The circular that will change the energy system

José María Marín Quemada is going to leave the presidency of the National Commission of Markets and Competition (CNMC) after six years in office with the new en

The circular that will change the energy system

José María Marín Quemada is going to leave the presidency of the National Commission of Markets and Competition (CNMC) after six years in office with the new energy system channelled, one of the obsessions of the past few months. To date have already been approved 11 of the 14 circular that will govern for six years, and from 2020, the electricity market and from 2021 the gas. These circulars collect the formulas of compensation to the companies that transport and distribute the gas and electricity, as well as the tolls paid by the consumer.

Settings for the next period

Rate salary
(by 7.4% up to 2019)
5,58% (transport and distribution of electricity)
5,44% (gas transportation and regasification)
5.83 to% (gas distribution)

Cuts and hikes
Transport of electricity (Electric power Network): -7,3%
Distribution of electricity (utilities): -4,51%
Transport of gas: -14,1%
Regasification: -2,96%
gas Distribution: to 9.6%
technical Manager gas system: between +6.9% and +11%
the Operator of the electrical system: between +23% and +28%

Electric (pending approval): -5,6%
natural Gas (pending approval):
-6,7% (average domestic)
-26% (industry average)

The initial objective of the agency, which took over the competencies regulatory competencies, which before he exercised the Government, it was to approve them by the end of 2019 to its launch on the 1st of January. However, there have been delays, mainly in those related to natural gas and tolls, because they have a need for the Executive to decide the charges (political price that is imposed to fund the costs unrelated to the activities being regulated, as the incentives to renewables, the insularity, or the repayment of the debt supply), and a Cabinet in functions could not do it. For this reason, the Ministry for the Ecological Transition has extended the current rules until the tolls ready.

The circular to try to make more transparent the way in which it fixed the price of energy, in addition to reduce, which impacts the remuneration that they receive the businesses that transported and distributed. According to the CNMC, the new model aims to improve the energy efficiency and the integration of renewables, “prioritizing the upgrade of the existing network; contemplating new investment and enabling the lengthening of the useful life of the facility, which represents a savings for the consumer and for the system as a whole”.

Impact on rate

The measures seek to make transparent and reduce the price of energy

The adjustments also have an impact on the rate, although the savings will go before you to settle the debt (18,000 million in the electric power system and 1,000 in gas), according to industry sources. Yes will be reflected in the invoice cuts in tolls. Is estimated at 3% in domestic consumption and a 6% in the industrial.

The circular makes key vault is the one that establishes the methodology of calculation of the rate of financial compensation:from it is calculated the rest. For electricity, the rate is 5,58%, while for the gas transport and regasification is of 5,44% and for gas distribution, from 5.83 to%. This circular represents a major change because it uses a formula of weighted average cost of capital, which is used by european regulators and which better reflects the reality of the markets. That is to say, the cost of debt and the yield required by the shareholders. Up to now it was estimated with the average yield of the government bonds of 10 years plus a spread of 300 basic points decided by the Government. The pay out was 7.4%, nearly two points more.

As a result of the reduction of the rate of financial compensation, remuneration for the transport of electrical energy, which performs Electrical Network of Spain (REE, quoted but with state participation), will suffer a cut of 7.3%. In cumulative terms, will be of 8.643 billion, compared to 9.315 million that would result from keeping the current system. That is to say, 672 million less, which caused them to put the cry in heaven to the company that presides over Jordi Sevilla.

The regulator has applied the formula used by the european regulators

on the contrary, increases to between 23.7% and 28.6% remuneration as the operator of the system. This circular is fixed for a period of three years. The first goes from 2020 to 2022, and the annual compensation expected will be between 71,8 and 74,6 million from 58 million in 2019. That is to say, an increase from 13.8 to 16.6 million, which does not compensate for the rectorte of the other circular.

have Not been happy with the power, whose remuneration for distributing the energy from transport networks until points of consumption implies a decrease in accumulated 1,571 million (4,68%), passing the 33.541 million that would result from keeping the system 31.970 million. In Spain, this activity make 300 companies, five of which belong to the major groups, electrical (Endesa, Iberdrola, Naturgy, EDP and Viesgo).

Controversy at the gas

Something similar happens with the gas. For the transport and regasification activity that affects mainly to Enagas, it is estimated that the reimbursement will be of 5.921 million on a similar claim to that of 2019. The impact on annual average would result in a reduction of 117 million (11 million regasification and 106 transport) on the current level. That is to say, 702 million in the period, a 10.6% less (in transport falls 14.1% and in regasification, 2.96%). The controversy has focused, however, on the circular that regulates the distribution of gas. The first proposal revised the remuneration based on the value of the assets; but after the allegations and pressures, mainly led by the company Naturgy, the CNMC decreased 17.8% to 9.6%, the reduction of the average remuneration, which happens to 1.420 million to 1.283 million.

The new tolls will reduce the bill by around 3%

The CNMC must complete the circular road. The fee is intended to pay the costs of access to the network, that is to say, it is a part regulated that must be paid regardless of the consumption that is right. The tolls have two components: the access (which is paid for taking the light) and political (incentives to renewable, insularity, debt...). The toll is fixed in the bill, and represents around 32% of what they pay for homes and businesses, except those of large consumption, with agreement of ceasepibilidad. The circular intends to reduce that percentage to 25%, so that the impact that would have on the receipt would be around 3%, a percentage that could be twice as high in the industrial tariff. To this end, it proposes to reduce the tolls of transportation and electrical distribution 5.6% over 7,000 million a year.

in Addition, it introduces the existence of six periods in a timetable, a structure variable prices for domestic consumers, who can choose the time of use. With this discrimination, it is directing users to consume the least costs, that is to say, for the night. In this way, it contributes to energy saving and efficiency, ensures that the remuneration of regulated activities and is provided to the electric car.

For gas, the discount depends on the type of consumer, and could be 26% for industrial and 6.7% for the domestic. According to the CNMC, the tolls of the local networks will be determined in function of the level of consumption, and there will be 11 different. That is to say, the idea is that consumers of the same characteristics, face the same tolls without significant cross-subsidies.

Updated Date: 20 January 2020, 12:00

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