The new powers of the National Commission on Markets and Competition regarding energy

Written on 21 Feb 2019

Congress passed Royal Decree-Law 1/2019, of 11 January, which brings the National Commission on Markets and Competition's powers in line with those established in Directives 2009/72/CE and 2009/73/CE of the European Parliament and of the Council,13 July 2009 that govern the internal markets in electricity and natural gas.

On 13 February 2019 Congress passed Royal Decree-Law 1/2019, of 11 January, on urgent measures to adapt the competences of the National Commission on Markets and Competition to the requirements deriving from Community law in relation to Directives 2009/72/EC and 2009/73/EC of the European Parliament and of the Council, dated on 13 July 2009 (hereinafter “RDL 1/2019”). In this way, and according to the Explanatory Memorandum of the aforementioned regulation, the incorrect transposition of the Directives on the internal market is rectified. This rectification allows for a distribution of competences that respects the Community framework and affords the National Commission on Markets and Competition (the “CNMC” or the “Regulator”) with the independence necessary for the exercise of its duties.

In order to achieve this objective, RDL 1/2019 gives the CNMC a list of new competences in energy matters. The CNMC must take into consideration the strategic priorities established by the Government through energy policy guidelines, which will be adopted by order of the Ministry for the Ecological Transition, with the prior agreement of the Government’s Delegate Commission for Economic Affairs. These energy policy guidelines will cover aspects such as security of supply, public security, economic and financial sustainability of electricity and gas systems, independence of supply, air quality. They will also cover the fight against climate change and respect for the environment, optimal management and development of national resources, demand management, management of future technological choices, rational use of energy and any other issues related to the Government’s exclusive competences in the field of energy.

Within the scope of the CNMC’s regulatory power, and in particular with regard to the CNMC’s approval of Circulars, RDL 1/2019 provides that before 1 October of each year, the Regulator must send a forecast of all those Circulars whose processing it intends to carry out during the following year to the Ministry for Ecological Transaction. In the event that the proposed regulatory Circulars affect aspects of energy policy -in particular, transmission and distribution tolling methodology, remuneration for regulated activities, access and connection conditions and operating rules for the electricity and gas system-, the Ministry for Ecological Transition may issue a report on the adaptation of the proposed regulations to the energy policy guidelines (without being binding). In the event of discrepancies between the two parties, the so-called Cooperation Commission will be called upon, with the aim of reaching a consensual solution between the CNMC and the Ministry.

The new competences conferred on the CNMC cover four fundamental aspects: (i) economic issues, (ii) access and connection conditions, (iii) supervision of organised markets and investment plans, and (iv) inspections and sanctions. The most salient aspects of these issues are outlined below:

A) Competence in economic regime matters.

  • To approve the methodology, the remuneration parameters, the regulatory base of assets and the annual remuneration of gas and electricity transmission and distribution activities and LNG plants (with the exception of underground natural gas storage facilities).
  • With regard to the rates of financial remuneration for transmission and distribution activities, it is established that they cannot exceed the maximum limit established by law for the regulatory period. This maximum limit will be judged with reference to the performance of the State’s 10-year obligations in the secondary market with an appropriate differential to be determined at the beginning of each regulatory period. This may be extended if the limit is not determined at the beginning of the new regulatory period or if the value of the financial remuneration rate of the previous period is not established as such.
  • To approve the methodology for calculating network access tolls, their structure and specific values.
  • To determine, in relation to the remuneration of the production activity, which of the system’s services are considered non-frequency and balance-sheet services, as well as their remuneration system, differentiating those that are mandatory from those that are optional.

B) Competences in access and connection matters.

  • Approve, by means of a circular, the methodology and conditions for access and connection, which will include the economic criteria and for the evaluation of capacity, the reasons for denial, the content of applications, permits and contracts, as well as the obligations of publicity and transparency of the relevant information for access and connection.
  • The remaining aspects concerning the regulation of access and connection shall be regulated by means of the Royal Decree approved by the Government.

C) Supervisory competences.

  • To approve the rules of organised markets in their regulatory capacity, in those aspects which require the national regulatory authority’s approval, in accordance with the rules of European Community law.
  • To oversee the investment plans of transmission system operators, in particular as regards their consistency with the Community-wide network development plan, and may also make recommendations for their modification.

D) Inspection and sanctioning competences.

  • By way of the Energy Directorate, the CNMC may inspect all matters within its jurisdiction., This includes the possibility of sanctioning types of infractions provided for in the electricity sector legislation, such as the unjustified interruption or suspension of supply, non-compliance with obligations relating to the system of tolls, distortion of information to cause the right to remuneration for transport and distribution activities, among others.
  • The CNMC is empowered to impose sanctions on infringements already provided for in the electricity and gas regulations.

Finally, and with regard to the transitional regime provided for in the regulation, we must indicate that procedures that have been initiated prior to the enactment of RDL 1/2019 will be conducted in accordance with the provisions of the regulations in force at the time they were initiated. On the other hand, procedures that, although not initiated at the time of the enactment of said regulation, refer to fiscal years prior to 2019, will be governed entirely by the previous law.