After the results generated by the approval and the months of circular controversy on the remuneration of the electricity distribution networks in the new regulatory period 2026-2031 so that January 1 can come into force, the National Commission for Markets and Skills (CNMC) considers that it has acted in accordance with the regulations despite the “essential” objections received from the Council of State, which require a new hearing procedure and the return of the legal text to the consultative body, according to the major electrical companies.
In addition to recalling that the directives of the Council of State “are not binding” (even if they have been approved countless times by the government), CNMC sources believe that these objections have been resolved in the circular which was finally approved and which will be published at the BOE in the coming days.
The Council of State has several substantive objections against the proposed circular which establishes a new remuneration model for distribution networks (not to mention the new financial remuneration tax, the TRF, which electricity companies consider insufficient). According to the first objection, the CNMC invades the powers of the Ministry of Ecological Transition by capping reciprocal investments at 80%, which results in article 40 of the electricity sector law. While the standard establishes that the limit currently in force is 0.13% of annual GDP, set by the government, 80% was a new regulatory limit that the CNMC ultimately eliminated by setting it at 100%.
The second objection alludes to the link between remuneration and demand. The Council of State considers that part of the remuneration of distributors cannot be linked to the creation of a new demand, because it has no legal basis and the CNMC is not competent. To support this point, the body that presides over Cani Fernández has maintained it on the condition that the minister approves the real decree-law that he has promised to launch next spring to respond to the second essential objection: the so-called sustainability scheme that integrates into the remuneration an element of demand risk, which maintains as in the case where a state norm comes into force that you can encourage investments above 0.13%. The aforementioned sources specify that it is not a question of encouraging investment according to demand, but rather according to power, it is a question of new contracts which are consolidated in the network but not in consumption.
The CNMC indicates that “no new regulatory options” have been added, which is why the hubies are required to submit to a new hearing procedure and the return of the text to the Council of State, which causes the extension of the current retributive model, threatened by the lack of time. In all cases, this model will govern for the first half-three-year regulatory period.
Concerning the economic policy orientations of the Ministry of Transition, the CNMC believes that they go beyond all the recommendations. A ministerial decree containing guidelines was only published more than a year ago, mentioned in the TRF circular, and the department headed by Sara Aagesen did not convene the so-called cooperation committee, which mediated between the regulator and the electricity companies, accused of the lack of dialogue. Even though they presented the allegations corresponding to the circulars, no meeting was held with the CNMC council, which only happened for the gas circulars, which are being processed soon, and for what the Commission observed with the managers of the companies concerned.
The CNMC supports its proposals calling for consumer protection, avoiding “perverse incentives”. Consider it an economically sustainable and flexible framework that promotes the use of the current network and new connections, promoting “efficiency between consumers and businesses”.
Concerning the circulars, the organization considers that it has been very careful. In addition to the distribution networks, it also approved the high-voltage transmission networks that manage Red Eléctrica, which did not cause controversy. The Council of State recommended that all current circulars (one on transport remuneration and the other on unit values) be unified in a single form, which was finally achieved.
Within the CNMC, they do not appreciate the high risk of losing in the face of a possible legal request from those affected. According to the organization’s judicial sources, “we have never lost any recourse to the National Hearing on the sectoral circulars of the current regulatory period”. It is also true that the current situation has never been given, only with the reduction of gas payments, proposed in 2019, which was resolved by ministerial arbitration.
On the other hand, the large electricity distributors (Iberdrola, Endesa, Naturgy and EDP) believe that a serious defect has occurred in such a way that they have not resumed the processing of a new circular following the essential objections of the Council of State, which rejects the Commission, therefore, in their opinion, “that parameters were not introduced, new people did not exercise their discretion, it was not necessary for the companies to be heard “. However, industry sources point out that the hearing is not only aimed at businesses, but also other affected parties, such as consumers. And I didn’t take it into account.
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