By Andrés González and Jose Elías Rodríguez
MADRID, July 11 The Spanish government will
discuss and likely pass on Friday a major reform of the energy
sector to plug a growing gap between power prices and generation
costs, three sources with knowledge of the matter said on
A 26 billion euro (US$33 billion) deficit created by years
of mismatched regulated prices and costs has become a growing
headache for recession-hit Spain. It is likely to slash
renewable energy subsidies as part of the reforms.
Two of the sources, speaking on condition of anonymity, said
the energy ministry would present two texts for approval at the
weekly cabinet meeting.
One will detail the new regulation of the electricity sector
and the other will share the burden of the deficit between
utilities, taxpayers and consumers, the sources said.
They also said that renewable energy producers such as
Acciona SA and Abengoa SA were expected to
suffer most from the reform.
Electricity company Iberdrola SA, power grid
operator Red Electrica Corporacion SA, as well as
Endesa SA and Gas Natural SDG SA are also
expected to take a hit.
The government briefed the utilities on Thursday on the
measures and their impact on the industry.
However, last minute changes are likely as a meeting of
senior officials who prepare the weekly cabinet meeting's
decisions was cancelled on Thursday and several ministers were
still at odds about who should foot the bill.
Subsidies for wind and solar electricity generation, as well
as for providing power to remote islands, have been largely
responsible for the tariff deficit.
Utilities have funded the shortfall until now and the
government has been gradually paying them back through the
issuance of state-backed bonds.
The treasury ministry, keen to control any extra spending as
it struggles to meet tough deficit targets agreed with the EU,
refuses to finance more than 350 million euros of the 4 billion
to 5 billion euros a year that the deficit is expected to keep
growing unless action is taken, the sources said.
Tensions escalated within the government this week when the
treasury ministry dismissed assertions from the energy ministry
that a deal had been struck on how the energy deficit would be