The electricity companies warn Ribera that the expansion of distribution networks is in danger if they cannot invest more and increase profits

The electricity companies send a clear warning to the Government in the process of updating the electricity distribution networks: it will not be possible to increase capacity if they are not allowed to invest beyond the legal limit that currently exists and to do so they must also be guaranteed a “reasonable” profitability, which is not diminished by the turbulence of recent years, from covid to inflation, through the war in Ukraine and the rise in interest rates. The consumer would see these measures affected by the electricity bill, but the sector affirms that without them it will not be possible to achieve the objectives of electrification and deployment of renewables that the Government itself has set in the update of the energy and climate plan for 2030.

The updating of electricity transportation and distribution networks is currently the focus of the debate around energy that occurs between renewable producers, electricity distributors, and the third vice president and Minister of Ecological Transition, Teresa Ribera, on behalf of the Government central and autonomous communities and the demands to be able to make more investments that are profitable for those who make them was the next step that all the actors anticipated would be taken.

The launch took place this Tuesday at the Naturgy Foundation, where a report was presented on the effect of inflation on the electrification of the economy that includes these two requests as a way to overcome the macroeconomic “turbulence” of recent years, in which inflation or the rise in interest rates to combat it have increased the costs of the entire chain, reducing the profitability that was set in 2017 and that has not been updated since then. To complete the picture, the Government foresees an investment of 45,000 million euros in electricity transport and distribution networks by 2030 to make possible the electrification of the economy provided for in the new National Integrated Energy and Climate Plan (PNIEC) while maintaining a cap on investment that only allows 24,000 million to be injected.

The sector recognizes that this request to raise the investment ceiling and the profitability of investments has a direct impact on the electricity bill, which among its elements includes “tolls”, where the consumer pays for the cost of transporting electricity from the place where it is generated and distribute it to your home. The effect would be to “increase them”, stated Cristina Olivera, from ADL, who added that “it is something necessary”, although “marginal” in the bill.

Correct but distorted tool

The director of Electricity Networks Spain at Naturgy, Mónica Puente, has spoken on behalf of “the entire sector” to point out that the electricity distribution remuneration model – which is made up of unit values and guaranteed profitability – is a “tool correct” but it is not so correct in the current circumstances of inflation and rate increases after Covid and in the midst of the war in Ukraine. It has also stressed that the level of investments that the regulation allows right now is not enough to achieve the investment to update the electrical networks that the Government itself foresees for 2030.. He has asked that “the unit costs be reviewed with all the effects that the war in Ukraine, the chip crisis, and inflation have had.”. Naturgy asks that “a signal be given” and that the regulator “make an exception taking into account the abnormalities.”

This limit is 0.13% of Spanish GDP per year for investment in transmission networks – from the generator to the substation – and 0.065% for distribution networks – from the substation to the final consumer -, which is equivalent to an investment potential by the electricity companies to improve the distribution of electricity to their customers by 2,600 million euros per year, 24,000 until 2030, “compared to the 45,000 million of private investment” that the Government expects from the companies. This limit was set by the Government of Mariano Rajoy in the midst of the real estate boom, seeing that many developers demanded access to networks for projects that were later not carried out but in which the investment remained.. At a time when electrical networks have become a key element to allow the energy transition towards renewables, the sector considers it essential that it can be increased. What maintains the sector and is supported by the report prepared by the consulting firm Arthur D. Little (ADL) is that “the current average permitted investment volume should at least double.”

They add to this request another regarding the profitability of these investments. For companies to want to invest in networks, they must be guaranteed a “reasonable” return, which is not currently occurring due to inflation and rising costs, which it warns do not reflect either the unit values or the guaranteed profitability contemplated by the investment system. remuneration. “They have not been updated and may not be presenting sufficient signs of investment,” says the report on

“This situation is causing high uncertainty and could mean that the objectives set by the PNIEC are not achieved,” indicates the document, which warns that the remuneration for companies' investment that was set with macroeconomic data from 2012 to 2017 for The period between 2020 and 2025 does not take into account the real costs of distribution and would result in an annual deficit of 1% that would make the Financial Remuneration Rate (FRR) of 5.58% that was set eight years ago ” was not enough to continue guaranteeing the investment”.

To reverse this situation, the electricity distributors are asking for a “cost review or temporary updates in exceptional situations”, “corrections or profitability margins in the TRF in exceptional situations and” making the investment limit more flexible so that it reaches at least double what is allowed today.

Commission with France on interconnections

Puente has stated that “it seems” that the National Markets and Competition Commission (CNMC) is willing to introduce some exceptionality factor and sources from the sector indicate that there are also contacts with the Ministry of Ecological Transition, without currently knowing if will listen to your demands.

For his part, Ribera was in Paris this Tuesday, to attend a ministerial meeting of the International Energy Agency (IEA), before which he met with the new minister for the Ecological Transition, Christophe Béchu, and with the Minister of Economy, Bruno Le Maire, with whom he has agreed to create a bilateral commission to advance interconnections, both the two electrical ones that, in addition to the one in the Bay of Biscay, remain to be designed through the Pyrenees and to study at the level technical support from both Governments on the H2Med project and particularly the underwater hydrogen connection between Barcelona and Marseille (BarMar) on issues such as “cost distribution” and “the best design”.