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Spain Risks Breaking Law on Power-Tariff Deficit, CNE Says

The Spanish government risks breaching the legal limit for the deficit in electricity-system revenues should demand fall short of its forecasts, the country’s energy regulator said.

“There are elements of uncertainty during 2012 that could lead to higher costs or lower revenues,” the Comision Nacional de Energia said in an e-mailed statement today. Those include “a declining trend in demand.”

Industry Minister Jose Manuel Soria raised power prices by 7 percent and cut 1.7 billion euros ($2.2 billion) from revenue this month for utilities including Iberdrola SA (IBE), Enel SpA (ENEL)’s Endesa SA (ELE) unit and Gas Natural SDG SA (GAS) after the Supreme Court forced him to honor a law limiting the so-called tariff deficit to 1.5 billion euros this year.

The government will adhere to the limits so long as unpublished forecasts it supplied to the regulator prove accurate, the CNE said.

The government forecasts the economy will contract by 1.7 percent this year, compared with a median forecast of 1.2 percent in a Bloomberg survey of 16 economists. Citigroup Inc. predicted the biggest contraction at 2.7 percent.

Higher financing costs for tariff debt, or the government’s failure to cover the cost of compensation payments, may also jeopardize the limit, the regulator said.

To contact the reporter on this story: Ben Sills in Madrid at bsills@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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