Press office

Press office

Statements by Jordi Sevilla, Chairman of Red Eléctrica de España, on the Impact of the Circular (Official Notice) on the remuneration of electricity transmission grids required for the Energy Transition

The Proposed Circular (Official Notice) issued by the Spanish National Markets and Competition Commission (CNMC) on 5 July, establishing the methodology for calculating the remuneration of the electrical energy transmission activity, introduces a series of relevant modifications to current regulations that do not favour the fulfilment of the strategic priorities established by the Government in energy matters.

This Circular introduces a high level of uncertainty regarding the remuneration of investments and incorporates a high degree of discretion regarding critical actions for the deployment of the energy policy and is discrimina-tory with the electricity transmission activity.

In addition, it could hinder the energy transition and the fulfilment of the National Integrated Energy and Climate Plan, since it does not establish a clear, stable or predictable regulatory environment. Lastly, it does not recognize the incorporation of new technologies and innovation in the maintenance activity as an incentivising factor.


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‘Cutting spending on investment and maintenance in the provision of an essential public service is not the right way to go. It has not been the right choice in the health service, or in education, nor will it be in the Spanish electricity supply service. Experience has shown us, here and in other countries, that the strategy of indiscriminate cuts in spending will undoubtedly lead to the deterioration in the quality of the service being provided, without any of the supposed advantages of the cutbacks having been seen. This also applies to any essential public service, regardless of whether it is financed with public resources from the State National Budget, or with private funds that must be obtained in the financial and capital markets, where the rules of the game established by these markets must be respected.

Cutbacks are not a guarantee of greater efficiency, nor of a lower cost of the service. The electricity bill will be reduced, as a matter of fact, due to the massive introduction of renewable energy foreseen in the National Integrated Energy and Climate Plan, whose goals and fulfilment of targets are put at risk if investment ceilings are lowered and the maintenance standards of transmission grids are reduced; a standard that until now, has been an international benchmark regarding quality and security of supply.

The current model of Red Eléctrica de España actually combines the best of the public sector by providing an essential service for citizens with the best of the private sector, through financing in international financial markets that requires that demanding levels of efficiency be maintained. A positive balance that should not be questioned by means of a regulation such as that proposed by the CNMC in its Circulars, which establish its ability to exercise discretion by assuming the power to decide a posteriori and unilaterally which investments are remunerated and at what price. Under these conditions of legal uncertainty, it will be difficult to convince private investors to contribute to building the grids which will be necessary for the energy transition.

 

'Red Eléctrica will continue moving forward to work to maintain its commitment to the quality of the electricity supply service and will continue to collaborate with the CNMC and the Ministry to meet the goals and targets set forth in the Energy Policy and in the 2018-2022 Strategic Plan announced this year by the Company.’

 

Ever since it was founded in 1985, Red Eléctrica de España, as the company responsible for guaranteeing the supply of electricity, has always complied with the various regulations established under the energy policy. In this period, in which REE has gone from being a public company to becoming a private company, albeit with a significant State shareholding, our country has looked after and built one of its major public service assets, of which we are truly proud: an electricity system that is efficient, modern and with outstanding levels regarding guarantee of the power supply, as well as being recognised worldwide as a benchmark for its ability to integrate renewable energy.

We are definitely committed to the Energy Transition and the energy policy guidelines of the Ministry and we trust that the comments and arguments of the companies affected, together with the mandatory intervention of the Spanish  Government in defence of these Guidelines, will amend the Proposed Circular so as not to put at risk the volume of private investment in electricity grids, which is undoubtedly necessary for the energy transition, or that it may have a negative impact on the maintenance of existing grid assets according with the quality and assurance standards that are currently demanded'.

Publication date: 
10.07.2019