Rajoy Sets Power Price as Utilities Dare Spain to Show Abuse

Dec 27, 2013 12:09 pm ET

(Updates with Unesa comment in sixth paragraph.)

Dec. 27 (Bloomberg) -- Prime Minister Mariano Rajoy’s government set first-quarter prices for Spanish power consumers today after a market-based pricing system collapsed amid recriminations from utilities and regulators.

The price of electricity for most consumers will increase 2.3 percent in the first quarter, Rajoy said at a televised press conference in Madrid. The power-industry regulator refused last week to validate an auction that would have seen power costs jump by about 11 percent.

The regulator said it detected “atypical circumstances” in the Dec. 19 auction, while Eduardo Montes, head of the power- industry lobby, Unesa, said that the utilities are being “demonized.”

“We can’t allow them to blame us,” Montes said in a televised briefing today. “If there really is something serious, be transparent, put the report on the table.”

Rajoy’s administration has been at loggerheads with utilities including Iberdrola SA and Gas Natural SDG SA for the past year over its proposals to eliminate losses in the state- controlled electricity system. The system has added 4.5 billion euros ($6.2 billion) to its government-guaranteed debt this year even though consumers are charged the highest prices in mainland Europe.

Unesa said Rajoy’s decision is a “backward step” for the process of liberalizing the power market, in a statement released following the prime minister’s comments. It said consumers and companies are paying for political errors.

Montes says the 9 billion-euro annual cost of subsidizing Spain’s renewable-energy plants should be stripped out of power bills. Solar-energy groups counter that nuclear and hydroelectric plants that have amortized their investment shouldn’t receive the same rate as new facilities that face higher costs.

--Editors: James Hertling, Eddie Buckle