Extra income for energy suppliers through Rajoy era schemes

by Lorraine Williamson
electricity suppliers during Rajoy era - https://commons.wikimedia.org/wiki/File:Mariano_Rajoy_-_European_People%27s_Party.jpg (cropped)
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MADRID – Following rulings by the Spanish Supreme Court, the Spanish government is revising two ministerial regulations from 2016. This is because of their harmful nature to consumers. Consequently, energy suppliers and grid operator Red Eléctrica received too much compensation. 

El Diario writes the Ministry of Ecological Transition has launched a procedure to reverse the excess payments received by the energy suppliers and grid operator Red Eléctrica de España (REE) between 2016 and 2019. 

Errors in regulations 

Following the recent rulings of the Supreme Court and the Council of State, “the ministry has slammed a fist on an issue that has been stalled for a long time,” said a source. This source is aware of a process that started back in 2017 when the Spanish National Commission of Markets and Competition (CNMC) warned that there were errors in the relevant ministerial regulations. 

In the case of the energy suppliers, “these errors resulted in compensation awarded to several companies. Furthermore, this exceeded what they were entitled to,” the ministry said in a justification report. 

“Excessive Fees” and “public Interest” 

The ministerial regulations were approved in June 2016 during the Rajoy cabinet. Following a warning from the CNMC, the council of ministers, then with Prime Minister Rajoy and Energy Minister Nadal, declared the scheme “damaging the public interest” in April 2018. 

They then went to the Supreme Court to have the settlement annulled. Nadal also filed for an annulment of another June 2016 ruling on the electricity transmission companies’ compensation for 2016. He did so after the CNMC warned that certain electrical installations had been “double-counted in REE’s compensation calculation”. As the Supreme Court ruled on June 29, this was contrary to the minimum cost principle for carrying out work for the electricity system as included in the Electricity Act, And, furthermore, not in accordance with the compensation system, as established by Royal Decision 1047/2013”. 

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As a result, in the case of transmission work, consumers will get a total of around 47.3 million in return. This relates to the period 2017-2019, and most of which comes from REE. This is stated in the report published by the Ministry of Ecological Transition. 

In the case of the suppliers, in May 2020, the Supreme Court annulled the 2016 regulation with regard to the method of attribution of certain values, such as the residual maturity (Vida Residual) and the basic remuneration (Retribución Financiera base), as set out in Annex 1 of the scheme approved by the Rajoy government. 

Provisional character 

Since the declaration of harmfulness, the compensation for electricity companies has been provisional in nature. In 2013, it was determined that the compensation for 2016 would be the basis for subsequent years. The energy suppliers have complained about the legal uncertainty that this situation creates. The partial annulment of the schemes and the declaration of harmfulness has therefore triggered a wave of appeals. 

Pending the publication of the revised scheme with the new fee calculation, the CNMC has submitted a proposal for a 2021 levy with different scenarios. This is based on the preliminary decision and the timing of its implementation. 

Doubt about correct method 

Last year, the ministry itself addressed the Supreme Court with a request to clarify the ruling. And also to ask for advice on the method to follow in the reformulation of the reimbursement calculations. This is because, according to CNMC, the methods and standards used by the companies Iberdrola, Viesgo and Hidrocantábrico” are called into question. 

The Supreme Court declined; “It is not for the Court to rule on how to comply with a decision in a judicial decision. That would go much further than just clarifying any ambiguities in a ruling.” º

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