A large, long-standing mortgage on the nation’s electricity system creates a yearly charge that all electricity users share. The cost, driven by a long-standing mismatch between expenses and revenues in the power network, has grown since the early centuries of the industry. What began as a debt owed by consumers to energy suppliers gradually shifted to banks and investment funds, with monthly bills carrying a portion of the burden for years.
Next year’s electricity bill is projected to include a payment of 2,310 million euros to service this debt, according to the government’s draft plan for electricity charges in 2023. The charges in the bill fund policy costs for energy, such as compensation for regulated renewable energy sources and other related expenses that help keep the system running across both peninsular and island regions, as well as any accumulated deficits.
Spain’s electricity system still carries a debt just over 10,000 million euros at the end of 2022, a figure that includes interest. Projections suggest the debt could drop to about 7,900 million euros next year, with the aim of repaying it in full by the end of 2027, subject to economic and policy conditions.
Since the era of Aznar and Zapatero
The debt, this mortgage on energy bills, arises from years in which the payments charged to consumers did not fully cover the system’s costs. The so-called tariff deficit grew, reaching a striking peak of 28.7 billion euros. After fourteen years of persistent shortfalls, the electricity reform under Mariano Rajoy reduced the deficits, and from 2014 the sector began to see the opposite effect as surpluses appeared.
Surpluses recorded between 2014 and 2018 accumulated a total of 1,687.5 million euros, creating a kind of temporary buffer that many governments have used to address imbalances in the network. The current administration has signaled that it can draw on the 2021 surplus to bolster the system against potential mismatches in the current year.
Initially, consumers bore the entire debt through their energy bills. Energy companies transferred the shortfall to their balance sheets and covered the difference over the years. By 2011, this spread of risk was securitized, and the debt was gradually moved to financial markets. Energy firms then shifted collection rights to mutual funds and banks as part of the evolving financing arrangement.
The majority of the debt was issued through market operations via the FADE open securitization program, with other instruments used to address specific gaps such as the 2005, 2007, and 2013 adjustments. Although the original plan anticipated finishing payments by 2026, new issuances tied to liquidity needs have extended the schedule by another year, keeping the mechanism in place to manage the ongoing imbalance.