Saturday, June 6, 2009

Union Fenosa Discovers What Competition Means

A few months ago I wrote about a fuss that was being made here over electricity bills. The government had forced the companies to change their billing system before they were fully prepared, resulting in a round of estimated bills between one proper reading and the next. That was, I said to anyone who would listen, the reason for it, and it was nothing to get worked up about. In England we are used to this, but in Spain it isn't so well understood that this often happens, even when you think your metre has been read.

Anyway, the point of this post is not just to say that I was right. Another argument I made at the time was that the main reason the bills are so high in the first place was that there is effectively no competition. In a given area the government allows a monopoly operator and then controls what it can do, a bit like the privatised utility regulators in Britain (I imagine).

Well, from this week it will be possible, and fairly simple, to choose your electricity supplier, rather than having to use the local company. And guess what? They called me yesterday offering me 5% off my bills if I agreed to stay with them. Amazing, isn't it?

As Timmy constantly points out, incentives matter, and competition is a powerful incentive to review your margins.

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