EC seeks to overrule Spanish power plan

Spain`s plans to compensate its privatized utilities for stranded costs in the electricity sector could be halted by European competition authorities.

Brussels has asked the Spanish government to justify the $8.7bn which will be paid to the utilities to reimburse them for past investments rendered uneconomic by the liberalization of the electricity sector.

Endesa, Iberdrola, Union Fenosa and Hidrocantábrico would benefit from the plans. The European Commission (EC) says that it has strong doubts about the estimated costs and fears that Spain`s plans will set a precedent for European nations opening up their energy sectors.

Spain approved a plan last December for the utilities to securitize Pta 1.03tr ($6.7bn) in costs to compensate for the fall in prices which competition will bring, paid for by a 4.5 per cent levy on national tariffs for 15 years.

Provisions in the EU electricity liberalization directive allow member states a certain degree of compensation for their electric utilities. However, the EC regards Spain`s plans as being equivalent to state aid and therefore over-protective.