Economy

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

This Royal Decree-Law, approved by the Council of Ministers and published in the BOE, aims to keep consumers' final electricity bill this 2021 at the same level as in 2018. The regulation combines general measures with specific measures of greater impact on vulnerable consumers, families, SMEs and the industrial fabric, as well as the environment and territories close to large reservoirs.

Among the temporary decisions adopted, those of a fiscal nature stand out:

• To extend until the end of the year the suspension of the Tax on the Sale of Electric Energy Production (IVPEE), which levies a 7% tax on generation.
• Reduce from 5.1% to 0.5% the rate of the Special Tax on Electricity (IEE) -the minimum allowed by EU regulations-.
• Expand the amount raised from European CO2 auctions to cover electricity system charges from the 1.1 billion budgeted for 2021 to 2 billion.

Likewise, the temporary reduction of the excess remuneration obtained by non-emitting power generation plants in the wholesale market has been approved. A formula similar to the one used to reduce the carbon dividend of non-emitting plants is applied.

This shock plan has an immediate impact on consumers' bills, either because of the tax reduction or because both the income from CO2 auctions and the gas reduction reduce the charges to be included in the tariffs. The applicable charges will be 96% lower than at present. This makes it possible to reduce the regulated part of consumers' final bills in a range from 47.2% for households to 24.5% for large industry. In addition, the lower tax burden will be applied to this reduction.

Also to face the situation of the coming months, the impact of the cost of the raw material in the calculation of the three bands of the last resort natural gas tariff (TUR) will be limited for a six-month period, so that the average increase in the next quarterly review, on October 1, will be 4.6%, instead of 29%. The amounts due will be passed on in the following reviews, with a damping mechanism similar to the existing one for butane cylinders.

In addition, other measures have been adopted with a view to permanence, such as a new minimum vital supply that extends the ban on cutting off electricity service to vulnerable consumers for six months in addition to the existing four - ten in total - during which time a minimum comfort supply will be guaranteed.

In order to increase the liquidity of the forward markets, auctions of power purchase contracts will be called. Dominant business groups will offer electricity in proportion to their share, and independent marketers, as well as large consumers, will be able to purchase it and sign forward contracts with them with a settlement period of one year or more.

The regulation also provides for the reform of the regulated tariff - the voluntary price for small consumers (PVPC) - to incorporate the auction price reference with a maximum weighting of 10%. Free marketers that purchase energy in this way will have to indicate this on their customers' bills.

On the other hand, the Water Law is modified to avoid sudden releases. Thus, at the beginning of each hydrological year, the hydrographic confederations will establish a minimum and maximum regime of monthly flows to be released in reservoirs larger than 50 Hm3, both for situations of hydrological normality and prolonged drought, as well as a regime of minimum volumes of reservoirs for each month.

In addition, Royal Decree-Law 5/2021 on extraordinary measures to support business solvency in response to the COVID-19 pandemic has been amended, extending the time scope covered by direct aid for the self-employed and companies.

In this sense, the period for the aid coverage is extended by four months, from May 31 to September 30. Thus, this finalist aid may be used for the payment of debts and fixed costs assumed by the companies from March 2020 to September 30, 2021.

In addition, the Royal Decree-Law clarifies that, within the purposes for which the aid may be used, the concept of fixed costs incurred includes accounting losses generated during the coverage period. Thus, the self-employed and companies may use the aid to satisfy debts and make payments to suppliers and other financial and non-financial creditors, as well as to offset the fixed costs incurred, including accounting losses, provided that they have been generated within the established period and come from contracts prior to March 13, 2021 (date of entry into force of Royal Decree-Law 5/2021).

These modifications will allow the autonomous communities that still have part of the allocated resources available to make new calls for aid during the remainder of the year.

This Royal Decree-Law will enter into force on the day following its publication in the BOE.

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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.