Don't electricity companies use their profits to lower prices?

I'm under the impression that electricity companies have very large profits. Can't you earn less and lower the price of electricity?

This question, which we often hear, must be answered with facts that can be verified and not with opinions or preconceived ideas.

First fact: at Endesa we are earning less than we did in 2020. In the latest profit and loss statement, which we presented publicly, for the first nine months of 2021, you can see a 14% decrease in profits compared to the same period of the previous year. And that includes the fact that 2020 was a bad year because of the pandemic and lockdown, which caused a drop in the demand for electricity.

Second fact: the rise in electricity prices does not benefit us. Electricity companies sell a lot more electricity than we produce, so we always have to buy energy. We have sold energy to all our customers at a price that was agreed months in advance.

The price increases we are seeing in recent months is mainly due to the increase in the price of gas in the international market. Therefore, those who are benefiting from the price increases in raw materials such as oil, gas and others are the countries and operators that control the global extraction and distribution of these raw materials. Not those of us who are end users.

Third fact: we do not set the price of electricity. The price is marked in a wholesale market that works as an auction in which supply and demand intersect.

Is it bad that a company has profits?

Now it's our turn to ask: Is it bad that a company has profits? On the contrary, it is good and necessary:

• For the country: our profits pay taxes in Spain and we contribute resources to the country's economy. Making money is a guarantee of the future, in the electricity sector and in any sector.
• For employment: obtaining profits is the best possible news for the more than 9,000 direct jobs provided by the company in Spain and Portugal, and for the 17,000 indirect jobs that depend on us through our suppliers, since both guarantee their continuity.
• To maintain infrastructures: we have more than 300,000 kilometres of electrical distribution lines, almost the distance between the Earth and the Moon. We work every day on carrying out the necessary maintenance tasks to improve it.
• To invest in the future: by 2030, we will have invested 31 billion euros to build more renewable energy plants that allow us to reduce the cost of electricity production and not depend on the import of fossil fuels. Another important part of this investment will be dedicated to the digitalisation and modernisation of the grid to improve the quality of service.

Do we earn a lot or a little?

To answer this, let's keep looking at the data. Following a technical criterion, such as the one that an economist or an investor could follow, we believe that the Central Balance Sheet of the Bank of Spain should be consulted, which analyses profitability by sectors.

The conclusion reached by analysing the 2015-2019 period is that the profitability of the companies grouped under the "electricity supply" heading is similar to water supply companies and lower than companies working in industrial, professional or hospitality activities, for example, and much lower than the profitability of wholesale and retail trade or the information and communications sector.

Our social commitment

At Endesa, we are very concerned about the reputational damage that the energy price crisis is doing to electricity companies. Above all, because we try to be sustainable and socially responsible, and that means having profits and, at the same time, contributing everything that is in our power to the development and wellbeing of society.

Proof of this is our COVID-19 action plan, which includes measures to cover the basic needs of particularly serious situations, to help vulnerable groups, and to contribute to the economic recovery of the country. We also work with the communities that live in the vicinity of our power plants to create a positive impact that allows us to build a future for the area.

Our commitment is to always put people at the centre of everything we do to make a positive impact both on the local communities were we operate and on the people who work at Endesa. And that is possible because we are a profitable and sustainable company that is committed to creating value for society.