Energy Spain Newsflash _ 03 November 2022

On 19 October, Royal Decree-Law 18/2022, of 18 October (RDL 18/2022), was published in the Official State Gazette (BOE), approving, among others, measures to strengthen the protection of energy consumers and to contribute to the reduction of natural gas consumption in application of the "Plan + seguridad para tu energía (Plan +SE)". In particular, through RDL 18/2022, eighteen of the measures of the Plan +SE are adopted. More information on the Plan +SE can be found at the following link.

The following are the main measures of RDL 18/2022:

MEASURES TO STRENGTHEN THE PROTECTION OF NATURAL GAS CONSUMERS

Natural gas supply contracts

(a) Articles 38 and 40 of Royal Decree 1434/2002, of 27 December 2002, which regulates the transport, distribution, marketing, supply and authorisation procedures for natural gas installations (RD 1434/2002), are amended to reinforce consumer protection in the area of cancellations and terminations of natural gas supply contracts.

• Contracts on the liberalised market (mercado liberalizado) (Article 38).
  
  Supplies by third parties in the liberalised market will require a written contract between a duly authorised marketing company and the consumer, which will include all the following conditions: supply, security, continuity of service, quality, financial repercussions for non-compliance with the quality of supply, metering and billing, causes for termination, subrogation mechanisms and arbitration mechanisms, if applicable.
  
  As a general rule, the supply contracts shall have a maximum duration of one year, and may be tacitly extended for periods of the same duration. Extensions of said contracts may be terminated by the consumer with fifteen days' prior notice, without any charge being made as a termination penalty.

• Termination of supply contracts (Article 40).
  
  The termination of the supply contracts of consumers without the right to benefit from the tariff of last resort (tarifa de último recurso) will be subject to the conditions agreed by the parties. As for consumers with the right to benefit from the tariff of last resort, RDL 18/2022 establishes the causes for termination.
  
  In any case, additional services that have been contracted by the consumer together with the natural gas supply shall be terminated at the same time as the natural gas supply contract, unless the consumer expressly indicates otherwise at the time of termination.

(b) Extension of the subjective scope and temporary scope of the measures to make natural gas supply agreements more flexible, established in the fifth additional provision of Royal Decree-Law 29/2021, of 21 December, adopting urgent measures in the energy sector to promote electric mobility, self-consumption and the deployment of renewable energies (RD 29/2001). These measures will apply until the quotation of the daily product with delivery the following day at the Virtual Balancing Point (PVB), published by the Iberian Gas Market (MIBGAS) remains below 60 €/MWh for ten consecutive daily trading sessions or until 31 December 2023 at the latest.

Tariff of last resort (tarifa de último recurso) for natural gas

On the one hand, the application of the seventh additional provision of Royal Decree-Law 17/2021, of 14 September, on urgent measures to mitigate the impact of the escalation of natural gas prices in the retail gas and electricity markets (RDL 17/2021) is extended for the reviews of the price of the tariff of last resort for natural gas corresponding to 1 April 2022, 1 July 2022, 1 October 2022, 1 January 2023, 1 April 2023, 1 July 2023 and 1 October 2023, establishing the maximum increase in the cost of the raw material, term Cn, at 15%. In order to calculate the debt accumulated by last resort retailers, RDL 18/2022 establishes a set of data that must be provided to the Directorate of Energy Policy and Mines before 1 December.

The Directorate General of Energy Policy and Mines is authorised to approve a new tariff of last resort for natural gas. Until 31 December 2023, communities of owners of residential dwellings or groups of communities of owners of residential dwellings with an annual consumption of more than 50,000 kWh, as well as the energy companies that supply them, will be eligible for said tariff. RDL 18/2022 determines the procedure as well as the requirements that both agents must meet in order to benefit from this measure. In any case, it specifies that the energy service companies that take advantage of this tariff must transfer in full the savings obtained in the cost of acquiring natural gas to the unit price applied for the heating and domestic hot water service provided.

Thermal social voucher (Bono social térmico)

The minimum amount of aid per beneficiary of the thermal social voucher is increased to 40 euros, in the event that there is budget availability.

MEASURES TO STRENGTHEN THE PROTECTION OF ELECTRICITY CONSUMERS

Electricity supply contracts

Electricity supply contracts are temporarily made more flexible.

Until 31 December 2023, electricity supply points owned by the self-employed and companies may request a modification of contracted power, regardless of whether the consumers have voluntarily modified the technical conditions of their third-party access contracts to the grid within a period of less than twelve months and even if there has been no change in the structure of access tolls or charges affecting them.

From 31 December 2023, within three months, a consumer who has requested a modification of the contracted powers may request a new modification of the supply contract or new values of the technical parameters of the contract for third party access to the network.

Changes to contracts shall be made within a maximum period of five calendar days and without any costs being borne by the consumer, except for those provided for in RDL 18/2022.

Social electricity bonus (Bono social de electricidad)

Until 31 December 2023, Royal Decree 897/2017, of 6 October, which regulates the figure of the vulnerable consumer (consumidor vulnerable), the social bonus and other protection measures for domestic consumers (RD 897/2017), will apply, with certain particularities, to final consumers of electricity who meet certain income requirements.

Likewise, until 31 December 2023, the discount percentages of the social electricity bonus will be increased as follows: in the case of vulnerable consumers, the discount will be 65% and in the case of severely vulnerable consumers, the discount will be 80%.

The maximum consumption limits subject to the discount on the electricity social bonus invoice will also be increased.

MEASURES TO PROMOTE RENEWABLE GASES AND DIGITISATION

Declaration of public utility of the direct lines connecting renewable gas production plants to the natural gas transport and distribution network.

• Amendment of the article 78 of Law 34/1998, of 7 October, on the hydrocarbons sector (LSH).
  
  Direct lines for the exclusive supply of a consumer through a direct connection to the transport network shall be excluded from hydrocarbon infrastructure planning and from the application of the provisions on expropriation and easements established in the LSH, and shall be subject to the general legal system.
  
  Direct lines connecting a renewable gas production plant to the gas system for the injection of such gases into the system are excluded from hydrocarbon infrastructure planning. Nevertheless, said lines can be declared to be of public utility for the purposes of compulsory expropriation and the exercise of the easement of way, applying the provisions of Title V of the LSH.
  
  Consumers, as well as producers of renewable gases, may construct such direct lines. In said cases, ownership will be theirs and such direct lines will be excluded from the remuneration system for transport and distribution activities.
  
  The owner of the direct line must allow access to third parties in accordance with the regulatory provisions and the authorisation process for these facilities will correspond to the competent body of the Autonomous Community through which they run, except when they cross the territory of more than one Autonomos Community, in which case authorisation will correspond to the National Competent Authority. Irrespective of the competence to authorise construction, in the case of direct injection lines a binding report from the Technical System Manager will be required.
• Amendment of the articles 92 and 93 of RD 1434/2002.
  
  For the specific recognition of the public utility of the facilities referred to in Title IV of the LSH, it will be necessary for the interested company to request it, including a specific and individualised list of the assets or rights that the applicant considers necessary to expropriate or occupy.
  
  The owners of these facilities shall enjoy the benefit of expropriation and temporary occupation of the property and rights required for the necessary installations and services, as well as the easement of way and limitations on ownership, in cases where this is necessary for access roads and gas pipelines and auxiliary facilities required for their operation.
  
  The construction of direct lines for the exclusive supply of a consumer through a direct connection to the transport network is subject to the general legal framework. However, direct lines connecting a renewable gas production plant to the gas system for the purpose of injecting gas into the gas system may be recognised as being of public utility.
  
  RDL 18/2022 also approval of the implementation of smart natural gas meters for customers with consumption of 50,000 kWh or less. A ministerial order will determine the corresponding development plans for the implementation of such smart natural gas meters, as well as their minimum specifications.

BOOSTING SELF-CONSUMPTION

Royal Decree 244/2019, of 5 April, which regulates the administrative, technical and economic conditions for the self-consumption of electricity (RD 244/2019), is amended in the following aspects:

• A generation plant which, using exclusively photovoltaic technology located entirely on the roof of one or more buildings, is connected to the consumer(s) via the transmission or distribution lines, provided that these are located at a distance of less than 1,000 metres from the associated consumers; shall be considered as a production facility close to the consumption facilities and associated through the grid.
• A renewable energy community may be set up for the purpose of collective self-consumption, as long as the requirements for such are fulfilled by the community. Likewise, the community may act as a representative of the consumers, provided that the consumers grant the corresponding authorisations.
• At least on a quarterly basis, transmission and distribution system operators shall submit to the system operator, by electronic means, information relating to the self-consumption installations connected to the grids they control. This information shall enable each of the self-consumption facilities to be identified in the main electricity metering concentrator. Furthermore, the system operator shall send this aggregated information to the Directorate General for Energy Policy and Mines on a quarterly basis.

Law 24/2013, of 26 December, on the Electricity Sector (LSE) is amended in the following aspects:

• The requirements for considering a direct link facility between a production plant and an energy consumer as a direct line are modified. Since the entry into force of RDL 18/2022, renewable generation plants are exempted from the requirement that the owner of the production facility and the consumer belong to the same company or the same business group.
• Similarly, it is important to highlight the amendments regarding the authorisation of small power facilities: (i) article 53 of the LSE is amended to establish the possibility of exempting production facilities with an installed capacity of up to 500 kW from the authorisation system under the LSE; (ii) simultaneously, this possibility is specified by the modification of article 115.5 of Royal Decree 1955/2000 of 1 December 2000, which regulates the activities of transmission, distribution, commercialisation, supply and authorisation procedures for electricity installations, to exempt facilities that do not reach said threshold of installed power from the prior administrative authorisation and administrative construction authorisation regime provided for in the LSE.

MODIFICATIONS IN ACCESS AND CONNECTION FOR FAST INJECTION OF ENERGY INTO THE GRID

Exceptionally, the system operator may grant exceptional injection permits to facilities connected to the transmission grid that have a definitive operating permit and are connected in nodes reserved for access competition or in any of the fair transition nodes. Accordingly, said facilities will be allowed to incorporate into the transmission grid more active power than that included in the access permits granted and less than or equal to the installed power of the production facility.

In regards to management of the applications submitted, the transmission system operator, who will analyse that all the requirements established in RDL 18/2022 are met, must apply the time priority criterion. Once the owner of the facility has responded to the requests for rectification made by the transmission system operator, the latter will have a period of two months to grant or deny the exceptional injection permit and notify the applicant.

Royal Decree 1183/2020, of 29 December, on access and connection to electricity transmission and distribution networks (RD 1183/2020) is amended in the following aspects:

• To access the call for tenders in the nodes, it must be fulfilled that the availability, release or surfacing of capacity in the nodes, as appropriate in each case, will be equal to or greater than 100 MW, in the case of nodes located in the peninsular electricity system, and greater than 50 MW, in nodes located in non-peninsular territories.
• The nodes for which the Secretary of State for Energy has already issued a resolution agreeing to hold an access tender, shall remain reserved for tendering, regardless of whether the capacity reserved for tendering has been reduced below the limit of 100 or 50 MW respectively, as mentioned in the previous section. Likewise, they shall remain reserved irrespective of whether the conditions of Article 18.2 are no longer fulfilled after the above-mentioned decision has been issued.
• In the event that the facility awarded in a tendering procedure is the result of modifying an installation that already holds an operating authorisation, applications for access and connection will be treated as updates to the access and connection authorisations already granted.

MECHANISM FOR REDUCING EXCESS ELECTRICITY MARKET PAYMENTS DUE TO THE HIGH PRICE OF NATURAL GAS ON INTERNATIONAL MARKETS

The fifth additional provision of RDL 18/2022 extends, until 31 December 2023, the mechanism for reducing the excess remuneration of the electricity market caused by the high price of natural gas on international markets, regulated in Title III of RD 17/2021.

TAX CORNER

Chapter VII of RDL 18/2022 includes the following tax measures:

The deduction foreseen in the Personal Income Tax for works aimed at improving the energy efficiency of dwellings, consisting of the following, is hereby extended for another year (until 31 December 2024):

• Construction works for the reduction of the heating and cooling demand of the habitual adobe (20% of the amounts paid up to a maximum of 5,000 euros of the base amount);
• Construction works for the improvement of non-renewable primary energy consumption (reduction of at least 30% of the non-renewable primary energy consumption indicator or the dwelling is rated as class "A" or "B" in the energy rating) of the habitual adobe (40% of the amounts paid up to a maximum of 7,500 euros base amount);
• Energy refurbishment work on dwellings located in buildings of predominantly residential use during the financial years 2021-2024 (60% of the amounts paid up to a maximum of 5,000 euros per year and 15,000 euros cumulative basis in the financial years 2021-2024).

For corporate income tax purposes, taxpayers may apply the free depreciation mechanism for investments in facilities that start operating in 2023 and are intended (i) for self-consumption of electricity or (ii) for thermal self-consumption, provided that they use energy from renewable sources and replace facilities that use energy from non-renewable fossil fuel sources.