On 2 February 2013 the Spanish Government published Royal Decree Law 2/2013, of 1 February, which implements urgent measures in the electricity and financial sectors – the seventh energy reform in a year –, with the aim of tackling what is known as the tariff deficit, which by December 2011 had reached €24 billion.
The aim of this note is to analyse some of the main aspects of how legislation has evolved in relation to the Spanish energy sector since 2012. However, this is not and does not purport to offer a legal opinion on the subject. We also refer to each one of the newsletters published on our website for an analysis in greater detail of the measures brought in by each set of legislation.
Since January 2012, the Government has approved a raft of regulations with the ultimate aim of reducing the tariff deficit, including:
- Royal Decree Law 1/2012, of 27 January, which suspends remuneration pre-allocation processes and suspends financial incentives for new electricity production installations using co-generation, renewable energy sources and waste (Moratorium RDL) ("RDL 1/2012").
- Royal Decree Law 13/2012, of 30 March, which transposes Directives on the internal markets of electricity and gas and electronic communications, and which adopts measures to correct cost and revenue gaps in the electricity and gas sectors ("RDL 13/2012").
- Royal Decree Law 20/2012, of 13 July, which implements measures to ensure budget stability and to foster competition ("RDL 20/2012").
- Act 17/2012, of 27 December, having regard to the General State Budget for 2013 ("Act 17/2012").
- Act 15/2012, of 27 December, on tax measures for energy sustainability ("Act 15/2012").
- Royal Decree Law 29/2012, of 28 December, to improve the management of and the protection afforded by the Special System for Household Employees and other economic and social measures ("RDL 29/2012").
- Royal Decree Law 2/2013, of 1 February, which implements urgent measures in the electricity and financial sectors ("RDL 2/2013").
On 1 February 2013, the Council of Ministers also analysed a draft bill according to which the Ministry of the Exchequer and Public Administrations would grant an extraordinary loan of up to €2.2 billion to the Ministry of Industry, Energy and Tourism to "finance, if necessary, the premiums payable for the special regime energy production in 2013". The wording of the draft bill must first pass through the State Council before it can be approved.
2. RDL 1/2012
RDL 1/2012 continues in the same vein as previous legislation by implementing a set of measures with the aim of solving the issues threatening the economic sustainability of the electricity sector. RDL 1/2012, also known as the "Moratorium Royal Decree Law", essentially established:
- a moratorium on the subsidies for new "special regime" electricity production installations as well as ordinary regime electricity production installations using similar technologies that, at 28 January 2012, lacked an administrative authorisation awarded by the Directorate General of Energy Policy and Mines.
- a moratorium on the pre-allocated remuneration procedure to have access to the subsidised "premium".
In the above cases, the moratorium applied to (i) special regime installations that had not been registered in the Remuneration Pre-allocation Register by 28 January 2012; (ii) special regime installations using photovoltaic technology that had not been registered in the Remuneration Pre-allocation Register by 28 January 2012; and (iii) ordinary regime installations that had not obtained an administrative authorisation by 28 January 2012.
3. RDL 13/2012
RDL 13/2012, which contained measures for the energy, gas and telecommunications sectors, was published in the Official State Journal (Boletín Oficial del Estado) on 31 March 2012. This overview only covers the main aspects related to the transposition of Directives concerning the internal market of electricity and gas. RDL 13/2012 also contains other measures aimed at correcting the gap between costs and revenues in the electricity and gas markets, as well as provisions transposing European Directives related to the electronic communications sector.
The main features of RDL 13/2012 were:
- It established new provisions to achieve the effective unbundling of supply and generation activities from network activities.
- It strengthened the role of the national regulators and established objectives, obligations and competencies for those regulatory authorities.
- It also strengthened the public service obligations within the electricity sector. It covered, among other things, access by consumers to the consumption data, prices associated to service costs, and information related to dispute resolution.
- The transmission grid manager was appointed and certified.
- It established a procedure for authorising third party access exemptions consistent with the procedure established in article 36 of Directive 2009/73/EC in relation to new gas infrastructure.
- New measures were implemented aimed at protecting consumers, in coordination with other administrations.
- New cost cutting measures were established, including (i) a moratorium on new regasification plants; (ii) a moratorium on administrative authorisations for new gas transport pipelines and regulator and metering stations; and (iii) modifications to the remuneration of underground storage areas.
- It established mechanisms for international collaboration for the purpose of honouring the commitments made in Directive 2009/72/EC of the European Parliament and Council, of 13 July.
- Directive 2009/028/EC, on the promotion of the use of energy from renewable sources, had already been transposed, almost completely, by the Sustainable Economy Act and other regulatory provisions. However, the Electricity Sector Act was modified with the aim of enabling the government to implement international cooperation mechanisms aimed at satisfying the renewable energy usage commitments contemplated in the Directive.
4. RDL 20/2012
RDL 20/2012, of 13 July, was published in the Official State Journal on 14 July 2012 (it entered into force on 15 July) and introduced significant measures affecting different economic areas, including those aimed at correcting cost and revenue gaps in the electricity sector.
The main measures introduced by RDL 20/2012 can be summarised as follows:
Measures aimed at correcting cost and revenue gaps in the electricity sector:
- Several measures were established in relation to the island and non-mainland electricity systems, including measures to review the remuneration model amending the calculation of the fixed and variable costs of plants under the ordinary regime in the island and non-mainland electricity systems.
- The remuneration applicable to transmission services was reduced from 1 January 2012.
- Any taxes or duties applied by the autonomous regions or surcharges over state taxes levied directly or indirectly on electricity supply activities or installations shall be included as a supplement to the access fee and the "last resort" tariff, and they shall be paid by the consumers within each autonomous region.
- A deficit was acknowledged in respect of the electricity sector's regulated activities in 2006.
- A series of changes were made to the regime applicable to and the functions of the Institute for Energy Diversification and Saving (IDAE). In particular, the IDAE was to come under the direct control of the central government, and became its technical service organism; the rules of procurement of the IDAE also came to be governed by the provisions of Legislative Royal Decree 3/2011, of 14 November, which approved the Public Sector Contracts Act, as amended.
- The Minister of Industry, Energy and Tourism was authorised to apply progressive criteria to access fees, taking into account average consumption at the supply points, without affecting vulnerable consumers.
- Finally, RDL 20/2012 removed the quarterly review of electricity transmission and distribution network access fees.
5. ACT 17/2012
The main electricity-related subjects regulated in Act 17/2012 are:
- The suspension during 2013 of the set-off mechanism against the Spanish state budget, as a result of the overcosts of generating electricity in the island and non-mainland electricity systems in 2012.
- Contributions to finance the electricity sector.
6. RDL 13/2012
According to the Statement of Purpose of Act 15/2012, the collaboration of all the members of the electricity system – the public administration, companies and consumers – is necessary to ensure its economic sustainability, and efforts in that direction should be distributed among them.
The main measures included in Act 15/2012 are:
The creation of:
- 7% tax on the value of the electricity produced.
- A tax on the production of used nuclear fuel and radioactive waste from the generation of nuclear energy.
- A tax on the storage of used nuclear fuel and radioactive waste at centralised installations.
- A duty on the use of continental waters for electricity production.
- It changed the rates of the special taxes established for natural gas and coal (known as "green cents" applicable to petrol, diesel, gasoil, LPG, natural gas, kerosene, bioethanol, biomethanol, biodiesel and coal); it also removed the exemptions on energy products used in the production of electricity and in the cogeneration of electricity and useful heat.
- It modified the Spanish Electricity Sector Act, removing the entitlement to the premium or the sale of fuel-generated electricity at installations that use as their primary energy any of the non-consumable renewable energy sources, except in the case of hybrid installations using consumable and non-consumable renewable energies, in which case the use of consumable renewable energy sources may be eligible to the premium.
- Act 15/2012 provided for the financing of regulated activity costs by means of (i) revenues from transmission and distribution network access fees paid by consumers and producers; and (ii) items set aside in the general state budget.
7. RDL 29/2012
RDL 29/2012 modified certain aspects of the legal regime applicable to renewable energy installations as well as the restrictions to the electricity system's tariff deficit.
RDL 29/2012 established that:
- The premium applicable to special regime production installations will be cancelled if, as a result of an inspection or any other legally valid means, it comes to light that a special regime generation installation registered in the Remuneration Pre-allocation Register has not been completed by the deadline for definitive registration in the Register of Special Regime Production Installations and started to sell energy.
In other words, any special regime production installations that were not completed before the deadline established for having achieved definitive registration in the Register of Special Regime Production Installations or that had equipment not included in the construction project would be stripped of the premium. In particular, it was understood that the installation had not been totally completed if:
- all the evacuation infrastructure necessary to feed electricity into the distribution or transmission networks has not been totally completed.
- all electricity generating equipment is not completely built and in service.
- as applicable, the entire solar plant is not fully built and in service.
- as applicable, the entire storage capacity established in the construction project is not fully operational.
The premium would also be forfeited in the event of modifications to the construction project, unless otherwise provided by regulations approved by the Spanish government, which would be able to establish a specific remuneration regime as a result of a substantial modification or enlargement of an installation's power capacity.
- It removed restrictions to the tariff deficit by repealing the first paragraph of Additional Provision Twenty-one of the Spanish Electricity Sector Act 54/1997, of 27 November1, setting tariff deficit caps for years 2009, 2010, 2011 and 2012 (€3.5 billion, €3 billion, €3 billion and €1.5 billion, respectively).
8. RDL 2/2013
The most recent modification of legal regime governing the Spanish electricity sector was made by RDL 2/2013, of 1 February, which was published in the Official State Journal (Boletín Oficial del Estado) on 2 February 2013 and entered into force on that same date. The purpose of RDL 2/2013 is to adopt a series of urgent measures to reduce costs in the electricity system and save, according to government estimates, between €600-800 million per year.
The main changes introduced by RDL 2/2013 are:
It cancels the premium established in electricity sector regulations for special regime installations that sell their energy to the market, i.e. those falling under option b) of article 24.1 of Royal Decree 661/2007, of 25 May, which regulates the production of electrical energy under the special regime ("RD 661/2007"). RD 661/2007 is modified to the extent that the premiums applicable to energy must now consist exclusively of the regulated tariff; however, the owners of installations may nevertheless sell their energy freely on the energy market without receiving the premium. The following changes are made to RD 661/2007:
- The value of the premium applicable to all groups and sub-groups shall be €0.0/kWh.
- The option to sell energy on the market at a premium is removed.
- Special regime installations that, from the entry into force of RDL 2/2013, choose to sell their energy on the electricity production market cannot subsequently change to the regulated tariff established in article 24.4 of RD 661/2007.
RDL 2/2013 also establishes a series of measures that will apply from 1 January 2013, outlined below:
- A change has been made to the methodologies linked to the general Consumer Price Index for reviewing the remunerations, tariffs and premiums received by the electricity market operators under sector regulations. From 1 January 2013, that index shall be replaced by the Consumer Price Index at constant tax rates, excluding unprocessed foods and energy products 2013.
- Special regime installations that have sold their energy on the market (option b under RD 661/2007) between 1 January 2013 and 2 February 2013, shall receive the premium from the Spanish Comisión Nacional de la Energía, taking into account the energy produced as if they had selected the regulated tariff option (option a) pursuant to article 24.1 of RD 661/2007.
- Installations that, at 2 February 2013 (date on which RDL 2/2013 entered into force), are selling the electricity they produce on the market shall automatically be subject to the regulated tariff with effect from 1 January 2013 under the regulated tariff option. However, the owners of those installations may expressly notify the Directorate General of Energy Policy and Mining before 15 February 2013 that they wish to continue to sell on the market without premium (option b). However, if they do so, those installations will not be entitled to subsequently change to the regulated tariff established in article 24.4 of RD 661/2007.
- RDL 2/2013 also contains other provisions related to the economic regime applicable to installations using innovative solar thermoelectric technology, and other technologies, that are successful in context of the competitive tender processes for those technologies.