Spain’s Energy Companies Will Pay Town Councils For Cables Installation

electricity companiesSpain's electricity companies

The Supreme Court has ruled that town councils should charge the electricity and gas companies for using the public domain for their energy transport installations, at a rate of between 3,000 and 12,000 euros per linear metre a year. This is what the court has set down in five legal rulings, putting an end to a long dispute between the town councils and the companies which refused to pay these fees. The Supreme Court’s sentences against Red Electrica, Union Fenosa and Gas Galicia, which also have a direct impact on the rest of the sector, affect nearly 5,000 Spanish town councils.

A local council tax law established in 2004 that the electricity companies, with their cables of every kind of tension, as well as gas, water and hidrocarbon companies should pay the town councils they supply by air, overground or underground 1.5% of their revenues in the local terminus. They should also pay for passing through municipalities even though they don’t supply them with energy, a fee which should be determined by a technical-economic report. Up to now, the companies have not paid for passing through the municipal terminals, either because they didn’t acknowledge the existence of fee or they thought it was disproportionate.

The fee the companies will pay will be between  3,000 and 12,000 euros per linear metre, depending on the type of tension – low, medium or high. As far as the gas companies are concerned, the fee will be between 500 and 4,000 euros. Around 5,000 city councils will benefit from the meaure. The amount of income will vary according to the amount of public linear metres accumulated, as private linear metres are not included. In fact, when an electricty cable is going to go across private land, the companies reach agreements with the owners and generally offer compensation.

Bankinter says these new measures imply an increase in the taxes paid by the electricity companies, and is another example of the regulatory/tax risk to which the sector is exposed.

One of the companies most hit by these measures is Red Electrica, which has over 42,000 kilometres of high tension cables. The final amount to be paid will depend on the amount of public linear metres, as private metres are not included in the tax calculation.

Other recent measures which could have a negative effect on the electricity sector include the possible cancelation of the payments by capacity or the approval of incentives for the renewables which are less than expected by the industry. This regulatory risk is one of the reasons which justifies our negative view of the sector for 2017.

 

About the Author

The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.