it hard to believe that an operator in a market of this size could consider a takeover strategy to involve defrauding customers. It’s a bad strategy, it makes no sense.

—Endesa has several long-term power supply agreements (PPAs) in Galicia with industrial customers such as Alcoa and Sentury. Will there be more?

—We believe in long-term energy contracting models for large consumers. In Galicia, the main one is Alcoa, which opted for this long-term PPA model, which gives the client stability and enables better planning.

—And at prices lower than those on the daily market…

— Of course, at more competitive long-term prices.

— And can’t you find out at what price Alcoa will sell electricity?

—I cannot disclose the specific price of the agreement with the client. However, in general, these are individual, complex deals, with long negotiations and a lot depends on the facility and risk coverage. We have a special commitment with Galicia and are strengthening our presence in renewable energy sources and in contracts with large consumers. We already have contracts with Alcoa, with Sentury and our vision is to work so that the industry located in Galicia has access to the best contracting modalities. What we want is to have long-term customers and clients.

— Employers of the electro-intensive industry complained, on the other hand, that they could not obtain public procurement contracts at competitive prices.

— We have signed PPA contracts with large energy consumers for a long time and we continue to do so. It is also true that many of these clients were with products indexed to the daily market and when there was such a sudden increase in prices, they somehow thought about getting out of that indexed formula and entering into a long-term contract.

— What would you advise a consumer who does not know what electricity price to contract? Would you say that being in a regulated market is crazy, as the president of Iberdrola said a year ago?

— My advice is to compare and make a decision based on whether you want a stable price. There is an option on the free market for anything a customer wants, but I will obviously recommend Endesa.