Small electricity companies and large industry clamp down on the Government to launch the forced auction of cheap electricity.

The Government included in its first shock plan against the energy crisis, at the end of the summer of 2021, the call for forced auctions for large energy companies to offer electricity purchase contracts with stable prices and with a duration of more than one year.

The Executive's idea was to hold auctions to which the four large electricity companies(Iberdrola, Endesa, Naturgy and EDP) would be obliged to go in order to sell part of their electricity produced by nuclear, hydroelectric and renewable energies to independent marketers - the small electricity companies not integrated in the large energy groups - and to large industrial consumers.

Royal Decree 17/2021, through which the first package of measures to contain the price of electricity was articulated, included an express mandate for the Government to hold the first of these auctions before December 31, 2021. This deadline was missed and continues to be missed, as these auctions have never been held. The Executive has still not carried out the necessary regulatory development to set them in motion.

And from the companies involved, both those obliged to sell electricity and the beneficiaries of this forced sale, it is beginning to be taken for granted that the legislature will close without any auction having been called. To the delight of the former and the anger of the latter.

The small electricity companies and large industry that could buy that electricity at a fixed and affordable price continue to demand the call of that auction and show their discomfort at the failure of the Ministry for Ecological Transition, led by Vice President Teresa Ribera. Independent electricity traders and large industrial groups are working together to ensure that the Government finally fulfills its commitment.

Both the Association of Independent Energy Marketers (ACIE) -which brings together some twenty companies not integrated in the large groups such as Totalenergies, BP, Cepsa, Feníe or Factorenergia- and the Association of Large Energy Consuming Companies (AEGE) -which represents some thirty large industrial groups such as ArcelorMittal, Acerinox, Sidenor, Sidenor, Sidenor, Cepsa, Cepsa , Feníe or Factorenergia- and the Association of Large Energy Consuming Companies (AEGE) -which represents some thirty large industrial groups such as ArcelorMittal, Acerinox, Sidenor, Ferroatlántica or Tubos Reunidos - have repeatedly asked the Government to call the auctions and complain that they have not received a response, according to sources from both organizations confirmed to EL PERIÓDICO DE ESPAÑA, part of the Prensa Ibérica group.

"The regulation to hold the auction is still sleeping the sleep of the just. We only get administrative silence as a response. And we take for granted that in this case it is negative administrative silence," AEGE points out. "The industry continues to hope that the auction will be called". An aspiration shared by ACIE's independent marketers, who with the auctions could access electricity at a reasonable price produced by the large groups to offer it to their customers and thus reduce their exposure to the volatility of the wholesale electricity market.

Rejection of the large electricity companies

The large electricity companies that would be obliged to sell part of their electricity have spent the last year and a half flatly rejecting the measure and warning that it cannot be applied because they have sold all or almost all of their electricity production for the whole year for this and the following years, and that forcing them to go to the auction would force them to take electricity committed to some customers to sell it to others.

The Government is reluctant to officially rule out the plan of forced auctions, but keeps it frozen, assuming the threat that its call for auctions will make the large electricity companies break already closed sales contracts. The Ministry for Ecological Transition, in charge of organizing an eventual bid, does not confirm that the plan has been completely discarded, but admits that its implementation is complicated and that it is opting for caution.

Electricity supply contracts commonly have clauses that allow companies to break them in the event of regulatory changes that have a severe impact on conditions and profitability. Iberdrola has gone further and is including specific clauses that allow the contract to be broken without any compensation for the customer in the event that the Government finally pushes for auctions and the company is forced to go.

The National Markets and Competition Commission (CNMC) already sent the report setting the reserve price required to hold the bidding (the minimum price above which companies can sell electricity without incurring losses) nearly a year ago, but no progress has been made with any other preparatory steps for the launch of the bids.

For the large electricity companies it will not be an option to participate, it will be an obligation to attend these auctions. Even the amount of energy to be auctioned in the first of these auctions, initially scheduled for 2021, was already fixed: 15,830 gigawatt hours (GWh), equivalent to 25% of the annual electricity production of the year with the lowest production of the affected facilities. The distribution of the energy to be contributed by each of the electricity companies has even been fixed according to their share of generation: Iberdrola, more than 7,300 GWh; Endesa, 6,700 GWh; Naturgy, 1,400 GWh; and EDP, 360 GWh.