1. Ruben Esteller

The Ministry of Ecological Transition gives up and confirms that it will reform the formation of prices of the regulated tariff in Spain, as requested for years by the electricity companies. The Government will formally take this step, predictably, at the end of this year, since for the time being it is going to submit the formula it intends to adopt to public consultation and will keep it open until October 22.

In the recent Ribera decree, in which 2,600 million were confiscated from electricity companies, the Government already included the first step for this measure, which consisted of launching capacity auctions for large industrialists and marketers.

This measure, which has been foreseen since then, was going to account for 10% of the new basket of products that will serve to set the price of customers who remain in the regulated market, but the growing increase in prices has forced the Government to accelerate the adoption of measures to try to contain the growing social pressure.

Ribera has assured today that "on Monday he has summoned the associations of the industries that consume the most energy because I want to listen closely to their concerns and recommendations, because we have to be very aware of them".

The large industrialists have vigorously protested this week against the sharp increase in prices that their companies will begin to notice predictably from next year and that, according to studies carried out by Bank of America, may lead to price increases of between 50 and 70%.

Ribera will meet specifically with the employers of the Anfac motor, the AOP oil companies, the Aspapel paper company, the Feique chemical company, the Fiab food company, the Oficemen cement company and the Unesid steel company.

The vice president explained that on Tuesday she will meet with "the council of consumers and users to have a conversation with them, because it is true that one of the domestic rates, the one that we believe is the most competitive according to the data of the last six years, is indexed to the evolution of the wholesale market, the so-called pvpc (the Voluntary Price rate for Small Consumers), the cheapest and the one that is currently suffering the greatest volatility".

Ribera will be seen specifically with the Adicae, Auc, Cecu, Facua, Fuci, Hispacoop, OCU and Unae associations.

The vice president indicated that "there are those who recommend corrective measures and also many associations are reluctant to see these changes, that is why I want to be able to talk with them and be able to have their first-hand input on how they value, what worries them, what recommendations they make," she added in statements collected by Efe.

"Today we publish a prior consultation for a possible change in the regulation of this rate and on Tuesday I will speak with consumers. We have no problem, on the contrary, it is essential to work with the different sectors, industrial and domestic consumers and the companies themselves. to be able to rise to the occasion in a crisis that is not only Spanish and that is terrible in terms of price spirals, the like of which has never been seen".

The Government's decision comes just after the price in the wholesale market had reached 216 euros/MWh and with the futures for next week already pointing towards 250 euros, an extreme that left the entire shock plan put on hold. launched by the Government just 15 days ago.

Ribera's measures have also been considered highly controversial both by the main Spanish electricity companies and by the large global infrastructure funds that have even filed a formal protest with the European Commission.

The situation has reached such an extreme that companies such as Iberdrola have decided to paralyze their purchasing processes in Spain to analyze whether the investments they planned to carry out in renewables can go ahead.

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The Government is also about to hold a new renewable auction on October 19 and the agents already expected that with the increase in regulatory risk in Spain, an improvement in the prices of the previous auction could not be achieved.

The Ministry of Ecological Transition poses a series of questions to companies in order to develop the PVPC reform.

1. From the perspective of the different subjects involved, is it considered necessary to reformulate the structure and/or calculation methodology of the PVPC? If so:

2. What structure do you consider most appropriate to define the PVPC?

3. To what extent is it considered appropriate that the energy price that the PVPC takes as a reference should take into account the price signals of the futures markets?

4. In the case of incorporating information from the futures markets in the calculation methodology of the PVPC, what type of contracts and what delivery periods do you consider most accurate?

5. Do you consider it convenient to maintain a certain exposure to the spot market? What distribution between both markets, in cash and term, do you consider more optimal?

6. To what extent is it considered convenient that the energy price that the PVPC takes as a reference is based on a basket of prices of different energy products in term? What basket of energy products would you use?

7. How often do you think the PVPC should be updated if it were referenced to a basket of forward prices?

8. Should the current dynamic PVPC supply option be maintained, that is, fully indexed to the spot market, for those consumers who request it?

9. How do you think the transitional period between the current configuration of the PVPC and the new proposed structure should be articulated?

Once the answers are received, it is expected that the Ministry will have a month to analyze them and prepare its proposal with the intention that in 2022 the new tariff system can be launched.

Rigor and legal certainty

Ignacio Sánchez Galán, chairman of Iberdrola, defended in his speech at the La Toja 2021 Forum the need to address the energy price situation and the challenges of decarbonising the economy from a European perspective, "with solutions in accordance with the of the European Union and with rigor in the analysis". Mariano Rajoy and Felipe González also demanded rigor and legal certainty.

The chairman of Iberdrola underlined that the European Union has been at the forefront of climate action for decades and that the Fit for 55 program, which estimates a 55% cut in emissions by 2030, is ambitious and a great opportunity, which will bring investments of around 3.6 billion euros. But he has stressed that it is a European law that must be complied with and it will only work if it has a European response. "Let's not call it into question, when others want to imitate it," he pointed out. "What cannot be is that each country goes its own way to the first storm."

Likewise, he has defended that, faced with European challenges, the answer has to be European. "All member states must implement coordinated measures to meet the objectives of the European Union in the face of national measures that fragment the European internal market and delay the transition," he explained. In this sense, he explained the validity of the European Union principle of "who pollutes pays", compared to national measures that have created a mechanism with which "who does not pollute also pays and more".

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