The National Markets and Competition Commission (CNMC) will modify the calendar of the regulatory Circulars that they published at the beginning of the year. The regulator approved in plenary session this Monday a modification that will advance the proposal for the financial remuneration rate for electric energy transportation and distribution activities in the third regulatory period, which will span from 2026 to 2031.
Initially, Competition was not going to launch the public hearing process until December for the modification of Circular 2/2019, by which a financial rate of 5.58% was set for 2020-2025. Now, having heard the companies’ complaints and as La Información has learned from sources in the sector, the CNMC will accelerate the process so that the distributors have a greater vision and know the remuneration they will receive for their investments in May or advance
The same sources emphasize that the change has occurred in order to provide the process with greater transparency and participation of the sector. Likewise, within the framework of the drafting of the new circulars, Competition has made the decision to carry out a prior public consultation on the elements that must be considered in the calculation of the rate – which is expected before summer -, according to El Español. I invested. This last step was not done for the previous regulatory period because there was no time between the transfer of powers and the approval of the circulars.
Update compensation to the current economic environment
The sector expects that, a priori, the financial remuneration rate will be based on the WACC methodology of Circular 2/2019. The sources consulted anticipate that the CNMC will defend its use and application because its adoption was carried out through several public consultation processes among the different agents, and after a long period of analysis, it will be a long-term proposal.
However, the sector does not propose a methodological change, but rather wants distributors to be recognized with adequate macroeconomic parameters that have not been adulterated by the economic condition of the moment. In the same way, it considers that it may be interesting to adopt measures where incentives or measures are recognized in exceptional situations, whether economic or political.
Unitary values are also in the spotlight.
For its part, as the regulator itself has recognized, certain adjustments will be made to the calculation methodology to adapt it to the challenges of the energy transition, and enable efficient investment in networks. The previous calendar stipulated an adoption date for the circular for the end of October 2025.
On the other hand, according to what this media reported, the CNMC would have also conveyed to the sector its willingness to review the unit values - the costs that are recognized – for the first time since they were set more than a decade ago. The unit values were established in Order IET 2660/201558 and its definition was intended to cover the investment and operation and maintenance costs associated with the deployment of electrical assets.
Specifically, it was Royal Decree 1048/2013 through which the remuneration of the first period was regulated and, therefore, established the use of investment and operation and maintenance reference unit values. These had to be reviewed annually, but as a consequence of Law 2/2015 de-indexing the economy, the update was suppressed. The sector denounces that, as of today, the unit values are in 2014 prices.
The CNE will continue the processing (if it exists when it is approved)
On the other hand, the sources explain that the changes in the calendar will not affect the segregation of the energy part of the CNMC. “Whatever the CNMC starts, the National Energy Commission (CNE) will have to finish, if it exists by then. The competence is transferred and is transferred with what is being processed,” they say. With the previous calendar, companies complained that it forced them to invest ‘blindly’ because investment decisions had to be made now.
PwC Report Underlines The Need to Establish a “Simpler, Stable and Predictable Remuneration Framework Aligned with Best Practices and Adapted to the New Challenges and Roles of the Energy Transition That Suppose a Positive Impact on the Spanish Economy and the rest of the sectors”. And, above all, let it not be downward. The previous circular meant a cut in the financial rate of 4.1% for distribution and 5% for transportation compared to the previous period.
They fight for recognition of ex-ante costs
In this sense, the sector demands that all regulated costs and investments that distribution companies are declaring in their audits be recognized ‘ex-ante’. The consulting firm’s report also indicates that unit values have lost 28% in value in real terms due to inflation, which has meant that the networks have stopped receiving around 1,658 million euros in remuneration. Furthermore, it states that the financial remuneration rate is not aligned with the new financial or operational context.
Some companies have informed the regulator that distribution activity is characterized by high variability in expropriation and easement costs depending on the distribution area in which it is distributed. Likewise, they highlight that these costs are external to the companies, which do not have any management margin (Compensation Boards, Courts, etc.). Therefore, it proposes that unit costs consider this singularity and be modified to give special treatment to said type of costs.
Spain does not update the financial rate with inflation and this is lower than that of neighboring countries such as France, which is at 7%. Another study prepared by Arthur D. Little and published by the Naturgy Foundation shows that the profitability rate of the current regulatory period, applicable to remuneration between the years 2020 and 2025, was calculated with information corresponding to 2012-2017, which means that the references used are out of date by up to eight years. Where it does seem that the electricity companies have lost is in the fight to eliminate the limit on investments that is linked to GDP. The Government refuses – after having raised the possibility itself – because it assures that it would increase consumers’ electricity bills through pesos.
