CNMC asks power and gas companies to collaborate on its proposal

By Energía 16

The CNMC assures they are open to analyzing the proposal to reduce the returns for electricity and gas distribution and transport

The National Commission of Markets and Competition (CNMC) proposal to reduce the returns for electricity and gas distribution and transport continues to generate statements and reactions from utilities and the sector’s regulator.

A little over a week ago, the CNMC proposed a medium reduction of the returns for electricity distribution and transport of 7% and 8.2%, respectively. As to gas, the proposed cuts amounted to 17.8% for distribution and 21.8% for transport.

The reduction has had a negative impact on utilities that could be seen even in the stock market. Consequently, these companies have heavily criticized the CNMC.

Propuesta de recortes a la retribución de la electricidad y del gas impacta en los mercados y en las empresas del sector #E16 https://t.co/IubGpikDbp pic.twitter.com/YiaRT8pKGI

— Energía16 (@GrupoEnergia16) July 14, 2019

Negative reactions

One of the first companies to react was Naturgy. Last week, the company announced it will temporarily suspend investments in new gas networks, which it handles through distribution subsidiary Nedgia. The company explained the decision was made “for caution” in light of the planned cut of the returns for electricity and gas distribution and transport.

Jordi Sevilla, President of Red Eléctrica de España (REE), also spoke out against the cuts. The executive said “they don’t guarantee higher efficiency or lower service costs.”

Moreover, he mentioned the uncertainty sparked by this proposal, stressing it impacts on investments in the sector at a key moment of the energy transition.

The president of the Spanish Confederation of Business Organizations Antonio Garamendi was especially hard on the CNMC’s initiative, calling it an “atrocity” that has costed companies like Naturgy and Red Eléctrica around €8 billion.

#Energía | Sobre posibles recortes a la retribución, en el caso de la #Electricidad, la rebaja puede repercutir hasta el 40 por ciento de la factura. Para el #Gas, se ubica en 70 por ciento. https://t.co/T6BNoXB0SL pic.twitter.com/5g6nbIZwfL

— Energía16 (@GrupoEnergia16) July 11, 2019

Garamendi indicated that a country must have some predictability in regulation, especially considering that foreign companies are seeking to invest in the sector.

Open to dialogue

“Our goal is rigor, reasonable prices for consumers and reasonable returns for companies. That is the common interest moving the CNMC,” it said.

In this regard, Marín Quemada recalled that the proposal open for public consideration on July 5 only “maintains what we have said in recent years in terms of prices.”

La CNMC plantea recortes del 7 % al 21 % en la retribución de gas y electricidadhttps://t.co/1qnbiOqou8 pic.twitter.com/JFg7Zo8nli

— ProfesionalesHoy (@ProfesionalesH) July 14, 2019

Reasonable proposal

The official invited companies to collaborate with the CNMC in the period of public information. He said this would facilitate “reflections that will enable us to be more accurate in these circulars that will determine the price of certain components in the electrical and gas bill with absolute stability and strictly technical criteria over the next 5 to 6 years.”

“We expect that instead of being background noise (companies) collaborate with the CNMC so that during the public information period we get accurate reflections that enable us to be more accurate in these circulars,” he added.

The president of the CNMC believes that these comments by the affected parties are “accurate and with sufficient basis” to be taken into account. However, he warned that, were that not the case, the Commission will continue on the path of reducing the returns for these activities.

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