Electricity regulation in spain overview practical law1

Electricity regulation in Spain: overview, Practical Law Country Q&A 4-529-8116 (2018)
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Electricity regulation in Spain: overview
by Juan Ignacio González Ruiz and Maria José Descalzo Benito, Uría Menéndez
Country Q&A | Law stated as at 01-Aug-2018 | Spain
Overview
Electricity market
Overview
Recent trends
Regulatory structure
Regulatory framework
Regulatory authorities
Electricity companies
Main companies
Generation
Transmission
Distribution
Supply
Unbundling requirements
Foreign ownership
Insolvency
Import of electricity
Electricity generation and renewable energy
Sources of electricity generation
Fossil fuels
Nuclear fission
Renewable energy
Government policies/incentives
Renewable energy targets
Authorisation and operating requirements
Electricity transmission
Transmission charges

System balancing
Electricity distribution
Distribution charges
Electricity supply
Trading between generators and suppliers
Electricity price and conditions of sale
Consumer
Wholesale
Statutory powers
Tax issues
Insurance
Reform
The regulatory authorities
Ministry of Energy, Tourism and Digital Agenda (Ministerio de Energía, Turismo y Agenda
Digital)
National Markets and Competition Commission (Comisión Nacional de los Mercados y la
Competencia)
Online resources
Red Eléctrica de España (REE)
OMI Polo Español (OMIE)
Contributor details
Juan Ignacio González Ruiz, Partner
Maria José Descalzo Benito, Counsel
A Q&A guide to Electricity regulation in Spain.
The Q&A gives a high level overview of the domestic electricity market, including domestic electricity companies, electricity
generation and renewable energy, transmission, distribution, supply and tax issues. It covers the regulatory structure; foreign
ownership; import of electricity; authorisation and operating requirements; trading between generators and suppliers; rates and
conditions of sale and proposals for reform.
To compare answers across multiple jurisdictions, visit the energy and natural resources Electricity regulation Country Q&A
tool.
This Q&A is part of the global guide to energy and natural resources. For a full list of content visit www.practicallaw.com/
energy-guide.

Overview
Electricity market
1. What is the role of the electricity market in your jurisdiction?
Overview
The electricity sector has changed substantially in the last two decades due to the implementation of European
directives creating (and therefore liberalising) a sole internal electricity market. Since liberalisation, electricity
activities are primarily carried out by private entities on the basis of free competition. There are no state-owned
entities or companies controlled by regional or local authorities.
The electricity sector has been declared a service of general economic interest (servicio económico de interés
general) meaning that, in practice, public authorities have powers to guarantee that the energy supply will be
provided under suitable conditions to satisfy the general interest (that is, efficiency, quality, regularity, affordability
and convenience). This implies that public authorities can impose public service obligations (obligaciones de
servicio público) on private entities and set out more conditions on the exercise of their activities.
Spanish regulations distinguish between regulated and non-regulated activities. Regulated activities include:
• Transmission.
• Distribution.
• Economic and technical management of the system.
Non-regulated activities include:
• Generation.
• Load managing services.
• Wholesale supply activities.
Regulations set out that transmission and distribution facilities must (with a few exceptions) be available for use
by other agents in the electricity system, so transmission and distribution companies cannot refuse access to their
facilities if they have enough capacity. Remuneration for this use is set out in the regulations.

Unregulated activities are conducted on the free market, which is open to all economic agents and prices can be
set freely (with the exception of the supply of "reference"). Since 1998, electricity supply has been structured into
two regimes:
• Free market supply to eligible consumers (all consumers became eligible on 1 January 2003) carried out by
free marketers using freely agreed conditions.
• Supply to specific consumers carried out by reference marketers under tariffs, terms and conditions set out
in regulations approved by the central government.
The economic aspects of electricity generation, distribution, supply and transmission are regulated at a central
government level (particularly issues around the production market, tariffs and the basic economic relationships
between different market agents).
Regulations introduced by regional authorities are relevant in the context of environmental and construction
permits. Electricity facilities that do not have an impact on other territories are subject to permits issued by the
regional authorities.
Electricity generation remains an unregulated activity (so it is not subject to the same constraints, supervision and
remuneration schemes as transmission or distribution), although construction and operation permits and licences
must be sought from different authorities. There is no generation licence or charter. Generation facilities are licensed
and the person responsible for their operation will be registered together with the particular facilities. Since the early
1980s, a special regulatory regime has been made available to co-generation facilities, mini-hydro power stations
and other facilities using renewable energy sources.
Recent trends
One of the biggest issues in the electricity sector was the tariff deficit (see Question 8) and the main purpose for
reform was to resolve the problem. It arose when the regulated costs exceeded the regulated proceeds. The main
purpose of recent regulations was to achieve economic and financial sustainability in the market and balance the
proceeds and costs to get rid of the deficit.
Regulatory structure
2. What is the regulatory framework for the electricity sector?
Regulatory framework
The main regulatory framework includes:

• Directive 2009/72/EC concerning common rules for the internal market in electricity and repealing
Directive 2003/54/EC (Electricity Markets Directive 2009).
• Law 24/2013 of 26 December on the Electric Sector (Electric Sector Law) is the main piece of legislation. It
establishes the rights and duties of operators and authorities, which authorisations and permits are required,
the legal framework for activities and the applicable offences and sanctions.
• Royal Decree 2019/1997 of 26 December, which controls and governs the electricity production market.
• Royal Decree 1955/2000 of 1 December, which regulates the production, transmission, distribution,
marketing and supply of electricity and the authorisation procedures for electricity facilities.
• Royal Decree 413/2014 of 6 June, which sets up the economic and industrial legal framework for renewable
energy production.
• Other rules found in various laws, royal decrees, ministerial orders and other pieces of legislation, as well as
all the specific regulations introduced by Parliament and the government of each autonomous region (mostly
dealing with permit proceedings and environmental issues).
• Operating procedures developed by the system operator Red Eléctrica de España (REE) (see Question 21).
• Generation Market Functioning Rules (Reglas de Funcionamiento del Mercado de Producción de Energía
Eléctrica) approved by the market operator OMI Polo Español (OMIE).
Regulatory authorities
The authorities differ according to the legal distribution of areas of authority and functions with regard to vertical
distribution of powers (central/regional/local) and the subject area (regulatory, environmental). The following is a
non-exhaustive list of the main Spanish authorities with powers:
• Ministry of Energy, Tourism and Digital Agenda (Ministry of Energy).
• Ministry of Agriculture and Fishing, Alimentation and Environment (Ministry of Environment).
• The Department of Energy in each autonomous region.
• The Department of the Environment in each relevant autonomous region.
• National Markets and Competition Commission, which is a single regulatory body that combines
the functions of the competition commission and the regulatory supervision bodies of the energy,
telecommunications, media, post, railway, transport, air transport and gambling sectors.
See box, The regulatory authorities.
Electricity companies
Main companies

3. What are the main companies involved in electricity generation, transmission, distribution and
supply?
Spanish regulations distinguish between main and secondary networks. The main network (transporte primario)
is composed of:
• Power lines, parks, converters and other electrical elements with nominal voltages of at least 380 kV.
• Other international interconnection facilities.
• Interconnections with non-peninsular territories.
Secondary electricity networks (transporte secundario) include:
• Power lines, parks, transformers and other electrical elements with nominal voltages of at least 220 kV that
are not considered primary networks.
• Other facilities with nominal voltages under 220 kV that fulfil transport functions.
• Networks with nominal voltages of at least 66 kV in non-peninsular territories.
• Island interconnections not considered primary networks in view of their voltage.
Assets relating to communications, safety, control, auxiliary services and so on, whether or not related to electricity,
are considered complementary.
Generation
The two largest companies represent 39% of electricity generation in Spain. These are Endesa (21%) and Iberdrola
(18%). However, market share among electricity companies varies according different criteria (in terms of the energy
source or technology used).
Transmission
Red Eléctrica de España (REE) is the system operator and the sole and exclusive transmission system operator in
Spain. However, it is foreseen that specific transmission facilities belonging to the secondary network can be owned
by distribution companies on a case-by-case basis.
Distribution
Distribution companies are undertakings or co-operatives of consumers and users (cooperativas de consumidores
y usuarios) that distribute electricity to end consumers (Article 6.e, Electric Sector Law). Distribution facilities
comprise lines, parks, transformers and other facilities with nominal voltage under 220 kV.

Supply
Generation and supply are currently dominated by the three largest companies in the sector:
• Endesa.
• Iberdrola.
• Gas Natural Fenosa.
Supply activity is divided between free marketers and reference marketers (see Question 1).
Unbundling requirements
Legal and functional unbundling means that distribution companies can only undertake ownership, development
and management functions in relation to the distribution grids, and only wholesale suppliers (comercializadores)
can supply electricity. However, a group of companies can carry out activities that could not be undertaken by
the same company (for example, distribution of electricity and supply) provided that the activities are developed
through separate companies and certain specific functional unbundling requirements similar to those contained in
the Electricity Markets Directive 2009 are met.
Unbundling was carried out in line with the Electricity Markets Directive 2009 and Spanish implementing
regulations opted for the transmission system operator (TSO) regime. The alternative independent system operator
regime was not deemed necessary because the high voltage power transmission grid (except for very few facilities
that are in fact part of the distribution grid) belongs to REE. In practice, ownership unbundling has been in place
for the high voltage transmission network in Spain since 2010.
REE was certified as TSO by the National Markets and Competition Commission on 19 July 2012.
As the TSO, REE is subject to specific limitations that are peculiar to Spain. In particular, no individual or entity can
hold more than 5% nor exercise voting rights in excess of 3% in REE. In addition, any entity carrying out activities
in the electricity sector and individuals or companies who directly or indirectly, hold a shareholding exceeding 5%
in it, cannot exercise voting rights in excess of 1% in REE. Under EU unbundling regulations, additional restrictions
apply to REE as certified TSO in respect of investors participating in generation or supply companies carrying out
production or wholesale supply activities.
Foreign ownership
4. Are there any restrictions concerning the foreign ownership of electricity companies or assets?
Foreign ownership of electricity companies and assets is not subject to restrictions.

However, there are certain transactions subject to a post-closing notification process that can lead to the imposition
of specific conditions if there is:
• A real and sufficiently serious threat to the security of supply.
• The transaction consists of the acquisition of shares by a regulated company or in a regulated company by a
non-EU company.
Under Law 3/2013, the following transactions, when carried out by either an EU undertaking or non-EU
undertaking, must be reported to the Ministry of Energy:
• Acquisitions of (or by) companies undertaking regulated energy activities or owners of certain types of key
energy assets.
• Acquisitions of assets that allow regulated activities to be carried out.
• Acquisitions of stakes in a percentage of share capital that confer a significant influence on the management
of companies that (directly or through controlled companies) undertake regulated activities or are the title-
holders of the assets.
Any of the above acquisitions carried out by non-EU or non-EEA persons can be subject to conditions imposed
by the National Markets and Competition Commission (CNMC) on the activities undertaken by them if the CNMC
believes there is a real and sufficiently serious threat to the security of supply of electricity within the scope of the
activities undertaken by the acquirer. Specific duties can be imposed on the acquirer to secure compliance with any
conditions imposed on the target company.
A real and sufficiently serious threat to the security of supply is defined as:
• Security and quality of supply (seguridad y calidad de suministro).
• Security against the risk of insufficient investments (seguridad frente al riesgo de una inversion
insuficiente).
• Breach of the required legal, technical, economic or financial capabilities required from the acquirer or the
acquired company under the Electric Sector Law.
Insolvency
5. Are there any special insolvency regimes that apply to companies operating in this sector?
No special insolvency regimes apply to the companies operating in the electricity sector. Therefore, the general
insolvency regime also applies to such companies. However, the Electricity Sector Law allows the public intervention

of the Spanish Government in companies operating in the electricity sector if the breach of their obligations may
affect the continuity and security of supply and with the aim of guarantying it.
Therefore, public intervention is possible (among other cases) when a company has been declared insolvent and
it is not in a position to comply with its obligations if the winding up of the company as a result of the insolvency
has commenced.
Import of electricity
6. To what extent is electricity imported and/or exported?
Due to its geographical position, the possibility of enhancing Spain's interconnections with the rest of Europe is
limited and this is one of the country's weaknesses.
Exchanges of electricity in the EU can be freely carried out subject to the terms and conditions of Electric Sector
Law. Acquiring electricity using intra-EU interconnectors or with third countries can be carried out without any
further requirements by generators, wholesale suppliers or direct market consumers. Sales to other EU countries
can be carried out by generators, wholesale suppliers or direct market consumers following notification to the system
operator. When it comes to exports, the relevant generator or wholesale supplier must identify the border through
which the energy is due to be exported and whether it is a sale to a specific foreign unit or to a foreign system. The
system operator will then check the capacity available at the relevant interconnectors and produce the Provisional
Viable Daily Programme.
Exchanges of electricity with third countries are always subject to administrative authorisation from the Ministry
of Energy.
Spain has several interconnections with Portugal, France, Morocco and Andorra.
Interconnections between Spain's transmission grids and those of their neighbouring countries is substantially
limited, particularly the one between Spain and the remainder of Europe through France. The limited capacity
available at the Spanish-French border puts an enormous burden on the amount of power that can be traded between
the two countries and has led to the implementation of a series of rules dealing with the allocation of the limited
capacity (for example, through auctions).
EU authorities have set up a non-binding target of 15% of international/intra-community exchanges for 2030. In
Spain, the interconnection ratio is less than 5%, one of the lowest in the EU.
Spanish and French authorities nevertheless have plans to construct new interconnection facilities through the
Pyrenees to reach an interconnection ratio of 10%.

Electricity generation and renewable energy
Sources of electricity generation
7. What are the main sources of electricity generation?
There is a wide and diverse mix of sources from which electricity is generated, ranging from conventional
non-renewable sources (like coal and natural gas) to a large variety of unconventional renewable sources (like
photovoltaic and wind farms).
Unconventional renewable sources have experienced major growth in recent years, reaching 45.5% of installed
capacity and 39% of generated electricity.
Fossil fuels
Coal and oil are the main sources of energy generation.
Nuclear fission
Electricity produced from nuclear fission represents 7% of the total installed capacity and 21% of total electricity
generated.
Renewable energy
According to statistics provided by system operator Red Eléctrica de España, the main renewable sources and their
percentage of total generated electricity in Spain are:
• Hydroelectric (14%).
• Photovoltaic solar (3%).
• Thermosolar (2%).
• Wind power (18%).
• Waste (0.5%).
• Other (1.5%).

8. Are there any government policies, targets or incentives in place to encourage the use of renewable
or low carbon energy?
Government policies/incentives
In line with the EU renewable energy policy, Spain has established a legal framework for renewable energy
production, cogeneration and waste, including specific remuneration incentives, to encourage the use of renewable
and low carbon (clean) energy.
This framework is mainly contained in the Electric Sector Law and developed by Royal Decree 413/2014.
Under Decree 413/2014, the remuneration incentives framework for new facilities is based on a regulated
remuneration system intended to cover the overrun associated with such technologies and grants a reasonable return
calculated on the basis of a hypothetical "efficient and well-managed facility" (planta eficiente y bien gestionada).
However, not all new facilities can benefit from the specific remuneration regime. The allocation of economic rights
is performed through public auctions and the allocated economic rights are limited to a specific level of installed
capacity. The promoters of new facilities can participate in the public auctions to be awarded the economic rights
associated with a specific capacity.
The economic rights resulting from the two most recent public auctions were nearly zero. Meaning that the specific
economic regime for the awarded facilities will be similar to the wholesale market price (precio de casación).
Renewable energy targets
Spain is bound by the targets set by the EU through Directive 2009/28/EC on the promotion of the use of energy
from renewable sources (Renewable Energy Directive). This sets a target of 20% for 2020 in terms of overall final
consumption from renewable sources in the EU. There are also energy and climate goals under which EU countries
have agreed on a target for 2030 of at least 27% of final energy consumption from renewables.
In addition, new renewable energy targets may appear in the context the EU Energy Roadmap for 2050, which aims
to establish the basic elements for a transition of energy to a low-carbon economy in the EU.
See box, Renewable energy sources.
9. What are the main obstacles to the development of renewable energy?

The main obstacle to the development of new renewable facilities is the lack of profitability if the facility is not
entitled to regulated remuneration allowing it to guarantee a reasonable return. These projects can face problems
securing external financing.
Under threat of financial unsustainability caused by the tariff deficit, the Spanish authorities adopted numerous
reforms between 2012 and 2014 to reduce it. These regulations substantially modified the economic incentives
for renewable energy already established in older regulations and significantly affected the economic results of
companies operating in the renewable sector.
Entitlement to regulated remuneration for new facilities is allocated through public auctions and so not all new
facilities receive it.
10.Are there any plans to build new nuclear power stations?
The moratorium on the construction of nuclear power plants (established under the 1983 National Energy Plan and
Law 40/1994) expired in 2015, so there are no restrictions on building new nuclear power stations.
There are currently six operational nuclear power stations:
• Almaraz I and II.
• Ascó I and II.
• Cofrentes.
• Garoña
• Vandellós II.
• Trillo.
According to the government's most recent energy statements, it is not anticipated that new nuclear power stations
will be developed in either the short or medium term. In fact, there is a current political and social debate about the
closure of the current nuclear plants, or their non-renewal.

11. What are the authorisation requirements to construct electricity generation plants?
Spanish regulations establish that the construction of generation plants (and the facilities or connection nodes
associated with them) require administrative energy authorisation (autorización administrativa). Therefore, a
company must have the following authorisation and permits:
• Prior administrative authorisation (autorización administrativa previa) to prove that:
• the proposed facilities comply with the necessary technical and security standards; and
• the location of the facilities is consistent with land planning requirements (régimen de ordenación
local).
• Approval of the execution project (aprobación del proyecto de ejecución), meaning approval of the
engineering construction project necessary for the works to start.
• Operating licence (autorización de explotación) without which the relevant facility cannot start its
commercial operation.
Construction of generation plants is also subject to strict environmental control, which in most cases requires that
the following authorisations and consents be obtained from the relevant authorities before construction works start:
• Integrated environmental authorisation (autorización ambiental integrada), which establishes the
environmental conditions that the generation plant must comply with (for example, waste management and
gas emissions).
• Environmental impact assessment (evaluación de impacto ambiental), through which the authorities
declare the extent to which the environment will be affected by the generation plant and the actions that
must be taken to prevent and mitigate the risk of environmental damage.
These will be granted either by the Spanish authorities or by regional authorities depending on the capacity of the
generation plant.
Various other permits must be acquired before or simultaneously with the prior administrative authorisation,
including:
• Grid access and connection permit.
• A series of planning requirements and licences relating to the municipal activity and operations that may be
required at municipal level.
• Water authorisation and other permits or consents to cross land or public domain infrastructures.
12. Are there any requirements to ensure new power stations are ready for carbon capture and storage
(CCS) technology, or requiring a plant to retrofit CCS technology once this is ready?

Carbon capture and storage (CCS) technology is currently regulated by Directive 2009/31/EC on the geological
storage of carbon dioxide and Law 40/2010, which establish the permits and ongoing requirements to build and
operate underground carbon storage facilities and third-party access to them.
However, there are no requirements imposed on existing facilities for them to be considered ready for CCS
technology (which is currently at an experimental stage in Spain).
13. What are the authorisation and main ongoing requirements to operate electricity generation
plants?
See Question 10.
14. What requirements are there concerning connection of generation to the transmission grid?
The Electric Sector Law grants generation plants a right to access either the transmission or distribution grid (known
as third party access or TPA) (acceso de terceros a la red).
Connection is subject to the prior grid access and connection permit, which is issued either by the transmission
system operator or the distribution system operator depending on whether the facilities will be connected to the
transmission grid or the distribution grid.
The requirements for the grid access and connection permit include:
• The existence of free capacity in the grid.
• The fulfilment of all technical requirements.
• The granting of a security right in favour of the public authorities to guarantee that the company will
undertake the correct actions to obtain the applicable authorisations.
To the extent that TPA is considered a right for any generation plant, grid access and connection permits cannot be
denied for any reason other than those listed above.

15. What requirements are there concerning the decommissioning of a generation plant at the end of
its period of operation?
The owner of a generation plant intending to close its power station (even at the end of its useful life) must submit
an application for the closure of the Plant to the MINETAD and has an obligation to dismantled the plant (Article
135, Royal Decree 1955/2000 of 1 December, regulating the transportation, distribution and wholesale supply
activities and the electricity facilities administrative procedures (RD 1955/2000)).
Together with the notice of the intention to close down the plant, the applicant must submit:
• A closure project.
• A summary memo of the most significant reasons to proceed with the closure (technical, economic,
environmental or others).
• The most recent technical drawings and plans of the plant.
• A dismantling project that must take into account the environmental aspects provided under the applicable
regulations and those in the environmental permits of the plant (if any).
The MINETAD must obtain prior reports on the closing down of the plant from the regional government, the CNMC
and the system operator. The closure resolution must be notified to the owner and published in the Spanish Official
Gazette and in the Autonomous Region Official Gazette.
Once the closure resolution is issued, the MINETAD must issue a closure certificate on the date the closure becomes
effective. Finally, the registration with the administrative registry of generation facilities (Registro Administrativo
de Instalaciones de Producción de Energía Eléctrica) must be cancelled.
In general, decommissioning obligations aim to return the areas affected by the projects to their original state. In
most cases, the project's promoter must have deposited security in favour of the relevant authority that can be
enforced if there is a failure to comply with the relevant obligations.
Electricity transmission
16. What are the authorisation requirements to construct electricity transmission networks?

See Question 10.
17. What are the authorisation and main ongoing requirements to operate electricity transmission
networks?
Although regulations do not provide for an operation licence as such, the construction, modification and closure
of transmission and distribution facilities requires prior administrative authorisation. To secure them, applicants
must evidence their legal, technical and economic capacity.
The construction, modification or closure of transmission or distribution facilities require the same permits as
described in Question 10.
Transmission charges
18. How are the charges and conditions for the transmission of electricity regulated?
The regulated costs of the electricity system are financed through:
• Access tolls to transmission and distribution grids paid by consumers, generators and traders. Access tolls
must be approved by the Ministry of Energy using methodology approved by the National Markets and
Competition Commission (CNMC).
• Other charges that may be established by the government to cover other costs of the electricity system.
• Any other financial mechanism established by regulations.
• Any provision included in the state annual budget to cover renewable energy generation costs and non-
peninsular costs.
• Any other proceeds allocated for these purposes by Spanish regulations.
All tariffs, tolls and charges are based on voltage levels, hourly periods and type of consumption and are the same
nationwide. Tolls payable by generators take into account the electricity supplied by them to the grid and is in line
with the maximum permitted under EU regulations (EUR0.5/MWh). Third party access tolls payable by power users

only include costs to access the transmission and distribution grids. Other costs (for example, costs of regulated
remuneration payable to renewable generators or system or market operator costs) are paid by consumers in their
final electricity bills and are no longer included as part of third party access tolls.
The CNMC approved Circular 3/2014 on the methodology to determine transmission and distribution tolls.
However, the competent authority to approve transmission and distribution costs is the Ministry of Energy and it
does this on an annual basis (although tolls can be reviewed at any time if certain circumstances arise).
The tariffs and charges applicable in 2017 were set by Order ETU/1976/2016 (www.boe.es/diario_boe/txt.php?
id=BOE-A-2016-12464).
System balancing
19. How is electricity supply and demand balanced?
Given that electricity cannot be stored in large quantities, it is essential that the electricity generation market's
balance is preserved at all times.
The ultimate guarantee of this balance rests with the adjustment services that are rendered by generators and
managed by the system operator. As system operator, Red Eléctrica de España (REE) must ensure the security and
continuity of supply, and proper co-ordination between production and transmission, guaranteeing that the energy
produced by the generators is transported to distribution networks under the quality conditions required by the
regulations in force from time to time. Therefore, REE's main role as system operator is to ensure that there is an
appropriate balance between generation and consumption of electricity.
REE must carry out the following key functions to balance the supply and demand of electricity in Spain:
• Forecast the short and medium-term generation capacity of the system to determine an electricity generation
programme and analyse whether or not to introduce more generation capacity.
• Anticipate the short and medium-term demand for electricity and use of generation equipment, particularly
hydroelectric reserves.
• Schedule the functioning of generation plants along with the information provided by market operator OMI
Polo Español and private parties that have bilateral agreements for the direct supply of electricity.
• Order generation plants to carry out the adjustments necessary to respond to a potential change in electricity
consumption or generation that causes an imbalance in the supply of the electricity programme.

Electricity distribution
20. What are the authorisation requirements to construct electricity distribution systems?
See Question 10.
21. What are the authorisation and the main ongoing requirements to operate electricity distribution
systems?
See Question 10 and Question 13.
Distribution charges
22. How are the charges and conditions for the distribution of electricity regulated?
See Question 16.
Electricity supply

23. What are the authorisation and the main ongoing requirements to supply electricity to end
consumers?
The supply of electricity is a completely liberalised activity. Therefore, a company must only report the start of its
supply activities to the Ministry of Energy along with a sworn affidavit that the company complies with all technical,
legal and economic capacity requirements (if the supply is only to a single autonomous community, notice must be
sent to the relevant regional body).
The technical, legal and economic requirements must be certified by Red Eléctrica de España and OMI Polo Español
and then submitted to the Ministry of Energy. These include:
• Being a commercial company (or equivalent in another country) with no limitation on supplying electricity
and the ability to sell and purchase electricity and comply with unbundling provisions.
• Complying with the technical conditions established by Operational Procedures (Procedimientos de
Operación) and Electricity Market Operating Rules (Reglas de Funcionamiento del Mercado de Producción
de Energía Eléctrica).
• Meeting the economic requirements regulated in Operation Procedure 14.3 and rule 50 of the Generation
Market Functioning Rules (which contain specific guarantees).
24. How is electricity traded between generators and suppliers?
See Question 25.
Trading between generators and suppliers
25. How is electricity trading (between generators and suppliers) regulated?
Electricity is physically traded in Spain through:

• A mandatory pool system (mercado español de producción de electricidad).
• Physical bilateral contracts entered into between certain agents. These contracts are notified to the system
operator and the market operator (OMI, Polo Español) (OMIE). The report must identify the generation or
selling units, supply and consumption points, schedules and duration (a minimum of one year). They are
integrated into the final match of the electricity bidding and offer system on close of the daily market.
To participate in electricity trading, generators, suppliers, direct consumers and representatives must submit an
application to OMIE to be a market agent.
Before selling or buying electricity in the market, potential market agents must sign an adhesion contract with OMIE,
accepting the application of the Generation Market Functioning Rules to its activities in the market. Once market
agents have deposited their guarantee and completed all additional procedures, they can offer or buy electricity in
the daily or intraday market.
Electricity price and conditions of sale
26. How is the price for electricity and conditions of sale regulated at the consumer and wholesale
level?
Consumer
The supply of electricity to small consumers is regulated under the Electricity Markets Directive 2009.
Under the regulations, Spanish law introduced the following public service obligations:
• Low-voltage customers with a contracted capacity equal to or less than 10 kW can opt for a regulated system
of voluntary prices for small consumers (Precio Voluntario al Pequeño Consumidor). These regulated
supplies can only be provided by certain regulated reference marketers. Wholesale reference marketers
(appointed by the Ministry of Energy) must supply consumers at specific rates, which are generally lower
than free market prices.
• Consumers who satisfy certain social, economic and consumption requirements can benefit from certain
social subsidies (Bono Social). These subsidies cover the difference between the voluntary prices for small
consumers and a base value known as tariffs of last resort (tarifas de ultimo recurso).
Wholesale
Consumers who do not comply with the above requirements contract for their electricity supply in the retail
market with wholesale suppliers (comercializadores) using free prices and conditions. Furthermore, consumers can

contract for their electricity directly through the pool by qualifying as wholesale market participants. However, in
practice, only large consumers qualify as market participants, due to the associated operational and financial costs.
Statutory powers
27. Do companies involved in the generation, transmission, distribution or supply of electricity have
any statutory powers to undertake work (for example, compulsory purchase powers or street works
powers)?
Companies involved in these activities have no statutory powers as such. However, under the Electric Sector Law, all
electricity facilities (whether generation, transmission or distribution) have public interest and therefore the owner
of a generation facility can commence expropriation proceedings over any plots affected by the project.
For the right over the land to become concrete, the owner must:
• Request a declaration of public use over the specific assets affected by the project.
• Undergo the expropriation procedure set out in the law.
• Pay any relevant compensation (justiprecio).
Tax issues
28. What are the main tax issues arising on electricity generation, distribution, transmission and
supply?
In addition to the regular tax obligations that relate to any corporation, the following specific taxes apply:
• Law 28/2014 modified the legal regime governing the tax on electricity consumption (only applicable to
consumers), increasing its rate to 5.1% from 4.86%. Value added tax (at 21%) applies to consumers.
• Law 15/2012 introduces new taxes on electricity generation to the Spanish grid to foster the sustainability of
the electricity system. Under Law 15/2012, generators must pay a 7% coefficient on the value of the volume

of energy effectively supplied to the grid. This law was challenged before the Constitutional Court and the
final judgment is pending.
Insurance
29. Are there any insurance requirements from the regulatory authority?
Electricity operators are legally required to secure civil responsibility insurance for an amount that is sufficient to
cover the risks to any persons and goods stemming from their activities.
Reform
30. What reform proposals are there for the regulation of the electricity sector?
The Draft Bill on Climate Change and Energy Transition undergoing public consultation (until 8 October 2017). The
government is working towards compliance with all commitments from the EU and the Paris Agreement. This draft
bill is expected to be enacted in 2018.
Others relevant pieces of regulation that are in their consultation period include:
• A Royal Decree on the new closure regime for generation facilities.
• A Royal Decree on the regulation of the vulnerable consumer regime, the social bond and the suspension of
electricity supply for consumers with less than 10 KW of contracted power.
• A proposed bill to control, monitor and reduce greenhouse gas emissions relating to transport.
The regulatory authorities

Ministry of Energy, Tourism and Digital Agenda (Ministerio de Energía, Turismo y
Agenda Digital)
Address. Paseo de la Castellana, 160. Madrid, España.
T +34 91 349 46 40 / +34 90 244 60 06
E https://sedeaplicaciones.minetur.gob.es/crmformweb/formularios/infosia.aspx
W www.minetad.gob.es
Main responsibilities. The Ministry of Energy is competent to regulate, supervise and grant most main
authorisations.
National Markets and Competition Commission (Comisión Nacional de los Mercados y
la Competencia)
Address. Calle Alcalá, 47. Madrid, España.
T +34 91 432 96 00
E info@cnmc.es
W www.cnmc.es
Main responsibilities. The CNMC monitors and controls the electricity sector.
Online resources
Red Eléctrica de España (REE)
W www.ree.es/es
Description. This is the official website of REE, the owner of the transmission grid and the technical
system operator of the Spanish electricity market. Useful information is provided in connection with
regulations that apply to technical operations, energy pool details, access to transport facilities and a
broad range of data related to the electricity sector.
OMI Polo Español (OMIE)
W www.omie.es/inicio
Description. This is the official website of OMIE, the Spanish electricity market operator. Useful
information is provided in connection with market participation, energy price details and a broad range
of data related to the electricity sector.

Contributor details
Juan Ignacio González Ruiz, Partner
Uría Menéndez
T +34915860381
F +34915860484
E juan.gonzalezruiz@uria.com
W www.uria.com
Professional qualifications. Lawyer, Spain
Areas of practice. Oil and gas; energy; natural resources; banking and finance; project finance; M&A;
corporate.
Maria José Descalzo Benito, Counsel
Uría Menéndez
T +34915860381
F +34915860484
E mariajose.descalzo@uria.com
W www.uria.com
Professional qualifications.Lawyer, Spain
Areas of practice. Oil and gas; energy; natural resources; banking and finance; project finance; M&A;
corporate.
END OF DOCUMENT
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