HEREN: Spanish regulator to hold first power auction 1st July 2007
Spanish energy regulator CNE is set to hold its first power auction on 1st July this year, the industry ministry said on Tuesday (27th February). The auctions are part of new legislation on bilateral contracts for distributors in the regulated market, set to pave the way both for the common Iberian power market, MIBEL, and the phasing out of Spanish tariffs. The main aim of the new legislation is to improve competition and get rid of discrimination towards power distributors in the free market, the ministry said. It added in a statement: “The auctions are key to prepare the market for full liberalisation. One of the first consequences of the auction is that any price risk will be transferred from consumers to sellers.” Under the new system for bilateral contracts with physical delivery, distributors will be able to combine three different ways of buying power: daily and intra-daily real-time purchases in the wholesale market, the pool, operated by Spanish OMEL, purchases in the forwards market operated by Portuguese OMIP and purchases in the auctions held by Spanish regulator CNE. This is in contrast to the original MIBEL agreement, which outlined that OMIP alone would be responsible for the forwards market (see EDEM 10.222). CNE’s auctions will be based on a ‘descending clock’ model. The seller or auctioneer starts at a set, relatively high, price and then lowers this price repeatedly as time passes, until the bid is accepted. The starting price will be fixed so that it is higher than the expected closing price, to make sure of some degree of competition at the start of the auction. Within 72 hours after the results are published, the players have to sign the contracts. As a new way of buying power in the regulated market, the auctions would help set a price for the ‘tariffs of la`st resort’ outlined by the government last year. These tariffs would only be available to “vulnerable” households, reflecting the auction prices for firm supply contracts with delivery during the time the tariffs are in force. Spain is battling a large tariff deficit, as regulated tariffs are lagging behind the cost of generating energy, while the MIBEL project has been slow to get off the ground. Madrid announced in November last year that it would launch a new power tariff system in the second half of 2007. Under this system, distributors would be able to buy power at auctions from the regulated market, which they then will be able to sell on to third parties (see EDEM 10.244). The new legislation also means that tariffs will be revised quarterly in line with global fuel prices, mainly petrol. In an interview on Spanish radio, industry minister Joan Clos said power tariffs would not rise “significantly” in the second half of 2007. Falling oil prices and mild winter temperatures should keep any price rise in check, he said. © Heren EDEM Report 11041/27 February 2007

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