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Spain: Endesa urges Spain to ditch domestic coal obligation

https://www.chemnet.com   Jul 29,2010
The Spanish government should abandon its current support for
domestically produced coal as it seeks to come up with a new long-term
framework for the electricity sector, Andrea Brentan, chief executive of
Enel-owned utility Endesa, said Wednesday.


The current Socialist government brought in legislation in February to
support the use of domestically produced coal by offering premium prices to
nine coal-fired power plants that use Spanish coal. Endesa and other utilities
opposed the move because they said it would give them less flexibility in
their generation, would likely lead to higher prices and would require imports
of expensive foreign coal to be burned alongside poorer quality Spanish coal.


"Concerning coal and the very complicated situation of the coal decree,
which we always said was not the right thing... in the present situation, the
best thing to do would be not to continue with that decree but to use the
other decision that the EC has made that coal mines that have a plan to close
should close in 2014," Brentan said during Endesa's first-half results
conference call on Wednesday.


"With the state aids allowed [by the EU], domestic coal could be
competitive to 2015," he said.


But Spain, along with Germany, Poland, and possibly the UK and Romania,
has vowed to block a European Commission proposal made on July 20 that would
allow only those coal mines that are profitable and have a closure plan to
continue receiving state aid until 2015.


The EC proposal aims to ensure that only coal mines that are profitable
without subsidy remain in operation beyond then.


POLITICAL PACT ON TARIFF DEFICIT


Brentan also vowed that Endesa would continue to seek to influence the
talks on a long-term energy framework currently taking place between the
Socialist government and the opposition People's Party.


"[We are] facing key milestones on the regulatory front, especially in
Spain but we will be active in calling for a regulatory regime that provides
remuneration for the past present and future," he said.


He was referring to the need for a long-term deal to tackle the tariff
deficit--debt that has accrued to Endesa and other utilities for selling power
at regulated rates below market costs.


He said he expected a plan to securitize the tariff deficit should be
finalized by September, and that other key elements of the pact would not be
agreed until then, rather than by the end of July as the government had hoped.


"The timing of July has been mentioned, and from our point of view this
is practically impossible and everything will probably be postponed to the
autumn. We believe it is a great opportunity to have a stable set of
guidelines for a long period of time, but naturally it depends on what the
content of the agreement will be."


He reiterated that Endesa was angry that the government had halted a
planned regulated tariff increase for July 1, pending the current talks, and
that Endesa had appealed this in the courts on the grounds that it did not
comply with existing electricity legislation passed in 2009.


Brentan said Endesa felt an increase in tariffs was "unavoidable" but
that the extent of the increase would depend on other factors including the
cost of renewable feed-in tariffs, stressing that the high tariffs offered to
solar photovoltaic producers that led to an explosion in PV deployment in 2008
had been a "mistake."
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