Highly charged

2 March 2012 By Fiona Maharg-Bravo

Power producers have for years been forced to sell electricity at below cost. It’s hard to see how consumers can now be migrated to economic pricing without further damaging the economy. There’s no easy way of normalising the situation. The government faces some hard decisions.

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Iberdrola and Endesa, Spain’s largest utilities, recently called on the government to set out how it plans to reduce the so-called 24 billion euro tariff deficit. This is the difference between what it costs to produce energy and what utilities are allowed to charge for it.
The gap was 5.6 billion euros in 2010 and 4.1 billion in 2011, according to Iberdrola estimates. The utilities’ lobby group, Unesa, estimates the deficit will be 5.9 billion euros this year. The previous government had committed to eliminating the tariff deficit by 2013, with a 1.5 billion euro limit in 2012.
The deficit, which is clawed back via future electricity bills, has largely been financed by Spain’s five largest utilities. The utilities have already received 13.7 billion euros through a state-sponsored securitisation, according to Endesa’s presentation.
On Feb. 16, Industry Minister Jose Manuel Soria said the sector, consumers and the government would have to find solutions to prevent the tariff deficit from accumulating.

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