The Spanish electrical system was fueling a huge financial hole for 14 consecutive years. The permanent gap between revenues and recognized costs (the once so famous rate deficit) reached 29,000 million of euros that became debt that customers continue to pay on their bill month after month and will continue to do so until at least 2028.
The drastic electrical reform of the first government of Rajoy, with severe cuts in all items of the system, turned the situation around and since 2014 the income of the electrical system began to be greater than the expenses, for which successive surpluses were accumulated. year after year. Between 2014 and 2018 the successive surpluses made it possible to accumulate a total of 1,687.5 million euros.
A money that for years was kept in an ordinary bank account of the Santander bank -inherited from Popular after its absorption-, whose owner is the National Commission of Markets and Competition (CNMC). It was a kind of piggy bank of light millionaire that by law initially could only be used to reduce the accumulated debt.
However, successive governments have been introducing legal changes to be able to use it to pay compensation to electricity companies for lawsuits won in court, to cover mismatches between income and costs of the electricity system in recent years or to finance some policies to promote renewable. The need to cover part of the income breakdown and costs of the electricity system in 2021 caused by price records and the Government’s measures to cushion the rise in electricity has caused the electricity piggy bank to run out.
The current government has injected into the electrical system accounts the last 115.7 million of euros left
n in that piggy bank of light, as confirmed by the CNMC in its latest report on the evolution of the system’s debt. The piggy bank empties… or empties again. Because the Ministry for the Ecological Transition already used all the remainder that was left a year before, but finally it did not have to use those almost 116 million that ended up becoming a new surplus.
Plug holes
For years, the accumulated surpluses were immobilized because the legislation only allowed them to be used to reduce the debt of the electricity system, but required regulatory development that did not come.
The Government of Mariano Rajoy found the way to start making use of this disused amount and included in an additional provision of the General State Budgets of 2017 that allowed the use of these funds to face the payment of compensation to power companies or investment funds in international lawsuits. And other subsequent partial legislative changes made it possible to use that remainder for purposes other than payment of the accumulated debt.
In recent years, successive governments have used the electricity piggy bank to pay 519 million in compensation to electricity companies after the Supreme Court rulings that brought down the social bond financing system (the bill discounts that apply to vulnerable households) between 2014 and 2016; another 11.3 million to compensate the companies of manure treatment after a lawsuit; and 120 million were allocated in two calls for aid to renewable projects through the Institute for the Diversification and Saving of Energy (IDAE).
Since 2019, the Government of Pedro Sánchez has made use of these accumulated funds to cover mismatches between income and costs of the electricity system each of the exercises. That same 2019 injected 528 million euros to avoid a rate deficit and achieve balance in the accounts. In 2020, it also allocated 506 million to cover the hole, but finally other adjustments made that amount excessive and an unexpected surplus of 116 million was caused.
It is those 116 million leftovers that the Ministry for the Ecological Transition, commanded by Vice President Teresa Ribera, has used to inject them into the electrical system and those left practically empty the piggy bank of light (The entire accumulated principal amount has been used, but the Government and CNMC do not disclose the interest generated by these funds while they were in the bank account because it is confidential information).
Balance in 2021?
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The Government’s shock plan to contain the rise in the electricity bill, with temporary tax cuts and a drastic cut of 96% of the charges that are paid on the bill, have caused a break in the income of the 2021 system The calculations handled by the electricity companies anticipate, however, that the system’s accounts could close the year practically in balance.
In recent months, the electricity companies themselves had been anticipating that in 2021 there would be a rate deficit of hundreds of millions of euros. However, the use of the accumulated surplus, the injection through the PGE to offset the impact of the decreases in power contracted during the confinement and the higher income from the auctions of CO2 emission rights, among other adjustments, have made that millionaire hole that the companies have been warning about will be covered.