Royal Decree-Law 17/2021 on measures to mitigate natural gas prices.

Response to the system operator on the application of Royal Decree-Law 17/2021, of September 14, on urgent measures to mitigate the impact of the escalation of natural gas prices in the retail gas and electricity markets.

This document provides clarification on Title III of Royal Decree-Law 17/2021, of September 14, which refers to the mechanism for reducing the excess remuneration of the electricity market caused by the high price of natural gas on international markets. In particular, clarifications are made on the following issues:

Regarding the scope of application:
The Royal Decree-Law establishes that it will be applicable to peninsular facilities that do not emit greenhouse gases, regardless of their technology. Installations registered in the first and second section of the Administrative Registry of Production Installations in certain groups will be considered as non-emitting.

Additionally, it is established that production facilities with a recognized remuneration framework of those regulated in the Electricity Sector Law are excluded. For these purposes, the facilities that appear with ACTIVE status on the last day of the month object of the reduction, t, in the Specific Remuneration Regime Register (ERIDE) in operating status will be considered excluded.

Regarding the energy considered for the calculation of the reduction:
It is considered that the installations of the owners of installations that accredit directly or through their representative each one of the following points are not subject to the mechanism of reduction of the excess remuneration of the electricity market:

• That the electricity produced affected by the reduction mechanism is covered by a forward contracting instrument whose execution date was prior to the date of entry into force of the aforementioned Royal Decree-Law.
• That the forward contracting instruments are at a fixed price, i.e., that they do not have a recognized delivery price that is indexed to the spot market price of electricity production.
• That the forward contracting instruments do not correspond to contracts signed between the generator and any company of its business group for the sale of the energy produced by the company, ultimately to a marketer of the same group.

Not being subject to the reduction mechanism will be limited to that part of the energy that, without having been matched in the daily electricity market managed by the Spanish Iberian Market Operator, is subject to bilateral forward contracting instruments with physical delivery, as well as that electric energy that is covered by instruments with financial settlement during the period of validity of the mechanism, due to the net selling position of the holding company subject to the mechanism.

Regarding the formula for calculating the amount of the reduction:
The Royal Decree-Law establishes the formula for the monthly reduction to be calculated for each facility. In order to make this calculation, the system operator will use the following information:

• To obtain the amount of the reduction, the system operator will deduct from the value of Qti, the value of energy that complies with the above, related to fixed-price forward contracting and hedging.
• The value of the term obtained as the percentage of hours (as a percentage of one) in which these facilities have marked the marginal price in that month, weighted by the energy matched in each hour.
• The value of the PtGN term, average price of natural gas calculated in accordance with Article 7.

In the case of September 2021, both the FMIGt value and the PtGN value will be calculated exclusively for the days in which the Royal Decree-Law is in force.

Regarding the liquidation of the reduction:
The system operator shall proceed to calculate, notify and pay the reductions as follows:

• The system operator will make a settlement to the owners of the affected facilities, separate from the settlement of the system adjustment services.
• The system operator will issue a monthly invoice to the incumbent companies before the 15th day of the month following the month subject to reduction (t), and a rectifying invoice for differences with respect to the initial invoice before the 15th day of the month following the definitive closing of measurements for month t.
• As with the initial invoice, if applicable, the owners of the facilities will have a period of one month to pay the corrective invoice to the system operator.
• The owner company of each installation is the one that appears in the administrative register of installations. In the event that the system operator requires information that does not appear in said registry, this information may be requested from the representative on its own behalf or from the person responsible for the balance sheet.
• The system operator shall include the amount of payments received before the 15th day of each month in the statement of net chargeable costs and revenues of the system for the month. Payments received after the 15th shall be included in the following month's statement.