Changes to the regulation and impact

The July 2014 reform boosted the penetration of natural gas in Spain

After the electric sector reform of 2013, the Ministry of Industry, Tourism and Trade carried out a review of the legal framework applicable to regulated activities in the natural gas sector. The main vehicles of the reform were focussed on eliminating the incipient tariff deficit which existed in the sector, ensuring the financial viability of the gas system in the coming years, as well as incentivising the penetration of natural gas into the Spanish energy mix (currently placed at 28% compared with 54% recorded in the European Union).

In this regard, Royal Decree 8/2014 established, among other things, the following measures, aimed at achieving the previously mentioned objectives:

  • Adjustments to the regulated costs totalling 238 million euros, of which 110.7 correspond to the distribution companies.
  • Elimination of the HPI (hydrocarbon price index) as an inflation-like factor for updating the remunerations.
  • Alignment of the remunerations to all the regulated activities of the gas system (and not just in the case of distribution, as was occurring until then) with the evolution of the demand for natural gas.
  • Increase in remuneration to distribution for supply points in areas of recent gasification, as well as a higher remuneration associated to the incremental demand for gas.
  • Recognition of the tariff deficit of 2014, which will be amortised within a maximum 15 year period.
  • Establishment of the tariff deficits which could eventually be generated, with a requirement for increasing tolls in order to balance the gas system accounts on the assumption that they are excessive.
  • Establishment of regulatory periods of six years.

Madrileña Red de Gas welcomes the measures adopted in the legal framework review, as they guarantee the economic viability of the gas system, boosting the penetration of natural gas into Spain considerably – essential tasks of the distribution companies – and brings the required regulatory stability and legal security under which the different actors in the gas system carry out their activities.