Regulation of electricity utilities – sales of power

Approval to sell power

What authorisations are required for the sale of power to customers and which authorities grant such approvals?

The sale of power to customers is carried out by traders. Trading activities are subject not to a prior authorisation regime but to a prior notification to MINET of the start-up of the activities. These notifications must include a responsibility pledge stating that the trader fulfils all the requirements to carry out the activity (including unbundling obligations, technical capacity and fulfilment of wholesale market rules).

If the trading activities are to be carried out only in a specific autonomous community, such notice must be provided to the administrative authorities of the autonomous community instead of to MINET.

Power sales tariffs

Is there any tariff or other regulation regarding power sales?

In Spain we can distinguish between power sales on the free and regulated markets. On the free market, consumers can choose their trading company and both parties freely agree the price of the electricity. However, some specific consumers can qualify for the regulated market, with small consumer prices (PVPC).

In both markets consumers will pay the corresponding access fees to the transmission and distribution networks as well as the corresponding taxes. Thus, the difference lies in the price paid for the electricity itself.

Questions 20 and 21 further develop the main features of the wholesale market and the PVPCs.

Rates for wholesale of power

Who determines the rates for sales of wholesale power and what standard does that entity apply?

OMIE is the electricity market operator. It manages the wholesale electricity market for the Iberian Peninsula (Spain and Portugal), where market agents trade the amounts they need (MWh) at transparent prices. OMIE also carries out the invoicing and settlement of the energy traded on these markets and oversees the corresponding financial settlements.

Market price is settled through daily and intra-daily auctions carried out in the wholesale or spot market. Daily auctions are carried out with the purpose of covering the electricity demand for the following day (24 auctions to cover the 24-hourly bands of the following day). In turn, the purpose of intra-daily auctions is to correct any deviations in the result of the daily auctions (unexpected increases or decreases in electricity demand or supply produced by meteorological circumstances, grid congestion, problems with selected generation units, and so on).

These auctions are inverse. In other words, offers are matched depending on their price - from low to high - until the entire demand is completely covered for the relevant hourly band. The final matched offer marks the price for all the previously matched offers (‘marginal price’), despite the prices of later offers being lower than the marginal offer. The marginal price is basically the market price for each auction.

Public service obligations

To what extent are electricity utilities that sell power subject to public service obligations?

Pursuant to article 17 of the LSE and Royal Decree 216/2014, PVPCs are the maximum prices that reference traders (those obliged to supply at PVPC) can charge for the electricity.

Consumers that can qualify for PVPCs are those with supply points with a voltage lower than 1kV and with a contracted power of less than or equal to 10kW. The PVPC is calculated taking into consideration electricity generation costs, access fees and trading costs.

In addition, in 2009 the Spanish government created a discount rate for certain vulnerable consumers, who are generally defined as falling into at least one of the following categories: having a contracted power of less than 3kW in their main residence; being at least 60 years old and having a retirement, invalidity or widow’s pension according to the social security system; being a ‘numerous family’ (with three or more dependent children); or being part of a family all of whose members are unemployed.

The discount rate is calculated as a discount of 25 per cent on the PVPC and vulnerable consumers have the right to be supplied with electricity under these special conditions.

Royal Decree 897/2017 develops the vulnerable consumer concept, including income thresholds for determination of vulnerable consumers. Certain mechanisms are also established to avoid cutting the supply to specific consumers at risk of social exclusion.