When Red Eléctrica also took part in the euphoria of liberalizations in the State

MadridBeyond the role that Red Eléctrica de España (REE) may have played in its origin –still to be deciphered– the power outage of April 28, the focus on the operator of the Spanish electricity system has also affected its structure: today it is a private company in which 20% of the capital is in the hands of the State through the State Industrial Participation Company (SEPI), but years ago it was under public control and the left in the Congress of Deputies –from Sumar, minority partner in the Spanish executive, even ERC, EH Bildu and the BNG – not only did not take long to remember it, but has already proposed that this model be recovered.

From the outset, it should be noted that Red Eléctrica de España assumes the functions of the electricity system operator (OS), but it is also the sole owner of the high-voltage transmission networks (lines, transformers, transformer stations, etc.) and, therefore, their management. Thus, it is a TSO (transmission and operation of the electricity system). Since the summer of 2022, Red Eléctrica has been a subsidiary of Redeia, a brand created to bring together other activities, for example, in the telecommunications sector (Reintel) or the space sector (Redeia controlled 89% of Hispasat, the Spanish satellite operator). until it was sold to Indra in January).

What is the Spanish government saying so far?

"Red Eléctrica is legally private," argued Third Vice President and Minister of Ecological Transition Sara Aagesen last week in the Congress of Deputies, when questioned specifically about the Spanish government's role in the company. Days earlier, Pedro Sánchez had spoken directly of a "private operator"But Aagesen did not overlook its strategic role, and also referred to the "protection" the company enjoys. "[Red Eléctrica] is protected by the protection of its independence as a special service, ensuring that no company can hold more than 5% [of the share capital] and that the shareholders' political rights can only vote up to 3%," the minister explained. In contrast, the State has what is known as the "golden share" or veto power, over 20% of the capital, which allowed it to appoint the current president, former Socialist minister Beatriz Corredor.

However, Spanish government spokesperson Pilar Alegría evaded the question at the recent cabinet meeting about whether, in the wake of the power outage and the demands of left-wing partners, a rethinking of the current structure of Red Eléctrica was on the table: "Now we have to focus our efforts on finding out." In any case, sources within the Spanish government acknowledge that the debate is "interesting."

Era of privatizations

Red Elétrica de España did not escape the privatization euphoria of the State at the end of the 20th centuryThe process of exiting public capital began in 1999. SEPI, under the presidency of Pedro Ferreras, appointed by the government of José María Aznar (PP), then held more than 60% of Red Eléctrica and began to divest itself little by little until it had eliminated more than 35% of the capital. The public holding company had entered the company in 1997, at which point the liberalization of Endesa (which held the bulk of the capital through subsidiaries) gained momentum. In 2005, the Court of Auditors, in a report on SEPI's operations between 1996 and 2002, denounced that this operation had been carried out "with a lack of clarity and transparency" and to the "benefit" of the electricity sector companies.

Today, beyond the State, Red Eléctrica has 70.22% of floating capital (free float), 5% is held by Pontegadea Inversiones (the investment fund of Amancio Ortega, founder of Inditex), and 4.64% is held by Blackrock. The company's share capital amounts to €270,540,000, while its market capitalization is €9.699 billion.

Division of the business

However, the branch of Red Eléctrica that is in the spotlight in terms of possible state control is the one dedicated to operating the electrical system, that is, the one dedicated to ensuring the normal daily functioning of the electrical system (security of supply and coordination between electricity production and transmission) but also planning the investments that the system requires in the medium and long term.

The merger of both functions (operator and transmission company) basically means that the organization (in this case, Red Eléctrica) that studies and prioritizes the necessary investments in the electricity system is also the owner of the assets or infrastructure (the high-voltage transmission network) on which the investments impact. In fact, Sumar, the minority partner in the Spanish executive, not only focused on SEPI "having greater public participation," but also on the separation of the business: "[Managing the system and acting as transmission company] are functions that generate contradictory needs." the party spokesman stated, Ernest Urtasun.

This debate is far from resolved, although sources within the electricity sector indicate that separating these functions could "reduce the risk" of prioritizing the interests of other stakeholders, such as generating and distributing companies, or the TSO itself. On the other hand, a more neutral approach could be "favored," the same sources indicate. Last summer, the National Commission on Markets and Competition (CNMC) recommended that Red Eléctrica strengthen the separation of its functions as transmission company and system operator to avoid "overinvestment." The entity chaired by Cani Fernández indicated that merging both tasks could be a risk at a time of increased investment due to the introduction of renewables and the adaptation of the electricity system to these technologies.

In any case, in the rest of Europe, the prevailing model is that of TSOs, that is, the same as Red Eléctrica: some examples are RTE in France, Elia in Belgium, Amprion in Germany, TenneT in the Netherlands, TransnetBW also in Germany, TERNA in Italy, and Swissgrid in Switzerland. In contrast, in the United States, Canada, Ireland, and, more recently, the United Kingdom, the model is separate. However, a separate model for functions in which the management or operation of the system were under public control—an approach that former Spanish Prime Minister José Luis Rodríguez Zapatero put forward but failed to prosper—would not solve the problem of those who should own the infrastructure.