Electric price hike on hold after auction annulled

The Competition Commission has overturned Thursday’s electricity auction, which caused an 11% raise in the price of electricity as from January, citing “atypical circumstances”.

Wait – Spain has a Competition Commission? Since when? It does, and it’s called the CNMC.

The CNMC refused to validate the results of the energy auction this morning, leaving the national government just 48 hours to decide whether to call for a new auction, or override the CNMC.

In short: Energy producing companies (ie, the Endesa Generating Company and the like) make electricity. Depending on the cost of fuel and other factors, they put a daily spot rate on the cost of electricity and very large consumers pay this. However, the companies that actually sell domestic consumers their power (ie, the Endesa Domestic Distribution Company – are you starting to see the pattern?) buy their power at a public auction every three months. So the distributing companies say they need 3 gigawatts over three months, based on their consumer base, and the generating companies offer them that amount at a fixed rate.

Consumer organisations have been complaining for some time now that around auction times the price increases, and as soon as the auction is concluded the daily price drops again. Leaving the net difference as profit for someone….

The political backlash against the 11% raise in the price of electricity – which has been widely seen as due to the incompetence in the governments running of Spain’s energy market, and the power of the electrical oligarchy – has been increasing all day yesterday.

The CNMC says it believes that the underlying base price of electricity has been increasing artificially in the last two weeks, causing the price on auction day to be artificially high, when set against the base industry rate of the previous months. Translation: Yep, the big boys are gaming the market.

The result comes after a stunning admission by the Minister of the Economy yesterday, when José Soria said in a press release that he believed the energy market was manipulated for gain.

The CNMC adds that it has repeatedly warned of the potential for abuse in the current system, and has again published a list of recommendations on how the system could be improved for consumers.

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