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Contracted power: how to find out if you are paying too much

Have you contracted the correct energy power? The tendency to overestimate may be causing you to overpay. Save now!
contracted power
Written by
Energy Management
Energy Efficiency

Lack of knowledge about the contracted power is often the main reason why many households and companies pay more than they should on their energy bill. The difficulty of understanding the information reflected in the bill, together with the difficulty of not being able to monitor consumption on a continuous basis, leads to this overcharge.

The impact of contracted power

A very clear example of this is to see that, in Spain, the total contracted power by consumers as a whole to distributors is 175,000 MW, a figure that far exceeds the installed capacity in the country according to REE, 108,000 MW. This difference is even more striking if one takes into account that, in 2015, the highest peak usage was 37,000 MW, and that the historical maximum record took place in 2007, reaching just over 45,000 MW.

These data show that we are paying daily for resources that are not consumed, which means an expense for all electricity consumers of more than 7,000 million euros per year.

The overestimation of contracted power in Spain in figures

According to a study carried out by Endesa among more than 1,000 companies with less than 10 workers located in Spain, around 60% of them could save between 500 and 2,000 euros per year in energy consumption, just by adapting the contracted power to their real needs. And in turn, by applying energy efficiency measures, 4 out of 10 companies would obtain savings of between 10% and 23% on their electricity bills.

This same study cites that 78% of SMEs do not control their consumption, unaware that with small changes in daily habits they can achieve great savings. Adjusting the power in their energy bill, eliminating hidden consumption, or adjusting the energy tariff to their working hours are some simple and inexpensive measures that will significantly reduce energy consumption.

Saving energy costs does not always mean saving energy

An important part of the budget of companies and organizations is destined to pay for their energy needs. Adjusting the power contracted for energy means increasing profitability and being able to allocate resources to other areas of the business of greater interest. That is why we constantly hear about energy efficiency, consuming less, saving energy...

However, although at first glance it may seem so, saving energy costs is not the same as saving energy. Clearly, if we manage to consume less, we will also manage to reduce energy expenditure, but we do not necessarily have to consume less to reduce energy expenditure.

It is possible to save a lot, not strictly in terms of energy, but in monetary terms, by adapting the contracted energy supply characteristics (contracted power and/or tariff) to our real energy needs, or by contracting indexed instead of at a fixed price. In other words, a poorly managed contract can cause us to lose significant sums of money.

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What should be taken into account when calculating what power to contract?

When it comes to adjusting the contracted power, the energy consumer usually resorts to consult the distributors, who calculate their needs based on the use and consumption of the electrical appliances that will be connected to the network, and sometimes even by means of simulators that are not very accurate in their conclusions. In addition, as it is obvious, the change is not interesting to the companies, so they tend to motivate the permanence in the current power by means of additional expenses to that modification that, in many occasions, simply correspond to the technical needs to carry out the change.

Today more than ever, based on the changes that the market is undergoing, it is crucial to have all this under control, and to make sure that our energy bills are adjusted to the minimum amount possible. In short, it is necessary to make sure that we are not overpaying.

For example, the power term is the price paid for the contracted power. It is a fixed cost, per kilowatt per day, which does not depend on consumption. Contracting an overestimated power means that the power term unnecessarily increases our bills. However, given that excess power is paid with important economic penalties, contracting it below our energy needs is of no interest at all.

It is a question of finding the right power value that makes us pay the minimum, once fixed costs of power term and excess power have been compensated. This is not easy. It is necessary to make calculations of what we would have paid according to our consumption pattern if the power had been different. Even more complex, it requires making a forecast of what we will pay in the future if our energy consumption patterns change.

On the other hand, supply tariffs set the prices of the energy we consume. There are different contracted power tariffs with different prices according to the time periods in which consumption occurs. It is necessary to know our energy demand, at what times of the day it is higher or lower, to select the tariff that will make us pay less for the energy we consume.

As in the case of contracted power, the task is not simple: it is necessary to have historical data on how much and when we consume, simulate bills under different tariff assumptions, forecast consumption and costs in the face of future scenarios.

Finally, the market offers the possibility of contracting energy at a fixed price or at a price indexed to the pool, which requires an analysis in each case of which is more profitable.

And here the complexity is multiplied, since in addition to needing to simulate and foresee scenarios, as in the previous cases, unlike these we no longer start from a fixed price with which to make our calculations. We must be able to simulate how much we would have paid and how much we will pay based on prices that are constantly changing, now.

How to know what power to contract?

In order to know what power to contract we need to have tools that help us to make all these calculations and forecasts, in short, that allow us to manage our energy contracts well and be sure not to pay a cent too much with our contracted power.

Therefore, having a system for monitoring and measuring energy and its consumption, allows companies to leave the ignorance behind, being able to observe and understand the use they make of it, being able to see the energy improvement options that exist, if they have a contracted power they really need or if they are overpaying for not tackling these problems or other problems. This will give a range of possibilities to improve energy efficiency, reduce unnecessary energy consumption and save on the bill.

Meet Smarkia Monitor

You can also turn to specific services to perform all these calculations for you and help you avoid mistakes on your energy bill. Smart Bills from Smarkia are a brand new set of tools specifically designed to perform this function. In the simplest way you can imagine, you will have the possibility to:


Simulate your energy bills with different power and tariffs in different consumption scenarios.

Potential savings

Calculate the savings potential of the different assumptions in order to establish the optimal power and tariffs.

Indexed rates

Perform automatic invoices and simulations with indexed tariffs, based on the updated prices published by OMIE.

Independent data

To have your billing data independently in order to be able to forecast and check the real data of the invoices you receive.

Actual costs

Know the real cost per kilowatt hour based not only on the energy term, but also on the total terms that make up your bills. Track this and other economic indicators, which will allow you to pass on costs, perform benchmarking or customize your reports and reports.

Customized recommendations

Get personalized recommendations on each bill on how to manage your contracts to achieve the greatest savings.

Conclusions on contracted power and the savings from optimizing it

As we have seen throughout the post, the problem of overestimation of contracted power is real and very noticeable in the case of Spain. The solution, however, involves a number of variables whose difficulty will depend on the training in terms of energy efficiency and bills you have. The most normal thing is that this overestimation of contracted power is due precisely to a logical lack of knowledge.

And that is precisely why Smarkia, a benchmark in energy efficiency and savings, is committed to suggesting solutions for this calculation of contracted power that include energy monitoring or specific solutions for Smart Bills from Smarkia. In this way, you will finally pay only for what you consume and you will stop wasting money that you are not really spending.

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