Spanish regulatory move could hurt utilities

20 November 2019 - 12:00 am UTC

The Spanish energy and markets regulator has passed a measure to regulate gas and electricity utility returns according to weighted average cost of capital (WACC) criteria, raising the prospect of steep cuts for infrastructure-fund owned companies in the market.

The Comisión Nacional de los Mercados y la Competencia (CNMC) is moving to cut the rate of return for electricity transport and distribution from 6.5% to 5.58%. It set the new gas distribution return rate at 5.83% and the rate for regasification and gas transport investments at 5.44%.

The CNMC is set to publish further regulation in the coming weeks on how to calculate the utilities’ asset base that could have a significant impact on companies’ returns, industry sources say. Based on initial CNMC estimates published in July, gas transmission and regasification returns could be cut by 21.8% and gas distribution returns could be slashed by 17.8%. Electricity distribution and transport assets could see their regulated returns cut by 7% and 8.2%, respectively.

Read more