01 October 2015

Spanish Competition Authority to review competition in the electricity generation market in Spain

On 29 September, the Spanish Competition Authority (CNMC) announced the commencement of an inquiry into the level of competition in the electricity generation market in Spain.

As part of its role to monitor the functioning of competition in all economic markets in Spain, the CNMC regularly conducts market tests and studies to identify possible competition concerns. Following the liberalisation process initiated in 1997, the electricity generation and retail markets are now subject to competition law.

The regulatory, structural and technological changes that the electricity generation market is currently undergoing may have an impact on the market in the short to medium term. The Spanish competition watchdog has, however, found preliminary evidence of inefficiencies which impede the functioning of a competitive market in the electricity generation sector.

The recently announced study will focus on the degree of concentration in the market as well as its consequences for competition, particularly in relation to prices in the pool and forward markets. The CNMC considers that undertakings in control of strategic assets which put them at a competitive advantage with regard to other companies, such as access to hydroelectric or fuel resources, may be unduly benefiting from the present market structure.

The CNMC will also investigate whether some companies are abusing the procedure for resolving technical restrictions. This procedure, which is limited to a specific geographic area affected by the restrictions, can only be used by undertakings operating a power plant in the affected area. As the prices in the day-market are lower than those available under the procedure, it may be possible that some undertakings are allocating more capacity to the procedure and less to the day-market.

Finally, the CNMC has announced that it will also focus on the current capacity payment system. It will analyse the payments for renewable energy, incentives for the use of national coal and in-house power production.

Following its analysis, the CNMC could propose further regulation to ensure more efficient generation and supply of electricity, in accordance with EU competition law.

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