The European Commission has initiated a formal second phase investigation into regulated electricity tariffs in Spain. Final consumers in Spain can purchase electricity from the liberalised market and the regulated market. On the regulated market, consumers purchase their electricity only from distributors designated by the State and at tariffs fixed by the State. In 2005, due to high electricity wholesale prices, regulated tariffs were largely below market prices. As a result, the regulated market had a deficit of EUR 3,811 million. In order to finance this deficit, Spain imposed a parafiscal levy on all consumers in Spain for 14 years. The Commission’s preliminary view is that the regulated tariffs were financed at least in part through State resources and provided a selective advantage to certain professional consumers. The same conclusion is drawn as regards the guaranteed profit element for the distributors designated by the State to provide electricity on the regulated market. The Commission doubts that the Spanish regulated tariffs system is compatible with the common market. Interested parties are invited to submit comments. (See Brussels Brief of 2 February 2007