Novelties of Royal Decree-Law 17/2019 on measures for the electrical system and the withdrawal from service of thermal power plants

Royal Decree-Law 17/2019, dated 22 November, for the adoption of urgent measures for the legislative alignment on the retributive parameters affecting the electricity system and the response to the process of withdrawals from service of thermal power plants ("RD-Law") entered into force on 24 November 2019, affecting (i) Law 24/2013, dated 26 December, on the electric power sector ("Law 24/2013"); (ii) Royal Legislative Decree 1/2001, dated 20 July, for the approval of the consolidated text of the water act ("RLD 1/2001"); and (iii) Royal Decree 413/2014, dated 6 June, regulating the activity of electricity production from renewable energy sources, cogeneration and waste ("RD 413/2014").

This Legal Alert will address the most relevant modifications regarding, among other aspects, the measures before the upcoming closure of thermal energy generation facilities from coal or thermonuclear, the reasonable profitability for the electricity production facilities affected by the change of the remuneration scheme, and the approval of the ministerial order regarding the review of the retributive parameters for the second regulatory period.

A) Measures before the upcoming closure of thermal energy generation facilities from coal or thermonuclear.

RD-Law introduces twenty-second additional provision in the Law 24/2013. The aforementioned provision intends to promote the construction of renewable energy facilities granting the capacity of access to the grid to evacuate the energy of the knots affected by the closure of the thermal energy generation facilities from coal or thermonuclear.

However, the procedures and requirements for the granting of the capacity of access are not yet regulated (i.e. the exercise of the aforementioned rights are pending for the adoption of a regulation issued by the Minister for ecological transition).

In addition to the aforementioned measure, RD-Law introduces sixteenth additional provision in RLD 1/2001, which establishes the possibility of granting a new administrative concession in the event of the termination of the concession caused by the closure of thermal energy generation facilities from coal or thermonuclear. The new administrative concession shall aim to promote projects favourable to economic, social and environmental purposes.

B) Maintenance of the current reasonable profitability of 7,398% for the electricity production facilities from renewable energy sources, cogeneration and waste subject to the special remuneration scheme.

Moreover, with the inclusion of third final provision in the Law 24/2013, RD-Law set forth the possibility of maintaining the reasonable profitability of 7,398% until 2031 for the electricity production facilities from renewable energy sources, cogeneration and waste subject to the special remuneration scheme before entering into force Royal Decree-Law 9/2013, dated 12 June, adopting urgent measures to ensure the financial stability of the electricity system.

In order to receive the reasonable profitability of 7,398% until 2031, the aforementioned facilities –which were negatively affected by the measures adopted by the Spanish government that eliminated the subsidies to encourage electricity generation from renewable sources– must waive their right to continue or initiate any arbitral or judicial proceedings and to receive any compensation.

For the purposes of this measure (i.e. maintaining the reasonable profitability of 7,398% until 2031), that will be automatically applicable if is not expressly resigned before 1 April 2020, under the General Directorate of Energy Policy and Mines, those proceedings that could be initiated or that have been initiated under International Treaties to which Spain is a party and based on the modification of the renewable energy remuneration regime will be considered as arbitral proceedings.

In essence, the following, among others, will be considered as arbitral or judicial proceedings:

• Proceedings initiated by the direct or indirect operator of the installation.
• Proceedings initiated by the investor of the installation.
• Proceedings initiated by third parties by virtue of transfer, subrogation, replacement and any other similar legal title.

In case of resignation of the provision, for the calculation of the remuneration that would corresponds to those facilities, with effect from the day of commencement of the regulatory period, the value of the reasonable rate of return set for each regulatory period in accordance with the ordinary provisions of article 14 of Law 24/2013 will be taken into account.

The measure introduced by RD-Law (i.e. maintaining the reasonable profitability of 7,398% until 2031) shall not apply when an arbitration or judicial procedure, based on the modification of the remuneration scheme operated after Royal Decree 661/2007 on the profitability of these facilities begins or has previously begun, including those derived from the entry into force of Royal Decree-Law 9/2013, and its related regulations.

However, even those facilities referred to above may benefit from the exceptional regime of paragraph 2.1 when the early termination of the arbitration or judicial procedure and the resignation to its restart or its continuation, or the renunciation of the perception of compensation, or compensation that has already been recognized as a result of such procedures is accredited before the General Directorate of Energy Policy and Mines, before 30 September 2020.

C) Term extension for the approval of the ministerial order regarding the review of the retributive parameters for the second regulatory period

The sole additional provision of RD-Law establishes a term extension for the approval of the ministerial order to review the retributive parameters applicable to electricity production facilities from renewable energy sources, cogeneration and waste subject to the specific retributive scheme until 29 February 2020.

RD-Law justifies the aforementioned measure because of the exceptional circumstances caused by the protracted period of the caretaker Spanish government.

D) Reasonable profitability of 7,09% regarding the review of the retributive parameters for the second regulatory period (2020-2025).

The sole article of RD-Law establishes that for the electricity production facilities from renewable energy sources, cogeneration and waste subject to the specific retributive scheme, the reasonable profitability after the review of the retributive parameters will be of 7,09% (before any tax) until 31 December 2025, when the next regulatory period will begin.

The measures adopted by RD-Law entered into force on 24 November 2019. The aforementioned RD-Law has been duly endorsed by the Spanish Parliament following the procedure set forth in article 86 of the Spanish Constitution and the others applicable legal provisions, as it is contained in the Resolution, dated 27 November 2019, issued by the Spanish Parliament.

Osborne Clarke[1].

[1] Note: This Legal Alert reflects the opinion from Osborne Clarke. It is based on a particular interpretation of the current legal framework. Therefore, the Legal Alert must be applied with reservation.