Saturday, February 24

The Government challenges the electricity companies and resumes the plan to force them to auction cheap electricity

The Government launched a shock plan this summer to try to cushion the impact on household electricity bills from the spiral of exorbitant increases in the electricity and gas markets. Among the measures contemplated, the Executive included the celebration of electricity purchase contract auctions term with stable prices and with a duration of more than one year.

Some auctions to which the large electricity companies (Iberdrola, Endesa, Naturgy and EDP) were forced to go to auction part of their electricity produced by nuclear, hydroelectric and wind to sell it to independent marketers (those not integrated into the large energy groups) and large industrial consumers. A measure that the large electricity companies rejected outright and that anticipated a clash between the Executive and the sector due to the obligation to attend the bid.

Royal Decree 17/2021, through which the shock plan was articulated to contain the price of electricity, included an express mandate for the Government to hold the first of these auctions before December 31, 2021. A mandate that the Ministry for the Ecological Transition, commanded by Teresa Ribera, failed to comply and the year ended without the bid being held.

The Government is now challenging the large electricity companies and is preparing to activate the plan so that the first of these auctions is held this year. “We have not yet been able to launch the inframarginal energy auctions for many reasons, but it is a commitment of this Government and we want to launch these auctions this year”, confirmed the Secretary of State for Energy Sara Aagesen, in an interview with ‘El Periódico de la Energía’.

The Ministry underlines the enormous technical complexity involved in lifting the specific mechanism for these auctions and confirms that it was not until this week that it received the report from the National Commission for Markets and Competition (CNMC) in which the mandatory reserve price is set to celebrate the bid (the minimum price from which companies can sell electricity without incurring losses). The Secretary of State has avoided setting a date for the auction, but has promised “agility & rdquor; so that it can be held as soon as possible.

For the large electricity companies it will not be an option to participate, it will be an obligation to attend these auctions. The amount of energy that they had to auction in the first of those auctions, initially scheduled for last year, was even predetermined: 15,830 gigawatt hours (GWh), the equivalent of 25% of the annual electricity production of the year with lower production of the affected installations. And even the distribution of the energy that each of the electricity companies must contribute according to their generation quota has been established: Iberdrola, more than 7,300 GWh; Endesa, 6,700 GWh; Naturgy, 1,400 GWh; and EDP, 360 GWh.

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Since the Government approved its shock plan of measures to contain electricity increases last September, the large electricity companies have been insisting on the impossibility of holding the mandatory auction urgently. The companies argue that they could not provide power for auction imminently because they had already sold all of this year’s power output. And, according to the companies, their electricity production for 2022 is also already sold in a very majority way, emphasizing that they have closed contracts in most cases for more than 80% of next year’s generation.

Large companies generally sell all or almost all of their electricity production to their own marketers, to subsidiaries of the same group. The Government’s claim is increase the liquidity of the futures markets, forcing part of that production to be transferred to independent marketers outside the large energy groups or directly to large industry so that it can contain energy costs in full spiral of rises.