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Publicatie Laka-bibliotheek:
Stranded costs in the Spanish electricity industry

AuteurM.Lasheras
Datumoktober 1998
Classificatie 2.13.0.00/14 (SPANJE - ALGEMEEN)
Voorkant

Uit de publicatie:

STRANDED COSTS IN THE SPANISH ELECTRICITY INDUSTRY

Florence, 7/OCT/98.

This paper describes how stranded costs are dealt with in the Spanish electricity 
industry and evaluates the procedures for calculating and recovering these costs as 
defined by the 1997 Electricity Act (Ley 54197). The present legal definitions of both 
stranded costs and competition transition charges (CTCs) bring transparency to tariffs; 
allow volatility in market prices to be combined with regulated fixed tariffs, thus 
minimising the costs of risk; can be used as a flexible regulatory tool to promote 
competition and, lastly, mitigate market power in generation. These are certainly 
the positive features that can be highlighted when discussing stranded costs and 
competition transition charges, but there is a negative side to the discussion too. For 
example, consumers are obliged to pay a competition transition charge they would 
never have to pay under fair competition pricing; when making bids to the market, 
generators must now take into account a new variable which might prompt them to 
take certain strategic decisions and act accordingly; and, lastly, companies might 
construe the present legal definition of CTCs as a first step towards establishing their 
entitlement to obtain certain revenues during the entire transition period. Indeed, 
right now, at the end of 1998, the utilities are demanding the securitisation of 
stranded costs by a "credit enhancement'' of the present legal definition that will 
bring an added burden to bear on electricity tariffs. In order to fully explain all of 
these points, the following paragraphs define stranded costs, describe why and how 
they have been applied in Spain and evaluate their advantages and problems.

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