Electricity law and regulation in Spain

1.1.1 The Spanish electricity system has experienced several significant reforms within the last few years. On the one hand, changes have taken place in order to meet the requirements of the Third Energy Package. On the other hand, national regulation has focused on trying to reduce and eliminate the Spanish tariff deficit and the imbalance between the cost of energy generation and revenues. The deficit has been caused mainly by low tariffs offered to large groups of consumers for political reasons, which were not sufficient to cover the costs of electricity generation. The pursuit of a balanced electricity system in respect of costs continues and several regulatory changes, together with an increase in the regulated tariff most electricity consumers pay for their supply, have been implemented (see paragraph 3.2.3).

1.1.2 The National Markets and Antitrust Commission (NCMC), the new regulator, replaced the Spanish Energy Commission. The regulator’s functions are aimed at ensuring effective competition in the electricity market and its objectivity and transparency for the benefit of all the users and for consumers (see paragraph 3.1).

1.2.1 Since the opening of the market to competition, approved by Law 54/1997 of 27 November 1997, which was replaced by the new Law 24/2013 of 26 December 2013 (Electricity Act), the electricity industry has been organised into four separate activities (generation, transmission, distribution and supply).

1.2.2 The sector moved from being vertically integrated and regulated, to being competitive in phases. Generation and supply are partially liberalised, whereas transmission and distribution are mainly regulated. At present, large companies continue to be vertically integrated, with a requirement that their distribution activities are separate for legal, functional and accounting purposes. The exception to this is in the transmission segment, which is controlled by Red Eléctrica de España, S.A. (REE), being the single transmission system operator (TSO). Spain has chosen the option of full unbundling of the TSO, including management separation and adoption of measures relating to effective decision-making rights.

1.2.3 Two main groups of generators can be distinguished: those operating under the general regime and those generating electricity under the specific retributive regime (see paragraph 2.1).

1.2.4 There are also two types of suppliers: liberalised suppliers, who are able to sell at market prices; and last resort suppliers, who are obliged to sell to certain customers (the vast majority of which are final customers) at a fixed price set by the government, the last resort tariff (LRT).

1.3.1 The Secretary of State for Energy is head of the government department responsible for energy matters. Its functions are carried out by the General Directorate of Energy Policy, composed of 5 different general sub-directorates. Each is in charge of several core functions, such as: granting authorisations to operate in the electricity sector, imposing duties related to the organisation and functioning of the electricity generation market, and the granting of licenses to construct and operate a generating station.

1.3.2 The NCMC regularly publishes a list of the main operators in the energy sector, in which is included any company or group of companies with a market share of over ten percent.

1.3.3 On 30 May 2013, the Spanish Energy Commission, the previous regulator, approved the publication of the latest list of main operators. Four operators were named as the dominant operators:

• Endesa Group;
• Iberdrola Group;
• EDP / Hidrocantábrico Group; and
• Gas Natural Fenosa Group.

1.3.4 These dominant operators, by means of their subsidiary companies, are among the key operators in the generation, distribution and supply sectors.

1.3.5 Moreover, these four dominant operators, together with E.ON, are the only five companies authorised to supply on the LRT. Specifically the five authorised LRT suppliers are:

• Endesa Energía XXI, S.L.;
• Iberdrola Comercialisación de Último Recurso, S.A.U.;
• Hidrocantábrico Energía Último Recurso S.A.U.;
• Unión Fenosa Metra, S.L.; and
• E.ON Comercializadora de Último Recurso, S.L.

1.3.6 REE, as mentioned above, is the sole TSO. The organisation of the company was referred in 2008 into a holding structure to strengthen the separation and transparency of the regulated activities in Spain (transmission and system operation). The holding company of the group is Red Eléctrica Corporación, which has two subsidiaries: REE, which is responsible for the electricity activities in Spain; and Red Eléctrica Internacional, which is responsible for the group’s international activities.

1.4.1 Undoubtedly, the main issue in Spain has been the tariff deficit, which stood at approximately EUR 26b on 30 May 2013 1 Comisión Nacional de Energía, “Nota resumen del saldo de la deuda del sistema eléctrico a 10 de mayo de 2013”, Approved by the Board of Directors on 30 May 2013.
www.cne.es/cne/doc/publicaciones/cne64_13.pdf . The tariff deficit would be, broadly speaking, the difference between the real electricity system costs and the revenue generated through the electricity tariff. The Spanish government has enacted several laws and has adopted a wide range of measures aimed at reducing the deficit level (see further detail in paragraphs 2.1.10-2.1.15 below) which has finally been reduced to 0 on 2014.

1.4.2 Many of these regulatory changes led to legal uncertainty in the sector, especially given that some of these amendments (such as the tax regulations and remuneration scheme) were applied retroactively to established plants that were developed on the basis of a fixed long term retribution system approved by the Spanish government.

Structure of the generation sector

2.1.1 Any company is allowed to carry out generation activities provided that the required authorisations are obtained. The Electricity Act established the main differences between generation under the ordinary and special regimes. Nowadays, the specific retributive regime, introduced by Royal Decree-Law 9/2013 and developed in the Royal Decree 413/2014, is the only one which is available for energy generators. The Royal Decree 413/2014 is currently being contested by CMS Albiñana & Suárez de Lezo´s Public & Regulatory Department on behalf of several subsidiaries of one of the dominant operators in the electricity industry.

2.1.2 The production facilities of renewable energy, high-efficiency cogeneration and waste-to-energy, can receive, besides the retribution for selling the energy with the market price, a specific retribution. This specific retribution is composed of a term per unit of installed potency. The reason is to cover the inversion costs that cannot be recovered by the sale of the energy in the market. The aim of this is to guarantee a reasonable level of profitability of the generating station. Application for the special regime is at the discretion of companies that own eligible facilities.

2.1.3 Generation under the general regime can be defined as any other electricity generation that does not fall within the definition of the specific retributive regime.

2.1.4 Most of the electricity demand is met under the general regime, although this has been decreasing since 2008. A total generation of 174,878GWh was registered in 2012 2 ibid , which is a similar figure to that recorded in 2000 and 2.9% lower than that in 2011 3 REE, “The Spanish Electricity System 2012”, 2013
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2.1.5 According to the latest available data from REE, electricity generated under the special regime accounted for almost 38% of total electricity generation in the Spanish peninsula in 2012, corresponding to 102,152GW 4 ibid , meaning that the country has already exceeded the European Union goal of 20% of energy coming from renewable generation 5 Directive 2009/28/EC on the promotion of the use of energy from renewable sources . There are no statistics concerning the new specific retributive regime yet.
Energy mix

2.1.6 The following generation methods fall under the general regime, by order of gross generation 6 REE, “The Spanish Electricity System 2012”, 2013
Click here :

• nuclear energy – 61,470GWh (+ 6.5% compared to 2011);
• coal – 57,662GWh (+ 24%);
• combined cycle gas turbine – 42,510GWh (-21.9%);
• hydroelectric – 19, 455GWh (-29.4%) (with an installed capacity above 50 MW); and
• fuel/gas – 7,5541GWh (+0.8%) (only in the extra peninsular systems).

2.1.7 The following generation methods fall under the special regime, by order of gross generation:

1. wind power;
2. non-renewable and renewable thermal (biogas and biomass);
3. solar (photovoltaic and thermoelectric); and
4. hydroelectric (with an installed capacity below 50 MW)

2.1.8 Electricity generated by facilities eligible for the special regime in the Spanish peninsula grew by 10.2% in 2012. This growth can be explained by the rise in generation from renewables which amounted to 31,866MW at the end of 2012. Electricity generated by renewable technologies supplied 31.8% of the electricity demand in the Spanish peninsula in 2012 7 REE, “The Spanish Electricity System 2012”, 2013
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2.1.9 Wind power was the highest contributor amongst renewables, representing almost 70% of the total renewable generation under the special regime. In 2012, the installed capacity of wind farm generating facilities was increased by 7.4% (in comparison to that of 2011) reaching 22,572MW in the Spanish peninsula 8 ibid .

The tariff’s deficit problem

2.1.10 Pursuant to the Electricity Act, generation and supply activities were liberalised. However, supply has been strongly conditioned by the tariff system since most consumers were paying a regulated tariff, which did not met the cost of generation. The continuing difference between regulated tariffs and market electricity prices led to an endemic deficit in the Spanish electricity system. Notwithstanding the fact that the electricity sector has been liberalised, regulated tariffs were initially set to control the price of electricity and keep it below the real cost of generation, making the price paid by customers artificially low. This structural deficit was initially borne by the five largest electricity companies, Endesa, Iberdrola, Gas Natural Fenosa, Hidroeléctrica del Cantábrico and E.On España, which were given collection rights to recover the debt over 15 years. Subsequently, the Tariff Deficit Securities Fund (FADE) acquired these collection rights from the companies and has securitised amassed debt with public bond issues.

2.1.11 Despite several regulatory measures set to control the tariff deficit, the growth of renewable technologies in 2010 (particularly thermal and solar PV) far exceeded targets for installed power under the Spanish Renewable Energy Plan 2005-2010. This had significantly increased the tariff deficit, leading to major changes being introduced by the new regulation.

2.1.12 However, those urgent measures initially weren´t enough to achieve the goal aimed in the Royal Decree-Law 6/2009 of eliminating the tariff’s deficit by 2013. By those days, the Spanish Government thought the generation capacity currently installed should be big enough to meet the expected demand over the coming years and as a consequence, the Spanish government considered that there was no need to retain the same subsidies incentivising investment in renewable generation facilities.

2.1.13 The Royal Decree-Law 1/2012 removed the economic incentives (feed-in tariffs, premiums and supplements) for all generation falling under the special regime (including solar PV) that was not recorded in the remuneration pre-allocation registry by 28 January 2012. This also applies to renewable generation under the ordinary regime which had not been granted authorisation by the Directorate General for Energy Policy and Mines by 28 January 2012. The pre-allocation procedure for the granting of economic incentives has also been suspended.

2.1.14 The Royal Decree-Law 13/2012 continued the reforming process started by the Royal Decree-Law 1/2012, aiming to correct the imbalance in the electricity system and to reduce the tariff’s deficit by decreasing costs and increasing revenues. Furthermore, it also transposed the European Renewable Energy directives and the Third Energy Package into national law 9 Directive 2009/72/EC regarding the electricity sector; and Directive 2009/28/EC for the promotion of renewable energies. .

2.1.15 The subsequent Royal Decree-Law 20/2012 limited the remuneration of several electricity activities, mainly related to the connection and use of system charges applicable to ordinary regime generating stations. However, all these measures initially turned out to be insufficient as the tariff deficit was growing.

2.1.16 The new Electricity Act regulates that if a deficit in the electricity system is produced, it will distributed among all the subjects of the liquidation system in a proportional way to their payment rights for their activity. Once the exercise liquidation closes, the subjects may recover their contribution within the five following years. The sums invested will be returned with an interest rate which will be fixed in an Order.

2.1.17 Finally, the measures taken by the Spanish Government have led to achieve the objective of ‘zero’ tariff deficit at the expense of the subjects of the liquidation system.

Structure of the transmission sector

2.2.1 Since 2010, REE has been the sole TSO and owner of the whole transmission network. As such, REE must guarantee the continuity and security of supply and adhere to the principles of transparency, objectiveness and independence. REE was set up in 1985 pursuant to Law 49/1984 of 26 December 1984, and the company is regulated by the Electricity Act and Royal Decree 1955/2000 of 1 December 2000, which regulates the transmission, distribution, retail and supply activities and authorisation procedures for electricity facilities.

2.2.2 REE is responsible for: maintaining, developing and extending the grid; managing the transmission of electricity between external systems and the peninsula; and guaranteeing third party access to the transmission grid under equal conditions.

2.2.3 The TSO may only refuse access to the grid in the event that the necessary capacity is not available.

Cross border issues

2.2.4 For the ninth consecutive year, the 2012 balance of energy traded through exchange schedules with other countries (France, Portugal, Andorra and Morocco) Spain was an electricity exporter, with a value of 11,187GWh. This is an increase of 83.5% from 2011 with the largest increase in electricity exchange being through the interconnection with Portugal. This interconnection saw an increase of 181% of electricity transmitted (with a resulting exporter balance) and there was an increase of 25.3% with France (with a resulting importer balance). 10 ibid

Structure of the distribution sector

2.3.1 Article 14 of the Electricity Act, Royal Decree-Law 6/2010 of 9 April 2010 and Royal Decree-Law 13/2012 of 30 March 2012 set out the unbundling requirements for distributors in line with the Third Energy Package.

2.3.2 In 2010, vertically integrated companies implemented compliance programs for unbundling activities and submitted reports on the measures taken to the Spanish Energy Commission, which is responsible for monitoring unbundling.

2.3.3 The key players in the distribution sector are:

• Endesa Distribución Eléctrica, S.L.;
• Iberdrola Distribución Eléctrica, S.A.;
• Unión Fenosa Distribución, S.A.;
• Hidrocantábrico Distribución Eléctrica, S.A.; and
• E.ON Distribución, S.L.

Structure of the supply sector

2.4.1 Customers have the right to choose their supplier and may contract their supply with either an authorised supplier or an authorised agent in the generation market (direct consumers only).

2.4.2 Authorised suppliers are entitled to sell energy directly to end users but only some of them may sell energy on the LRT (see paragraph 1.3.4). These last resort suppliers are also the key players in the supply sector as customers who receive their supply at LRT account for 74.6% of total domestic consumers. In total, LRT applies to 81% of the supply points and 76% of the electricity demand 11 Comisión Nacional de Energía, “Spanish energy regulator’s national report to the European Commission 2012”, 12 July 2012
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2.4.3 Suppliers, including last resort suppliers, are free to set prices (except for supplies on the LRT) for their customers. These prices are based on the wholesale market price and the regulated access tariffs that suppliers pay to the distribution companies. Electricity generators may also enter into bilateral supply contracts with qualified customers.

Key issues

2.4.4 The NCMC monitors retail electricity prices through a price comparison toll. Suppliers are also required to declare the average invoice charged to each type of customer. The results are published in a report twice a year.

2.4.5 The Royal Decree 13/2012 of 30 March 2012 establishes a general time frame of three weeks for the supplier switching process.

2.4.6 Around 2m customers abandoned the LRT in favour of the free market in 2011 and 10.61% of customers also changed their supplier 12 ibid . The Spanish supply market is therefore only partially liberalised, with the majority of customers still purchasing electricity at regulated prices (i.e. on the LRT).

2.4.7 Low-voltage electricity consumers who have a power supply of less than 10kW (i.e. the vast majority of domestic customers) are eligible for the LRT due to the fact that they may have trouble contracting in the free market at competitive prices.

2.4.8 The price of the LRT’s wholesale energy component is set by periodic procurement auctions known as CESUR (there is an automatic pass-through of wholesale market prices). Omel Mercados, S.A.U. is in charge of the organisation and management of the CESUR auctions (see paragraph 2.5.1 below) the corresponding settlements and the communication of the prices. To this wholesale market price, the connection and use of system charges and the supplier’s profit margin are added.

Structure of the trading market

2.5.1 The wholesale (spot) market in Spain is made up of two parts: the organised and non organised markets. The organised market is structured around a day-ahead market followed by six intraday auctions, whereas the non-organised market consists of bilateral contracts, the economic terms and conditions of which are agreed between the signing parties (and not known by the NCMC). The market operator must be notified of these bilateral contracts so the negotiated quantities are known.

2.5.2 The day-ahead market is the main market in Spain. Market participants include generators, distributors, suppliers and eligible customers.

2.5.3 Participation in the day-ahead market is mandatory save where bilateral contracts are entered into on the non-organised market. Bilateral contracts represented 40% of the energy sold in the day-ahead market in 2011 13 ibid .

2.5.4 In the day-ahead market, generators can send, for every hour of the day, simple generation proposals (volume and price) or more complex ones that recognise generation restrictions. In every period, the market operator constructs supply and demand curves with the received bids and determines the market clearing price along with the units generated and consumed. This price is uniform for all the transactions in the market; therefore, regardless of the economic proposal made by an electricity facility participating in the market, they will be paid the market price

2.5.5 The market operator and the agency responsible for the market’s economic management and bidding process is OMI-Polo Español S.A. (OMIE) (formerly OMEL). By virtue of the agreement on the implementation of an Iberian electricity market (MIBEL) between the Kingdom of Spain and the Republic of Portugal, as from 1 July 2011, OMIE assumed the management of the bidding system for the trading of electricity on the spot market within the sphere of MIBEL.

2.5.6 The intraday and complementary markets ensure a constant balance between generation and consumption in the network. The intraday market aims to manage the adjustments required after the day-ahead market has been fixed.

2.5.7 Generators, small-scale generators, external agents, distributors, traders, customers or their representatives, as participants in the generation market, may formalise bilateral contracts as an alternative to the wholesale market.

European Energy Exchange (EEX)

2.5.8 Several Spanish companies participate in the EEX in spot markets (Gas Natural SDG S.A., Iberdrola Generación S.A.U. and Factor CO2 Integral Trading Services S.A.), power derivatives markets (Endesa Generación S.A., Gnera Energía y Teconología S.L. and Iberdrola Generación S.A.U.) and derivatives markets (Banco Santander S.A. and Endesa Generación S.A.).

2.5.9 In Spain, electricity derivatives are traded through MEFFPOWER, the MEFF Energy Segment, which is an official secondary market regulated by Spanish laws and under the supervision of the Spanish National Securities Market Commission (CNMV). The CNMV approval of a new rulebook, on 5 January 2011, allowed the launch of MEFFPOWER in March 2011.

Data on traded volumes 14 REE, “The Spanish Electricity System 2012”, 2013
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2.5.10 During 2012, the energy traded in the electricity market (national demand and balance of exchanges) was 1.1% higher than the previous year.

2.5.11 Spanish peninsula demand decreased by 1.5% in 2012 (compared to 2011), to a total of 251,710GWh.

2.5.12 Further to paragraph 2.2.4 above, export exchange of electricity, globally considered, accounted for 17,459 GWh in 2012 (up by 42.7% compared to 2011) and imports remained relatively steady at 6,272 GWh (+2.3%).

Price differentials 15 Comisión Nacional de Energía, accessed on 11 July 2013.
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2.5.13 The final average price charged to consumers in 2012 can be distinguished depending on the destination and characteristics of the supply:

• last resort suppliers, EUR 63.32/MWh;
• regular suppliers and direct consumers in the free market, EUR 58.37/MWh;
• regular suppliers and direct consumers in the free market and export exchanges of regular suppliers in the free market, EUR 57.86/MWh;
• total national demand, EUR 59.42/MWh;
• total demand, EUR 57.88/MWh; and
• regular suppliers in the free market, EUR 58.39/MWh.

2.5.14 The average price charged over the total demand in 2012 was EUR 59.15/MWh, compared to the EUR 57.88/MWh of 2011. Overall, the average price of electricity decreased by approximately 2.19% in 2012.

3.1.1 Since 7 October 2013, the NCMC has been the regulatory body for energy systems. It was created pursuant to the Law 3/2013 of 4 June and its organic Statute was approved by the Royal Decree 657/2013, 30 August. The NCMC merged the existing National Antitrust Commission and the different market supervisory authorities currently operating, including the role of the Comisión Nacional de Energia (CNE). In fact, the NCMC has assumed all the competences of the CNE, such as issuing annual reports. This results in the regulatory and antitrust functions being assumed by a single authority. NCMC is made up of four directorates for the following areas: Antitrust, Telecommunications and Audio-visual Industry, Energy and Transportation and Postal Industry.

3.1.2 Pursuant to its Statute, the NCMC constitutes a public body with its own legal personality, patrimony and capacity to act with full independence from the public administration and any commercial interests in the development of its activities. All management and staff should act independently from any market interest and should not seek, or take, direct instructions from any government or other public or private entity when carrying out regulatory tasks. The NCMC is also required to co-operate with other Spanish national regulatory authorities (such as the National Competition Commission) and energy regulators internationally.

3.1.3 The NCMC’s board of directors is the highest decision-making body of the regulator, composed by the chairman, the vice-president and the counsel which is in turn composed of eight members, who are elected for a single period of six years. The board is chosen by the Parliamentary and appointed by Royal Decree, following a proposal from the Ministry of Economy and Competitiveness.

3.1.4 According to article 45 of the Royal Decree 657/2013, which approves the rulebook of the NCMC, the General Controller of the State Administration is responsible for the financial control of the NCMC. Nevertheless, this does not take precedence over those functions which are responsibility of the Spanish Court of Audit.

3.1.5 The NCMC will also be the competent authority concerning competition and market abuse in Spain, which is regulated by the Competition Act of 3 July 2007 16 Official State Gazette No. 159, 4th July 2007 .

3.1.6 The NCMC is empowered to investigate, introduce measures, and to foster competition within the Spanish energy market. The Laws 12/2007 and 17/2007 empower the NCMC to supervise the degree of competition in energy markets. The NCMC publishes an annual report monitoring the degree of market access.

3.2.1 The Electricity Act sets forth the legal framework in Spain and, along with the Royal Decree 1955/2000, it forms the core of the Spanish electricity sector regulation.

3.2.2 The main regulations for the specific retributive regime, which has been gaining relevance in the Spanish electricity system in the recent years, are established in the Royal Decree 413/2014, 6 June, as amended.

Recent regulatory changes

3.2.3 Since December 2012, the Spanish Government has enacted several regulations, aimed at the reduction of the tariff deficit and the economic balance of the electricity sector. These include:

• Law 15/2012 of 27 December (in force from 1 January 2013) on tax measures for energy sustainability, which aims to harmonise the tax system with a more efficient and environmentally-friendly use of energy by internalising the costs of energy generation. In order to achieve this goal, a new 7% tax over the value of electricity generated (under both the ordinary and special regimes) was created. A new tax concerning inland water use for energy generation has also been implemented under the Spanish Water Act. The tax rate is 22%, applicable over the total value of hydroelectric energy generated;
• The Royal Decree-Law 29/2012 of 28 December (in force from 1 January 2013) was brought in to reduce the imbalance level between the electricity system’s income and expense, as pointed out in the CNE’s report (number 35/2012). This law increased the upper limit of the tariff deficit for 2012. The 21st additional provision of the Electricity Act established that access tolls should be sufficient to finance the cost of the electricity system and, therefore, it aimed to prevent a further increase in the tariff deficit. Nonetheless, this measure proved to be useless, as the CNE’s report highlighted. The Royal Decree 29/2012 allows the Spanish government to increase the tariff’s deficit instead of increasing the access tolls. As well as the government to modify or eliminate the premium-based economic framework of the special regime facilities, where such facilities do not meet the deadlines for their construction; and
• Furthermore, the Royal Decree-Law 2/2013 of 1 February (in force from 2 February 2013) on urgent measures in the electricity system and financial sector introduced new measures aimed at reducing the cost of the electricity system such as:
  • indexation of the remuneration of regulated activities will be connected to the Consumer Prices Index, without considering food and energy prices;
  • several premiums granted for the production of energy in renewable and co-generation plants were reduced and the upper and lower limits to electricity pricing were eliminated; and
  • generators under the special regime must choose between selling their wholesale energy in the market, at market prices plus a premium, or receiving the regulated tariff (before this Royal Decree-Law, it was possible to change the remuneration mechanism each year).

3.2.4 As a consequence of the updated system, the Ministerial Order IET/221/2013 of 14 February 2013 established the access tolls and premiums for special regime generators from 1 January 2013.

3.2.5 However, the Spanish government enacted then the Royal Decree-Law 9/2013, which came into force on the 14 July 2013. This new law brought in a thorough reform of the electricity regulation system with the aim of ensuring financial stability of the system.

3.2.6 The main amendment was established by article 1(2), which eliminates the remunerative scheme based on a regulated tariff even for existing generation facilities, regardless of decisions made pursuant to Royal Decree-Law 2/2013.

3.2.7 The remuneration scheme for electricity generation under the special regime was replaced by a new economic scheme, which has been developed by the Royal Decree 413/2014, of June 6.

3.2.8 In general terms, the remuneration scheme established is based on the concept of ensuring reasonable profitability for the generating stations. What should be understood as “reasonable profitability” is linked to the yield of the Spanish government’s bonds over a 10-year period, plus 300 basis points. However, the Royal Decree-Law 9/2013 does not set out if “reasonable profitability” will be applied retroactively to generating stations currently operating, if they have obtained profits above this reasonable profitability in the past.

3.2.9 Although the new remuneration scheme came into force on 14 July 2013, no detailed regulation was enacted until the new Law 24/2013, of 26 December and the Royal Decree 413/2014 were published. During the transition period, payments were made under the former remuneration scheme but will be considered as “provisional”, until the detailed regulation for the new scheme is enacted.

3.2.10 The Royal Decree 9/2013 also modified the charges for transmission and distribution activities and capacity payments.

3.3.1 Both the Electricity Act and the Royal Decree 1955/2000 stipulate the obligation to obtain authorisation to construct, operate, modify, transmit or decommission any electricity generation, transmission or distribution facility.

3.3.2 The Royal Decree 1955/2000 regulates the procedure for obtaining this authorisation when issued by the state. Any autonomous region can establish its own procedures; otherwise the procedure stated in the Royal Decree will apply.

3.3.3 However, for generation facilities, authorisation may only be issued by the relevant autonomous region for capacities of 50MW and below. Higher capacities, pursuant to article 111 of the Royal Decree 1955/2000, must be authorised by the Ministry of Industry, Energy and Tourism.

3.3.4 The Ministry of Industry, Energy and Tourism is similarly responsible for authorising primary (i.e. transmission network above 400kY, international interconnections and extra peninsular network) and secondary (networks of 220kY and below that develop electricity transport functions) transmission where the transmission lines span more than one autonomous region.

3.3.5 Distribution networks should be authorised by the autonomous region in which the network will be located.

3.3.6 Pursuant to Article 121 of the Royal Decree 1955/2000, applicants must demonstrate sufficient legal, technical and financial capacity to develop their generating station to obtain authorisation.

3.3.7 Suppliers, pursuant to Article 72 of the Royal Decree 1955/2000, must also demonstrate their legal, financial and technical capacity. They must notify the General Directorate of Energy Policy at the start of their activities, with reference to the geographical area in which their generating station will be developed. Article 2 of the Royal Decree 485/2009 of 3 April 2009 provides for the appointment of last resort suppliers by the government every 4 years (also pursuant to Article 9(f) of the Electricity Act).

3.3.8 The Royal Decree 1955/2000 regulates the grid operating and maintenance procedures, technical requisites for network connections and general principles for grid network plans.

3.3.9 Recently, the new Electricity Act was enacted by the Law 24/2013, of December 26 introducing the economic and financial sustainability. The Electricity Act distinguishes the consideration for the use of networks and the rest of payments for the rest of the system costs. Besides this, the Electricity Act regulates the supply of “voluntary prices for the small consumer”. The concept of LRT will be limited to the most vulnerable consumers in order to maintain the social bond.

3.4.1 The Royal Decree 413/2014 regulates the specific retributive regime, creates the Register of specific retributive regime and the Register of producers facilities of electric energy. The retribution is composed by two retributive terms: the inversion and the operation.

3.4.2 Under this regulation, specific retributive regime generating stations were able to choose to receive payment for electricity under fixed feed-in tariffs or to participate in the market and receive an additional premium. This premium was subject to a cap and floor on final prices for each type of facility, depending on the technology used.

3.4.3 Capacity payments are the other main remuneration incentive given to generating facilities, to guarantee a certain reserve margin and assure the security of supply. These capacity payments have also been affected by the Royal Decree 9/2013. Capacity payments are not available to new generating stations. For existing generators the payments have been reduced but the generators are entitled to receive them for a longer period.

3.4.4 The Order of parameters, which was approved by the Order IET/1045/2014 of 16 June establishes the retributive parameters that are applicable to the facilities of production of electric energy from renewable energy, cogeneration and waste.

3.5.1 A new regulation concerning the wholesale market of electricity, to correct some dysfunctions of the auctions and the formation of prices came into effect on the 1 January 2014. The effects of this regulation will be closely monitored by the market.

4.1.1 The TSO states in its 2012 annual report that the demand for electricity in the Spanish peninsula fell by 1.5% to 251,710GWh in 2012, compared to 2011.

4.1.2 In the extra-peninsular systems (Balearic Islands, Canary Islands, Ceuta and Melilla), electricity demand increased by 0.7%, totalling 15,139GWh, and ended three years of decline.

4.1.3 Most technologies have seen an increase in generation over the past year, especially renewable energy technologies. Solar thermoelectric energy had a remarkable increase of 87.9% and coal increased by almost 24% compared to 2011.

4.1.4 Installed power capacity on the Spanish peninsula was 101.828MW at the end of 2012, which amounted to an increase of 2.4% compared to 2011. Renewable resource power plants are responsible for most of this growth (3,080MW).

4.1.5 Regarding transmission grid facilities, 859.64km of new lines were put in service in 2012; representing an investment of EUR 672m. By the end of that year, the national transmission grid amounted to 41,369km of lines. This can be split into 20,104km for the 400kV network and 21,265km for 220kV or less network (18,429km located in the Spanish peninsula, 1,544km in the Balearic Islands and 1,292km in the Canary Islands).

4.1.6 The interconnection between the Spanish Peninsula and the Balearic islands has only been running under normal operation since August 2012 following significant initial issues. This allowed the Iberian system to provide 15% of the electricity consumed in the Islands, improving the reliability of supply. The improvement of the interconnection with France has also been progressing.

• NCMC: www.cnmc.es
• Ministry of Industry, Energy and Tourism: www.minetur.gob.es
• State Department of Energy: www.minetur.gob.es/energia
• Ministry of Agriculture, Food and Environment: www.magrama.gob.es
• Official Gazette of the State: www.boe.es
• OMIE – Market operator: www.omel.es
• REE – System operator: www.ree.es
• REE Report on the Spanish Electricity System (preliminary version): www.ree.es/ingles/sistema_electrico/pdf/infosis/Avance_REE_2012_ingles.pdf
• Spanish Government: www.lamoncloa.gob.es
• Congress of Representatives: www.congreso.es