Competition supports the mechanism to stop the excess of remuneration to nuclear and hydroelectric plants, but calls for improvements

The plenary session of the National Markets and Competition Commission (CNMC) values ​​"favorably" the mechanism proposed by the Government to stop the overpayment of nuclear and hydroelectric plants, the so-called benefits that have fallen from the sky, due to the increase in cost of CO2 that they do not support these two technologies.

The Government plans to lower the electricity bill by 5% by cutting 1,000 million to hydro and nuclear

The Government plans to lower the electricity bill by 5% by cutting 1,000 million to hydro and nuclear

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In a report approved unanimously and published this Tuesday, the plenary session of the superregulator gives its endorsement to the proposed mechanism, albeit with nuances: it proposes eliminating the cut to wind power and pumping plants prior to 2005 and calls for adjustments to eliminate possible impacts on the wholesale market price; in addition, it proposes that the income obtained serves to reduce the cost of energy, and is not considered regulated income.

The agency values ​​favorably the draft approved by the Council of Ministers at the beginning of June, "inasmuch as it regulates a mechanism that allows transferring the income received by certain generation facilities for the cost associated with the internalization of the environmental impact in the market price of electricity, electricity consumers and economic activity as a whole ”. But he points to several possible improvements to the text.

The CNMC proposes that technologies that are "contestable", that is, that have competition, be excluded from the scope of application, unlike large hydroelectric power plants and nuclear reactors. It asks that the mechanism only be applied to those plants for which "the start-up of new facilities with the same technology and characteristics (nuclear, large hydroelectric plants) does not seem likely or viable, such that they can compete in the market with the existing ones. , pushing prices down. "

According to the CNMC, the cut will affect 1,500 MW of wind power and another 5,000 MW of pumping that are "contestable" and "see their ability to obtain an over-remuneration limited, because the incorporation of new entrants will increase the competition in the medium term, driving market prices to lower levels. "

For this reason, "the introduction of a criterion of non-contestability of the facilities could be considered in the determination of the subjective scope of the measure that allows excluding contestable facilities." "It is considered that the modification of the scope, incorporating the requirement of being a non-contestable technology, fits in a more adequate way with the object of the measure and with economic rationality."

The agency also considers it “especially relevant” to consider its proposals to eliminate the possible impacts of the mechanism on the price of the wholesale market. He believes that it is “convenient” for the mechanism to be adjusted “in certain aspects that will ensure the elimination of any distortion that may affect the behavior of the subjects in the electricity market”: in relation to the reduction of the income from pumping or its effect on existing contracts In this case, it raises the possibility of applying a transitional period to be applied gradually.

The CNMC also proposes that instead of considering the income obtained with the future law as payable income from the electricity system (which would allow to cover regulated costs such as premiums for renewables, according to the Government's proposal, and reduce the so-called charges set by the Executive), these serve to reduce the cost of energy to the electricity consumer, since it is who is really bearing the extra cost of CO2 emission rights that are passed on to the market price.

The agency also considers it "necessary that a tax reform be addressed with a global approach to the energy sector as a whole, aimed at more efficient compliance" of the objectives set in the National Integrated Energy and Climate Plan (PNIEC).

Impact of 1,000 million

The draft, rejected by the electricity companies, would mean a cut of about 1,000 million for the income of the companies and would lower the invoice by around 5%, according to government estimates. A part of the Executive (the ministers of United We Can) is in favor of approving by decree the cut given the high prices of energy, which has forced the Executive to apply an emergency reduction to electricity taxes. The fourth vice president, Teresa Ribera, prefers to process it as a preliminary project in view of the possible resources of the companies, which they have already threatened to advance the nuclear blackout.

The proposed mechanism makes it possible to transfer to consumers the extraordinary income received by nuclear, hydroelectric and wind plants (which do not bear the cost of CO2) for the operation of the wholesale electricity market, which is governed by a marginalist system in which the latter technology marks the price charged by the rest, and the rise in carbon prices, the price of which has doubled so far this year.

The measure is proposed for installations prior to 2005, when the European emissions trading system came into force. The CNMC warns that "the rapid rise in the price of emission rights in recent months is not a temporary phenomenon, but, on the contrary, responds to the objectives of European environmental policy."

As the CNMC recalls, when these plants sell their electricity in the wholesale market (electricity pool), they receive the price that the generation market reaches the last one that is incorporated. When this price is set by the CO2-emitting plants (combined cycle, thermal or cogeneration), it includes the cost of the rights paid by these plants for the emission of CO2.


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