Complaint against Naturgy: between a fine and the dock | Companies

It is relatively common to find news that an electricity company is under investigation by the National Markets and Competition Commission (CNMC): or for alleged anti-competitive practices (due to abuse of dominance or unfair competition) arising from competition. Chamber of this body or market price manipulation for violation of the Electricity Law, files corresponding to another chamber of the CNMC, the Chamber of Regulatory Supervision.

An example of the first assumption is recent research…

It is relatively common to find news that an electricity company is under investigation by the National Commission for Markets and Competition (CNMC): either for alleged anti-competitive practices (due to abuse of a dominant position or unfair competition) arising from the Competition Chamber of this body or manipulation of market prices for violation of the Electricity Law, files corresponding to another chamber of the CNMC, the Chamber of Regulatory Oversight.

An example of the first case is the recent investigation launched by Competition against the electricity distributor Naturgy (UFD Distribución de Electricidad) and its parent company, following an audit carried out a year ago at its headquarters, for alleged preferential and discriminatory treatment of incidents and claims made by independent third-party marketers in favour of marketers of the Naturgy group itself. The investigation is open and does not prejudge the final outcome, the CNMC and the company itself recall. Another example of the action of the Regulatory Chamber, in this case involving sanctions, are the two procedures against Iberdrola clients, in which this subsidiary of the Iberdrola group was fined 75,000 and 50,000 euros for serious violations of the Electrical Industry Act. In particular, for failure to comply with consumer protection measures.

Two examples of cases: one is under investigation and the others have been completed and, with appropriate penalties, approved by both chambers of the CNMC. Violations in these cases are punishable by fines, which electric power companies always appeal administratively and the amounts of which they manage in some cases to reduce or avoid.

But one problem is that companies face sanctions from the regulatory authority (something more or less common), and the other, very different problem is that companies face criminal prosecution after being accused of crimes against the electricity market , which only happened once (in particular with Iberdrola), and it can now be repeated in the case of Naturgy Generación after the National Court accepted the complaint filed by the prosecutor’s office on the complaint of Facua-Consumidores en Acción. This was based on CNMC’s year-old sanction dossier for inflated prices offered by its Sabón 3 combined cycle plant in the technical constraint market between March 2019 and December 2020 (which was offered 78% above the daily market average). The national court could archive this case.

The result of the long trial that Iberdrola went through since 2017, and the four directors who sat on the bench and faced two years in prison, has proven that it is almost impossible to prove the manipulation of electricity prices and, above all, that it implies a crime. against the market. Legal sources claim that “the standard of proof required in criminal proceedings is much higher than in administrative proceedings; this is the difference between a fine and imprisonment.” And although in this case the company pays the fine, in criminal proceedings justice is also directed against managers who made allegedly criminal decisions.

The lawsuit against Iberdrola was initiated by the former Minister of Industry, José Manuel Soria, who, unhappy with rising prices between November and December 2013, asked the CNMC to investigate all companies in the sector, resulting in a sanction file that ultimately As a result, only the energy company chaired by Ignacio Sánchez Galan was affected, which was fined 25 million euros for changing prices for hydraulics.

Already in 2017, the prosecutor’s office decided to end the administrative procedure and apply Article 281 of the Criminal Code to Iberdrola for allegedly removing from the market such an essential product as water, with the aim of “changing prices and causing harm to the consumer.” Earlier this year, seven years later, the company and its directors were found not guilty.

CNMC Experts

One of the problems in proving fraud that could benefit Naturgy Generación in the lawsuit it now faces (the Court asked for the names of board members from March 2019 to date) is that the prosecution’s experts are CNMC technicians , which in the case of Iberdrola faced many controversies. And the report on which this complaint was based (as well as the Naturgy report) is on file with the organization. “You have no other information to rely on.” Unnecessarily technical information, as it turned out, in this case, is the method for determining the value of water.

The complaint that the National Court has just accepted for examination regarding the inflated prices of the Galician mixed cycle Naturgy, for which the CNMC has already imposed a fine of six million, indicates that, at the preliminary stage and without prejudice to the subsequent classification: The facts included in the complaint have the characteristics of a crime, therefore they are accepted for examination. In this case, the market power of the gas plant is being decided, which “took advantage” of the unavailability of another Galician plant, Puentes de García Rodríguez, of Endesa, and the rise in coal prices.

“Due to technical constraints, the system operator calls on you to produce in the area where it needs you to meet demand,” recall industry sources, who add that “market power may exist in some areas.” Naturgy insists that its gas plants are unprofitable; In fact, he asked the Supreme Court (and it was granted) for the right to close 10 gas plants that are operating at a loss, and for the Ministry of Transition and Electricity (REE) to prevent him from closing to avoid supply problems.

The complaint considers an aggravating factor that the pricing abuse occurred during a pandemic, although the events began a year before it was announced.

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