The Dec. 19 auction of power futures used to set prices for 16 million Spanish consumers lacked “competitive pressure,” the nation’s regulator said as it vowed to probe the voided sale and its participants further.
In its deepest analysis yet of the auction, the regulator said “atypical circumstances” in pricing and trading volumes in the days before and during the bidding supported its Dec. 20 decision not to validate the sale, according to a statement released late yesterday by the watchdog known as CNMC. The auction was set to trigger a rate increase of about 11 percent.
Spain’s government overrode the results, the first time the benchmark sale was thrown out in 25 quarterly auctions held historically between power companies and traders. Instead, the state mandated a 2.3 percent price increase and pledged to devise a new method for letting market forces continue to influence rates. Those actions, which were followed by declines in power prices, were criticized today by a traders group.
“Such intervention caused significant distortions to the trading activity of a number of firms operating regularly on the Spanish market and applying best-risk management practices,” the European Federation of Energy Traders group said in a statement.
Since 2009, Spanish energy regulators have called for the government to change how consumer power prices are set. Today the commission said it will continue its probe.
The commission “affirms that ‘atypical circumstances’ concurred that impeded bidding from developing in an environment of ‘sufficient competitive pressure’,” the CNMC said in summarizing the conclusions of its supervisory board.
In the 17 days prior to the auction, spot-market prices jumped to the highest since 2002, or as much as 70 percent from the previous week, the CNMC said, without identifying a cause.
“These prices were transferred immediately to futures markets, and in particular, the product traded in the 25th auction,” the regulator said. As a result, the next-quarter futures advanced 7 percent in the auction, and fell about 15 percent in subsequent days, the CNMC said.
While it listed reasons that may have been driving up spot prices, the CNMC concluded that they shouldn’t necessarily have formed the basis for next-quarter futures being auctioned.
Some of the reasons were a halt at several nuclear plants and disruption of natural-gas deliveries. Also there were unexpected disruptions in coal-fired power plants, and below average wind-power production, the report said.
On top of that, Red Electrica Corp. SA, the operator of Spain’s power-transmission network, conducted maintenance in the electricity connections with Portugal, which reduced the ability to import energy, the report said. REE also had a reduced capacity of power connections with France.
Unesa, the trade group representing Spain’s biggest power suppliers, said the report showed no evidence of manipulation of power prices. None of the “atypical circumstances” implied illegal or anticompetitive behavior, Unesa said today in an e-mailed statement.
During the auction’s first round, participants withdrew more futures for negotiating than in any first round of the previous 13 sales. The bidding concluded in the seventh round, whereas all previous sales had run to at least 12.
The government has struggled for more than a decade to keep power expensive enough for investor-owned generators such as Iberdrola SA and cheap enough for owners of businesses and households that vote and have no alternative to regulated rates.
At the same time, suppressing power prices has helped curb the official consumer inflation rate, currently accounting for 3.33 percent of the basket of goods used to calculate it, according to data from the National Statistics Institute.
Unesa, which is fighting a separate battle with the state over taxes and subsidies, previously denied any wrongdoing by energy companies and has challenged the government to present evidence. Dictating a 2.3 percent increase for Jan. 1 was a “backward step” in the process of liberalizing the power market, Unesa said.