The liberalisation of the electricity sector led to the separation of the sector into different activities, distinguishing between regulated activities (such as transmission and distribution) and liberalised activities (such as generation and the retail of electricity). Among these activities, as defined by Law 24/2013, of 26 December, on the Electricity Sector, the retail activity is that by which companies, accessing the transmission or distribution grids, acquire energy to sell it to final consumers. Retailers are therefore entities that act as intermediaries between consumers, distributors and the electricity market itself.
The importance of these relationships with other players means that, although it is configured as an activity under free competition, the retail activity must be subject to numerous rules that condition its operation. Below, some of the most essential regulatory aspects that retailers must address are briefly outlined.
Requirements to carry out the retail activity
To be set up as a retailer and therefore to be able to carry out that activity, it is necessary to meet all the requirements identified in Article 73 of Royal Decree 1955/2000, of 1 December, regulating the transmission, distribution, retail, supply and authorisation procedures for electricity installations.
In other words, it is essential to meet the following legal, technical and economic requirements:
- Be set up as a commercial company and be entered in the relevant register. Among other details, the register must show that the company’s corporate purpose allows it to buy and sell electricity. In addition, the principle of separation of activities must be respected.
- Meet the technical requirements demanded of buyers in the electricity production market in accordance with the Technical Operating Procedures and, where applicable, the Operating and Settlement Rules of the production market.
- Demonstrate its economic capacity before the System Operator Red Eléctrica de España (REE) and before the Iberian Market Operator, Spanish Pole (OMIE).
If the above requirements are met, the start of the retail activity must be notified to the Directorate-General for Energy Policy and Mines of the Ministry for the Ecological Transition and the Demographic Challenge (“MITERD”).
Relationships with the various players in the electricity sector
In their operations, retailers interact with the vast majority of players that make up the electricity sector, and obligations arise from this:
1. Relationship with distribution companies
Distributors are the players the retailer interacts with the most, since this relationship is essential for managing customers’ supply points. In this respect, three main areas of action can be distinguished:
- Managing the third-party grid-access contract: it is the retailer’s responsibility to request from distributors, on behalf of the final customer, the sign-up, supplier switches, cancellation or changes to power or to any other technical condition of the supply contract, among other matters.
- Distributor billing: retailers, representing their customers, are responsible for contracting and paying the access toll for the transmission and distribution grids. Thus, retailers must handle and pay the toll invoices (or ATR invoices) issued by distributors for each supply point.
- Billing consumers: retailers must issue supply invoices to customers, in accordance with the consumption data and meter readings passed on by distributors through the ATR invoices.
2. Relationship with the electricity market and the market operator
The retail activity involves acquiring energy from generators, whether on the electricity market or directly through bilateral contracts. To this end, retailers carry out various activities related to the electricity market, notably consumption forecasting, the purchase of energy itself, the verification of final settlements and payment for the energy acquired. It is essential that retailers meet all the obligations necessary to operate in the electricity market, such as maintaining the legal, technical and economic capacity requirements, acquiring the energy needed to carry out their activity and, to that end, providing any guarantees required.
3. Relationship with the National Markets and Competition Commission
Retailers are required to send periodic information to the National Markets and Competition Commission so that it can carry out its function of supervising and controlling the operation of the electricity market. Among other information, they must report on retailer switches (sign-ups and cancellations), consumption and managed-energy data, consumer claims, billing obligations and commercial offers.
4. Relationship with the Administration
Like any other company, an energy retailer must comply with its obligations before the relevant public administrations and with the Tax Agency, to which it must declare and settle the corresponding taxes. Examples of these obligations include the obligation to send half-yearly and annual information to the Ministry on the prices applied to final, industrial and domestic consumers, as well as the obligation to settle and pay the amounts relating to financing the social bonus and the contribution to the National Energy Efficiency Fund.
5. Relationship with consumers
The main activity of retail is billing the final customer for energy consumption. The retailer is responsible for issuing supply invoices to its customers, for which it must not only comply with the sector rules but also respect the obligations established by consumer-protection legislation, as well as the personal-data protection rules.
Among all these duties and obligations that retailers must comply with in their daily relationships with consumers, the Electricity Sector Act stipulates the following as specific general obligations of retailers:
- Formalise supply contracts with final consumers in accordance with the applicable rules.
- Bill the supply in accordance with the contractual conditions.
- Have a service for handling claims and incidents.
- Not carry out advertising or formalise contracts during home visits not requested by the consumer themselves.
Conclusions
To carry out the electricity retail activity, it is necessary first to define how the company’s day-to-day will be managed and to have the appropriate economic, technical and human resources. These include commercial, operational, systems, legal and customer-service areas. Physical and material resources such as software, offices and external services are required, in addition to qualified staff for management, administrative tasks and customer service. Overall, electricity retail requires a significant economic, technical and human endowment, and involves a high economic risk owing to market volatility, price variability and the heavy and changing regulatory burden.
For all these reasons, it is necessary to have highly specialised regulatory advice that allows retailers to carry out their activity with full legal certainty and ensuring compliance with the applicable rules.
