The Council of State’s blow against the proposal for remuneration for electrical networks developed by the National Markets and Competition Commission (CNMC). According to sources familiar with the situation, the advisory body chaired by Carmen Calvo has prepared a legal opinion in which it questions the legal validity of the remuneration methodology circular.
The issue is not trivial, since if this opinion is accepted, the CNMC would be left with no room for maneuver to rectify and this circular could remain dead, since if it is not approved before December 31, the valid methodology would be the one in force, which would be renewed for another six years. The seriousness of the matter has forced the CNMC to call an extraordinary plenary session for this Friday, where it will have to decide what to do.
The opinion of the Council of State is mandatory, so the CNMC is not obliged to take its conclusions into account and could approve the circular once the advisory body has been heard. However, for the first time on an issue of this matter, the Council of State has made “essential objections”, which makes it almost impossible for a proposal to be approved without taking them into account. These objections point out that the CNMC could invade the ministry’s powers by questioning the increase in investment limits proposed by the Ecological Transition. The other essential issue points out that in a regulated activity such as electricity distribution, demand risk cannot be added, as the CNMC had done.
The opinion was approved this Wednesday and has already been sent to the CNMC, which must evaluate it in full and take it into account before the final approval of the remuneration circulars. The ten councilors of the CNMC will have to make a decision: either knock down the methodology circular or move forward without considering the opinion of the Council of State with the original proposal. . There are already councilors who rule out moving forward against the will of the Council of State due to the scenario of legal uncertainty and judicialization that will occur.
The sources consulted indicate that the Council of State’s ruling is very unusual. In this sense, they add that if their recommendations are taken into account, the current circular is impossible to fix; it would have to be returned to the technical services so that they could prepare a new proposal. Something unfeasible just twelve days before December 31. It is already recognized that there is no time to bring them back to public hearing. An intermediate position could be studied to try to save the circular, something that will have to be studied in the extraordinary plenary session this Friday, but it seems very difficult for the technical services to be able to save it.
Regarding the financial remuneration rate (TRF), the other circular that must be approved before the end of the year, its considerations are lighter. Although there are also objections, they are minor, so there has not been as much controversy there.
The remuneration of the networks has caused a strong confrontation between the electricity companies and the CNMC. The companies that own the electricity distribution lines (Iberdrola, Endesa EDP and Naturgy, fundamentally) consider that the proposal is insufficient to make investments, necessary to avoid bottlenecks in the industrial and economic development of Spain.
On the contrary, the regulator sees the remuneration paid by all consumers in the electricity bill as adequate and believes that raising it excessively has an inflationary effect that is detrimental to citizens’ pockets and the competitiveness of companies.
The issue has caused division of opinions with other relevant actors such as the Ministry for the Ecological Transition, as this media reported. However, the department led by Sara Aagesen could have raised the stakes further by convening the Cooperation Commission, a space to assert its arguments, and rejected this possibility, considering that the differences were not wide enough.
The processing of remuneration circulars has also generated discrepancies within the CNMC. Two councilors (Josep María Salas and María Jesús Martín) decided to draft dissenting votes against the proposal made. Currently, in the plenary session of the CNMC there are four councilors more favorable to the theses of the Ministry for the Ecological Transition and the electricity companies, whose interests are more or less aligned on this issue. And on the other hand, there are six councilors in favor of the proposal that the technical services have prepared, so a priori no major movements are expected.
However, approving the new methodology circular without taking into account the legal recommendations of the Council of State adds strength to further lawsuits against the CNMC. Already in 2019, the electricity companies appealed several remuneration circulars to the National Court, disputes that have not yet been resolved.
