CNMC has gone on holiday with the homework done and is that before summer has published a proposal to lower in the coming years gas and electricity tolls, 2-3% for domestic and 8-10% for industrial.

So, in the premiere of its competition, the corporation has decided to open the Pandora’s box of the sector. The proposed toll reduction is not only composed of changes in the methodology of calculation, but also propose a change in the structure of tolls, such as periods. The organization argues that the economic situation of the country is not the same as in 2013, when the “rules of the game” were created.

This proposal has been submitted for consultation until last week and is being evaluated by a Cooperation Commission. This commission is made up of members of the CNMC and the Ministry of Ecological Transition. The main objective is that it be approved before the end of the year.

What is included in that proposal?

These are 14 circulars regulating the electricity and gas market for entry on 1 January 2020.

Energy companies must pay more than 1,000 million euros for their networks, and another 730 million in electricity rebates.

The most relevant:

  • Methodology to calculate the financial remuneration rate for electricity transmission and distribution activities and regasification, natural gas transmission and distribution.
  • Methodology to remunerate of the electricity system operator.
  • Methodology to remunerate of the technical manager of the gas system.
  • Remuneration methodology to regulate natural gas transport and regasification activities.
  • Methodology to regulate of the regulated activity of natural gas distribution.
  • Methodology to calculate the remuneration of the electrical energy distribution activity.

This applies to the new regulatory period 2020-2025 for electricity and one year later for gas. The reduction in gas distribution would be 17.8%, 7% for electricity. As for transport, they propose a reduction of 21.8% and 8.2% respectively.  As shown below:

Figure: Average changes in remuneration for the following regulatory period Source: CNMC

However, these are average variations; prices per period are not yet published, so it is not possible to know the impact of each individual case.

In practice, if the electricity measures were approved, we would see in our invoices:

Figure: Tariff detail. Source: CNMC

  • Change in tariff nomenclature: NT0, NT1, NT2, NT3, NT4
  • All tariffs become 6 periods.
  • All tariffs become 6 powers (except 3.0 and 2.X).
  • The calculation of excess power is maintained with a change in the coefficients. The tariffs 2.X and 3.X are calculated as the tariffs of 6 periods.
  • The reactive calculation is maintained but the coefficients change.
  • In tariffs 6.1, the minimum power of 450 would be eliminated.
  • Change in the organization of the tariff periods, single for all tariffs. It is fixed in 4 seasons (high, medium high, medium and low) and according to the area (Peninsula, Balearic Islands, Ceuta and Melilla).
  • Change according to the activity of each day within each “season”.

Why now?

Since the beginning of the year, CNMC has been responsible to calculate and setting tolls, assigned by the Government in accordance with the European directive.  Other objectives are decarbonization, self-consumption, electric vehicles, energy efficiency and environmental sustainability.

The regulator is pressing to approve the proposal to come into force in 2020. If not will be approved for next year it would be extending the current system.

What did the sector say?

The focus of debate is on gas, specifically on over-paid gas. Sedigás (the sector’s employer) says that CNMC has made an imprecise diagnosis of the consequences that a cutback could have on the company’s managing the gas network infrastructure. They indicate that this measure goes against their future investments.

AELEC, the electricity employers’ association (formerly known as UNESA), for their part, do not disagree, although they are demanding an increase in the rate of remuneration.

In favor has been the organization Gas Industrial formed by the companies that make more use of gas industry in the country. For companies where gas reaches 60% of their energy cost, the price of gas determines their competitiveness (especially in exporters). So high prices have been a competitive disadvantage and a brake on the activity of companies compared to other countries.

REE, for its part, requests the gradual apply of the measures to ensure the sustainability of the system and the guarantee of supply.

Change is imminent

Before the end of the year, the Government is going to have to pronounce itself. Either the current regulation is extended, the CNMC proposal is approved, or a gradual change is made.

In a scenario, where Sanchez would be invested next week would have to approve the circulars before the end of the year. On the contrary, it would be the current board that would have to take charge and could have it ready in a month. In both cases, we are in discount time to decide.

Undoubtedly, we are talking about a major change especially in the electrical system. The work for the agents involved will be very hard. Especially in the domestic ones, where they will have to modify the contracts to six periods of all the users. This grand change could suppose a collapse in the systems of invoicing of the suppliers.

A regulatory change is more than necessary. We need to meet the challenges of the ecological transition proposed by the government in the transposition of the energy directive: decarbonization of the economy, the improvement of air quality and boosting the economy. But, for the moment being we only have to wait a few months to see what the conclusion will be.

Sonia Díaz | Energy Consultant

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