Oil, gas and industry pressure to stop the fund that will lower electricity by transferring the cost of renewables
Oil companies, gas companies and industrial employers are rushing efforts to try to stop the National Fund for the Sustainability of the Electric System (FNSEE), the mechanism to remove the cost of the old premiums for renewable energies from the electricity rate and charge it to the entire energy sector.
This instrument is contained in a bill that Congress plans to send to the Senate next week and that the Executive plans to carry out with the support of its usual partners. At a time of convulsion in the energy markets due to the war in Ukraine, in recent days the pressure of different associations against the measure has redoubled, announced by the Government in December 2020 and pick up at recovery plan.
This document recalls that its objective "is threefold: to avoid increases in the price of electricity, to give clear signs of electrification of the economy and to provide certainty, sustainability and balance to the system that will allow the mobilization of the necessary investments in the coming years" for the energy transition.
The FNSSE will assume the costs associated with the specific remuneration regime for renewables, cogeneration and waste (known as RECORE), which finances the bubble premiums of the first decade of this century. The idea is to distribute the effort that until now has fallen exclusively on electricity consumers to the entire energy sector and bring the Spanish model of financing these incentives closer to that of other European countries such as France or Germany, gradually freeing the electric bill.
This fund will be covered progressively (at a rate of 20% of the amount to be financed each year for five years, until reaching 100%) by contributions from trading companies in all energy sectors based on their sales. will be added to mechanism for reducing the extra income of power plants that do not emit CO2 (mainly nuclear and hydroelectric) and that benefit from the rise in emission rights, whose bill (presented almost a year ago) is also voted on by the Congressional Ecological Transition Commission next week.
As the Government explained when it presented it, once the FNSSE is fully in force (and for that five years will have to pass), "it will lower the domestic electricity bill by at least 13% thanks to the reduction in charges", the regulated part of the invoice fixed by the Executive.
But it is unknown what the actual savings would be. At the beginning of 2021, the National Markets and Competition Commission (CNMC) gave it its endorsement for understanding that "it is necessary to maintain the balance of the electrical system and avoid further increases in the electricity bill" and "provides adequate signals in prices for decarbonization", although he warned that "the optimal solution" in the medium term would have to go through a global reform of taxation that at the moment is neither here nor expected, in view of the tax reductions approved by the Government in the face of the incessant increase in the cost of the bill due to the gas crisis, to which will be added the additional VAT reduction this Saturday.
So, the CNMC estimated that after the implementation of the fund the electric bill would be cheaper by 86 euros, while for a gas consumer the increase would be 67 euros per year and for fuel, no less than 52 euros per year. But that was before the current energy crisis. When it was announced, the amount to be financed was around 7,000 million euros, but that figure is reduced every year, because the oldest facilities stop charging a premium after 25 years. In addition, the Royal Decree-Law that introduced the so-called Iberian solution regularized the RECORE remuneration by introducing an adjustment mechanism for deviations in the market price from 2023. With it, the amount to be financed would remain at around 4,000 million, according to industry estimates.
The fund has the backing of power companies such as Iberdrola and Endesa, and entities such as the Fundación Renovables. Its president, Fernando Ferrando, believes that it allows "a correspondence" between what the electricity consumer pays and that of gas and oil to meet the environmental objectives set by the EU. Although he believes that it lacks ambition and asks to shorten the deadlines for its application to two years and reduce the catalog of exemptions it contemplates.
Despite these exemptions, the measure is directly rejected by the companies that are going to have to finance it, such as Naturgy, which in fact left the aelec employers' association for its support of the FNSSE, and the oil companies, such as Repsol, which when it was announced he said he was thinking "serious legal doubts" and refused to pay "the party" of the electricity sector in the past. It is also against the intensive gas and oil derivatives industry, which fears that the cost will be passed on to them.
In their crusade they have as allies the parties of the right. The PP already seconded without success in September Vox's attempt to veto the processing of the billfor believing that it goes against rural Spain, with less weight of electrification.
On Wednesday, his deputy Juan Diego Requena insisted in Congress on that rejection. "Today we can agree not to approve the fund," he told the third vice president, Teresa Ribera. "Today we Spaniards pay more expensive gasoline than Germany, Italy and France." "You insist on making it more expensive. Is the fund going to involve a new tax to make diesel and gasoline more expensive by 10 cents, making Spain the country with the most expensive gasoline in Europe? It is your decision," she assured.
The Spanish Association of Petroleum Product Operators (AOP), which brings together Repsol, Cepsa, BP or Galp, insists on "the negative consequences of the creation of this fund for the entire energy sector, industrial development, activity economy and domestic consumption", with an impact "particularly damaging for the lowest incomes, the most vulnerable groups and the populations of rural and emptied Spain, where there is a greater dependence on gas and hydrocarbons, due to energy consumption needs and autonomy in mobility".
AOP has also underlined "the need to know the new figures that are being proposed for the FNSSE as soon as possible, since the time that has elapsed since the Bill was published in June 2021 and the current crisis may render previous calculations null and void. ".
The Alliance for the Competitiveness of the Spanish Industry, which includes AOP and the large employers of the automotive, paper, chemical and pharmaceutical, food and beverage, cement and steel industries, has asked that the manufacturing sector be excluded from the fund, which "would mean deal a €2.5 billion blow to industrial competitiveness, already battered by escalating energy costs". If it starts up, the accumulated cost for the industry between 2022 and 2026 would exceed 2,500 million, according to this employer's association, which ensures that this impact would be assumed mainly by gas-dependent industries and medium and intensive industrial consumers of electricity. For this reason, "he does not understand" that Congress reactivates in "the worst of times" its processing when measures such as the cap on gas or the inframarginal auctions, which have not yet been held, "have not managed to reduce the impact on the industry of energy costs that continue to run amok".
For its part, the tile employers' association, Ascer, assures that the fund could mean an additional cost of 210 million for the ceramic tile manufacturing sector in the five-year period 2022-26 and "torpedoes the competitiveness of the Spanish ceramic industry, which is already in a difficult situation because of the high prices of energy and CO2". And the gas company Sedigás has assured that it is a proposal "particularly inexplicable and inopportune" and that "the industrial sector will face a severe reduction in its international competitiveness."
According to Sedigás, the FNSSE "will affect consumers residing in cold, inland Spain and in more depopulated areas to a greater extent, generating even more territorial inequalities between rural areas and large cities." And it will be "particularly harmful to the most vulnerable consumers due to its regressive nature: the greatest impact occurs in households with the lowest income, while the 10% of households with the highest income would bear a much lower burden of the tax."
According to this employer's association, after the approval of the CNMC circulars, the "own costs" of the gas system, which cover regasification plants, transport and distribution networks and underground storage, amount to just over 1,900 million euros and the FNSSE increases them by an "exorbitant" 50%.
Gasindustrial, which brings together large consumers, affirms that the FNSSE "will increase costs to the industry at the worst time, if gas-intensive consumers are not protected", in the midst "of a very harsh crisis due to high gas prices". "It could be a serious blow to an intensive gas industry already hit hard, which is struggling to keep its activity and employment afloat in the worst possible context. Although the obligated subjects are the gas marketers, there is no doubt that these costs will end up falling in cascade over final consumers".
According to this employer, "if approved, the measure will cause a cross-subsidization of costs between the different final consumers." "Contributions to the FNSSE from the gas sector will increase each year until reaching 1,200 million euros, which in the five-year term will add up to a total of more than 3,500 million euros, harshly penalizing the gas-intensive industrial consumer."
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