The cost of the social electricity bonus and the battle over funding
The government adopted a new financing model last year to fund the social electricity bonus, replacing the previous mechanism that was struck down by the Supreme Court. The new scheme places the cost of aid on all players in the region’s electricity sector, including traders, distributors, and manufacturers—no one is exempt.
Electricity companies are resisting by seeking to overturn the reform, and they have already started litigation to undo the new financing method. For now, their efforts to block the cost share have not succeeded, and the framework remains in place as it stands. Independent energy traders have halted plans to avoid their share of the total relief cost for vulnerable customers.
The Association of Independent Energy Marketers (ACIE), which represents fifteen firms not part of large vertical groups and entities such as Acciona, Cepsa, BP, TotalEnergies or Fenie, filed an appeal last October to challenge the latest legislative reform. ACIE argued that the reform was discriminatory because it charged roughly half of its members’ electricity social bonus costs to the broader electricity sales sector.
Small electricity company operators also asked the Supreme Court to refer questions to the Court of Justice of the European Union to determine whether the new financing model complies with community law. They also sought a preliminary ruling to the Constitutional Court about the potential unconstitutionality of the reform.
The Supreme Court declined to accept ACIE’s appeal, saying the association lacked jurisdiction for the requested review. The court criticized the energy employers’ attempts to portray themselves as opposing a royal decree while noting that the issues in dispute concern the authority of the two royal decree laws themselves, which cannot be annulled by a court lacking regulatory status. The appellate challenge rests on a narrow set of rules in the royal decrees, which the Supreme Court cannot overturn due to their legal force.
The State Attorney General’s Office also weighed in against the appeal, joining the process to address ACIE’s complaints about alleged discriminatory treatment of trading companies in allocating the relief costs to vulnerable households. The attorney argued that there is no discrimination if all electricity sector activities are included in the distribution according to each company’s total bills and if inter-company allocations within sub-sectors reflect each company’s invoiced amounts. The possibility of discrimination remains a point of contention for some observers.
The cost of social bonding
The social electricity bonus provides discounts on electricity bills ranging from 25% to 40%, depending on the vulnerability of the customer. As an anti-crisis measure, temporarily, different provisions increased these discounts to 65% and even 80% on certain receipts.
Initially, the cost of the mechanism was shouldered by the major electricity groups that marketed the regulated tariff, including Iberdrola, Endesa, Naturgy, EDP, and Viesgo. Over time, reforms to the financing system broadened the list of companies required to bear the deductions for vulnerable households, bringing more players into the cost-sharing framework.
The current government, in response to the requirements of the European Union and following final clarification by the Supreme Court, approved a reform last year that distributes the cost of the mechanism across all companies in the electricity sector without exception. This includes marketers, distributors, and manufacturers, among others.
As the financial burden is allocated according to market share, the larger energy groups continue to bear the majority of the costs. These major electricity companies have long argued that the government should cover the expense through the general state budget, since it is a social policy, contending that the sector should not be responsible for funding these subsidies alone.