Bloomberg News

Spain Removes Limit on Power System Debt as Soria Measures Fail

January 02, 2013

Spain ended a legal limit on the deficit of its power system after measures by Industry Minister Jose Manuel Soria failed to rebalance costs and revenues.

A law published on Dec. 31 removes the 1.5 billion-euro ($2 billion) cap on the 2012 tariff deficit and a provision making further deficits illegal from next year. The deficit reached 4 billion euros in the first 10 months, the energy regulator says.

Soria pledged to meet this year’s cap and eliminate the tariff deficit next year when he introduced a new tax on power generation in September. The wrangling over power measures divided the government when Budget Minister Cristobal Montoro vetoed Soria’s first proposal to introduce higher tax rates on renewable generators that earn subsidized rates.

The new rules, tacked onto the end of a Royal Decree governing the social security provisions for cleaners and nannies, will allow the government to securitize an unlimited amount of power-system debt through the Fade bond program.

Prime Minister Mariano Rajoy named Alberto Nadal, the twin brother of his chief economic adviser Alvaro, as deputy minister for energy in the same Dec. 28 meeting as he decided to waive the tariff deficit cap.

In December, the Spanish parliament passed an energy law that imposed a 7 percent tax on electricity generation from Jan. 1 to plug the deficit. The measures affect renewable and traditional energy plants and mark the first time Spain has taxed wind and solar-power projects.

To contact the reporters on this story: Patricia Laya in Madrid at playa2@bloomberg.net; Ben Sills in Madrid at bsills@bloomberg.net

To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net; James Hertling at jhertling@bloomberg.net


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