Electricity companies ask EU to intervene in Spain's profit recovery plan

By Isla Binnie

MADRID, Jun 27 (Reuters) - Groups representing some of Europe's biggest energy companies called on the European Union to intervene over Spain's plan to withdraw profits from carbon-free power plants seen to have benefited from a fossil fuel-linked rally, according to a letter seen by Reuters.

Spain says older emission-free plants have received a boost in profits from high power prices in the broader market, which have been boosted because they are exempt from paying for pollution permits needed to burn fossil fuels such as gas and coal.

It is working on a law to force the companies that operate these plants to make payments to the state that reflect this fact.

Electricity prices have soared across Europe as Russia's energy supplies have become less predictable following the invasion of neighboring Ukraine by the main oil and gas supplier, prompting governments to intervene.

Industry groups AELEC, Eurelectric, the European Federation of Energy Traders, Wind Europe and the World Association of Infrastructure Investors opposed the proposed Spanish law in a letter to European Commission leaders on June 20.

"The draft law seriously undermines investment incentives for decarbonized electricity generation," it read.

Companies are concerned about the measures governments are taking in other countries, including the UK, where Germany's RWE has said a windfall tax would make it reconsider its investments.

Spain says the money should be reinvested in the electricity system to benefit consumers. It estimates that the measure could make E1.6 billion ($1.7 billion) a year available.

The industry groups, whose members include Europe's largest utility Iberdrola, Denmark's Orsted and France's Engie said the Spanish plan runs counter to the EU's carbon market structure.

They also said it should exclude power sold under long-term fixed-price contracts, and does not.

"We urge the Commission to enter into a dialogue with the Spanish government and to express its concerns about a draft law that is contrary to the EU framework," the groups said.

The law would cover nuclear and hydroelectric plants and some wind and solar farms built before 2003, when the European Union agreed to create a system of allowances for power plants, factories and airlines to cover planet-warming emissions they produce.

(1 dollar = 0.9451 euros)

(Translated by José Muñoz in the Gdansk editorial office)