Electricity distribution is one of the essential pillars of the Spanish electricity system and is legally configured as a “regulated activity”. The following is a general overview of how the electricity distribution activity is regulated in Spain, with particular attention to its obligations, functions and rights.
Article 6 of Law 24/2013, of 26 September, on the Electricity Sector, defines the various parties that carry out the activities for the supply of electricity and defines electricity distributors as those companies whose function is to distribute electricity to the points of consumption.
The distribution activity has the character of a regulated activity, which means that both its economic regime and its operation are strictly subject to the law. For this reason, it is essential that distributors have regulatory advice that allows them to optimise their decision-making at all times.
As to its material content, Article 38 of the Electricity Sector Act specifies that the purpose of the distribution activity is the transmission of electricity from the transmission grids, or other distribution grids, to the points of final consumption. The criteria for regulating this activity are set by reference to electricity distribution zones, with common characteristics linked to the configuration of the grid.
Likewise, the commissioning, modification, transfer and definitive closure of distribution installations is subject to a regime of administrative authorisation. This regime reflects the single-grid and natural-monopoly character inherent in any activity with regulated remuneration.
Article 40 of the Electricity Sector Act establishes a detailed regime of obligations, functions and rights for distribution companies, deriving from their status as owners of the distribution grids and from the regulated nature of the activity they carry out.
Obligations of distributors
As a general rule, Article 40.1 provides that distributors are obliged to provide the distribution service in a regular and continuous manner, in accordance with the quality conditions determined by regulation. They are also responsible for the construction, operation and maintenance of their distribution grid up to the point of connection with the customer.
The provision also gives distribution companies a central role in managing requests for connection to their grids, which must be analysed and, where appropriate, accepted, refused or made conditional in accordance with objective and non-discriminatory regulatory criteria, and must serve all requests on equal terms.
From an economic-regulatory perspective, before undertaking the necessary investments, distributors must submit their annual and multi-year investment plans, so that the planned investment ceiling can be authorised. Subsequently, once those investments have been carried out, distributors are obliged to provide the Administration with the information necessary to determine their remuneration regime, in accordance with the methodology in force.
Of particular relevance is the obligation to extend the distribution installations where necessary to meet new supply demands, without prejudice to the specific regime applicable to electricity connections and to the obligations incumbent on developers in the urban-planning sphere.
These responsibilities are complemented by the functions that Article 40.2 of the LSE attributes to distributors in their capacity as distribution-grid managers, under which they must establish the operating and maintenance criteria needed to guarantee the security, reliability and effectiveness of electricity supply.
These functions include managing grid access, coordinating with other grid managers and with the system operator, as well as performing essential functions in metering, meter reading and consumption-data management, applying and collecting access tolls, consumer protection, managing supplier switches, detecting and reporting fraud situations, and preserving the confidentiality of the information obtained in the course of their activity.
Rights of distributors
As a counterweight to the broad catalogue of obligations imposed on them by the sector rules, Article 40.3 of the LSE recognises a series of rights that are essential for distribution companies to properly carry out their activity.
First, distributors have the right to administrative recognition and to receive adequate remuneration for carrying out the distribution activity within the electricity system. Knowledge of the methodology in force is a key factor in obtaining adequate remuneration.
They may also require that the installations and receiving appliances of users connected to their grids comply with the technical and safety conditions required by the applicable rules, as well as their proper use, in order to avoid deterioration or degradation of their quality.
Likewise, distribution companies are entitled to require the installation of the legally established metering and control equipment from those parties obliged to do so, thereby ensuring proper metering and control of energy consumption. Finally, the LSE recognises distributors’ right to access the information necessary to carry out their functions.
Conclusions
The electricity distribution activity is configured in our legal system as a regulated activity. The framework set out in the Electricity Sector Act and its implementing rules precisely establishes the scope of the distribution grid, the role of distribution companies and the set of obligations, functions and rights required of them, in order to guarantee the security, reliability and effectiveness of electricity supply. To carry out a regulated activity, companies need highly specialised regulatory legal advice with expert knowledge of that framework.
