Today we learned that the Supreme Court has raised a question of unconstitutionality to the Constitutional Court regarding the payment of the "Impuesto sobre el Valor de la Producción de Energía Eléctrica" (Tax about the Value of Electricity Production), which applies a 7% rate to the obtained income from the sale of electricity by the producers of it, whether renewable or fossil energy.
The Supreme Court questions the environmental purpose of the tax and considers that in reality it is a pure collection tax. Therefore it decides to ask the TC, who has already dismissed some appeals of unconstitutionality, such as the one from Andalusia, although the legal arguments in that case were different (Article 9.3 of the Constitution, whereas now 31.1 is being invoked).
Now the ball is in the court of the Constitutional Court, who has to decide on the validity of the tax in a ruling that could have unpredictable consequences, since it is not at all clear, in case the tax money has to be paid back, how to perform such devolution. All we know is that whoever does not recur in the four years following to the settlement, will lose the right to recover the amounts paid in that annuity and that likely compensation to the plants will be reduced in case this tax should no longer be paid, since right now it is being computed as an operation cost. However, if the settlements are closed, theoretically they can not be opened.
In short, it is a development that we value positively, as we have always defended the illegality of the 7% tax, and which once again proves that the problem of the tariff deficit is not solved in a proper way. It remains to see what the TC decides and, in case of cancellation, how the decision applies.
Although this has proven an impossible concept to grasp for certain German political leader, spending to save is actually an option, and not a bad one at all.
Energy Performance Contracts (EPCs) set the framework by which installed energy efficiency measures, which are verified and monitored during the whole term of the contract, are paid for by reference to the agreed level of energy efficiency improvement or financial saving generated. In other words, the service provider (installer) implements the service or technology agreed by the parties for reducing energy consumption or for generating energy sustainably (what is known as the Energy Conservation Measure), thereby offering a financial saving, which is in turn used to fund the cost of the improvements and services.
The objectives behind an EPC project can be varied, from renewable energy generation, to reduction in CO2 emissions, cost savings and improved building environment. Similarly, the Energy Conservation Measure may at the same time contain a wide range of different measures, such as lighting, heating, combined heat and power or metering. Therefore, it is critical to clearly identify objectives and requirements in the contract, as they can sometimes be conflicting. For example, a CO2 reduction may be our main objective, however, the biggest cost saving may not necessarily give the largest CO2 savings, or vice-versa.
The other cornerstone of these type of contracts is the savings guarantee, meaning that the service provider has to achieve the savings or else, they face being liable for that underperformance. The duration of the guarantee will typically last until the project costs have been covered by the savings. Sure enough, austerity does not always have to be the answer.
In the UK, a number of such projects have been undertaken within the public sector, particularly following the entry into force of The Energy Efficiency (Encouragement, Assessment and Information) Regulations 2014. This piece of legislation sets the basic duties of the competent authorities in relation to energy services and energy performance contracts.
Unfortunately, on 7 August 2015, Eurostat published a guidance note titled "The impact of Energy Performance Contracts´ on government accounts" stating that under Eurostat Accountability rules, energy efficiency investments are considered to be a cost in terms of deficit targets. Unsurprisingly, stakeholder Veolia Spain has said that the guidance note has caused a delay or avoidance of public tenders to enter into energy performance contracts for public buildings.
Once again, while rules and legislation in the field of renewable energy and energy efficiency are pointing one way, common sense, technology and facts are pointing elsewhere.
The orginal version of this article is in Spanish and was published here.
In order to win a trial, persistence in the effort is needed. It is possible to go through different instances, appeals, cassations, exceptions of unconstitutionality and preliminary rulings of European Law, just to give some examples. Even there is the possibility to go to the European Court of Human Rights in Strasbourg.
When we defend ourselves against a relentless campaign to demolish the renewable energy sector in Spain, the persistence in one or other trial is not enough. We need perseverance in the global goal, and we need to promote all the necessary trials to return legal certainty to our sector.
We have focused on perseverance from the start, proposing a global and exhaustive strategy. We approached it from the scope of European Law and we have always said that the Court of Justice of the European Union will be the one to have the say the last word. This strategy has supposed an exhaustion of all the routes within our grasp, with different success possibilities among them.
Review of the different battles
The recent dismissal of the reclamation for pecuniary responsibility that we lodged in 2011 regarding the damages caused by Royal Decree 1565/2010. We already said it was a troublesome reclamation, as it implies a proof load over a forthcoming damage. That is the reason why we added it to the actions included in our economic proposal for the defense against Royal Decree-Law 14/2010.
The card-sharp play
In our opinion, the indirect contestation of RDL 14/2010 had more success possibilities, because of its high arbitrariness grade and its discriminatory result. We have contested RDL 14/2010 in an indirect form through the Circular 3/2011 of the CNE, a trial which still today is waiting for a specific date for voting and verdict of the Supreme Court, in cassation. Because of the doubts that appear regarding European Law application, the Supreme Court has the obligation to set out preliminary rulings, as the sentence dictated by the National Audience is based on European Law, but quoting obsolete regulations and jurisprudence, and it is manifestly wrong in its reasoning and its alleged application of European Law.
When the combination of regulations of RD 1565/2010 and RDL 14/2010 appeared as an authentic play of the card-sharp regulator, with the subsequent approved electric reform of José Manuel Soria, at the moment, the goal of both has come across. It is a card-sharp play, since it seems hermetic, in the sense that it is dressed as a relocation of the remuneration, not a cutback. It pretends to be a financial operation, compensated by something that in the past was mine, but which I only can quantify with certainty in fifteen years from now.
At this point, litigations against the electric tax of Law 15/2012 are entering the dispute phase and the State Lawyers do not even seem to try to defend themselves. The good question here is that at a material level the consultants of the own Government (Comisión Lagares) and the European Commission have existential doubts about the viability of this tax.
Constitutional Court Rulings
In December of 2015 a ruling of the Constitutional Court about RDL 9/2013 was dictated, and in February of 2016 another ruling dictated by the same tribunal appeared about Law 24/2013. These rulings have created discomfort among the Constitutional Court, resulting in a particular vote with two adhesions criticizing the deep shortages in its reasoning.
Moreover, both sentences do not talk about the reform in its execution, but only in its plan. In abstract terms, the idea of this reform does not have to be contrary to the law, and it does not have to let down the legitimate expectations of the interested. I say this in a hypothetical way, putting aside the serious practical problems of arbitrariness presented by the methodology used by the Government. As it happens in many fields of life, it seems easy to plan panacea solutions from the ignorance. Once they have to be started up, because of its arbitrary execution, they stumble upon the rule of law and other frivolities of trivial life.
These problems have not been object of scrutiny by the Constitutional Court, and they are still under a detailed analysis by the Supreme Court. This Court is considering whether it is appropriate to raise unconstitutionality questions, and it has asked us as complainants to express our opinion about the incidence that the first of the mentioned sentences may have in our litigations. What seems clear is that even the dissident magistrate is confused with the legitimate confidence. It would be difficult for him to maintain that this principle requires an individualized and detailed analysis and at the same time saying that he would have finished with the same sentence pronounced by the other magistrates when the most essential part to carry out this individualized and detailed analysis was not part of the sentence, as it was contained in the Royal Decree 413/2014 and the Ministerial Order IET/1045/2014.
Let’s focus on the execution of the most recent reform
We have reached the impugnation of Royal Decree 413/2014 and Ministerial Order IET/1045/2014. These proceedings are in its final phase, after the ratification of more than 300 expert reports, among the ones has stood out the report made by our expert Alberto Ceña, made over the most exhaustive sample of all the presented reports. The thing that has been stressed out most in our ratifications is the concept of the sunken costs, with deep investigations by the magistrates of the Supreme Court. It is here where it will have to distance itself from the reasoning of the Constitutional Court, which maintains from a simplistic point of view that the interested would have adapted to the technological evolution and so they would not need such or no retribution. Here we can clearly see what happens if we confuse the individual position in time with the position of a sector in a temporal window.
The Supreme Court, in repeated occasions emphasized the lodge of preliminary rulings, which were insisted by us as the petitioning party, and accepted as necessary by the defense. The legitimate confidence and the highly arbitrary approach of this reform will need to be analyzed in application of the jurisprudence of the European Union Court of Justice.
By mid-2015 the Spanish State initiated a new strategy in order to neutralize its opponents in international arbitrations and national trials, both with aspirations to reach the European Union Court of Justice. Ones through MICULA doctrine and others through its normal procedural development. We are talking about an auto-complaint through a late notification of the last electric reform as a possible constituent of State-aids, with its posterior extension to the Royal Decree 661/2007. At first, the State Attorneys received instructions to use it as a leverage to suspend the procedures in the Supreme Court, branded by part of its magistrates as improper and premature. Ultimately the Government is trying to ratify its cutbacks through a State-Aid expedient.
Non-notified state-aids, or notified after the passing of the regulation, which is more or less the same, are automatically illegal. Despite this illegality, these aids may be compatible, something which would result in a legalization of the status quo. That would mean that these aids will not need to be returned. The trick is in the details, if it was considered that the initial retribution was over-compensated and the current compatible, the legal fundament to plead legitimate confidence could be weakened.
I have been told from Brussels that they are not going to decide over the opening of this expedient before the investiture of a new government in Spain. Others have told me that the Directorate General for Competition prefers to close the preliminary investigation without the opening of the expedient, and that Commissioner Cañete is lobbying in the opposite direction. But they are all rumors. But it is important to bear in mind that Brussels does not have the final say here, as this issue would ultimately be sent to the European Union Court of Justice.
The difference between persistence and perseverance
The difference between persistence and perseverance is in the continuity of the action. Losing battles cannot demotivate you, you have to feed your perseverance in order to insist in a stronger way in the work that this supposes. The objective of such a strategy cannot be to win it all, it must be focused in winning the decisive battles. It is important to work with a cold head each and every of the lines that may help even if in some cases it my only be useful to stretch other lines in the wanted direction, because our opponent is doing the same thing. I am as convinced as in the start, and I saw coming all the difficulties commented in this article, and it is because of these difficulties that we are following this strategy.
The only one that I did not see coming is the State-aid file, partly because it is born from a doctrinal change which took place meanwhile. But its “europifying” effect works to our advantage, and I believe we also have good legal and technic-economic arguments to defend ourselves adequately in the content of this file. As you have been able to see in the development of this article, our perseverance has driven us to the middle of Europe, with Luxembourg on our way. Now the most important part is to come, to travel this last mile to the Palais de la Cour de Justice in the Boulevard Konrad Adenauer in Kirchberg, Luxembourg.
On June 29th, the Association of Renewable Energies (APPA) and the Spanish Energy Club (Enerclub) organise a session entitled: "A new stage for Photovoltaics" in Madrid.
The session starts at 08:45 with a general vision by Arcadio Gutiérrez Zapico, General Director of the Spanish Energy Club, and Xabier Albistur, President of APPA Photovoltaic. As one of the speakers in this first part of the day acts Piet Holtrop, partner of Holtrop SLP Transaction & Business Law.
The venue will continue with several round tables and panels until 14:00 and will be held at the Spanish Energy Club - Paseo de la Castellana 257, 1st floor - 28046 Madrid.
Both members of Enerclub and APPA as well as non-members can participate. Please download all the information regarding the event following this link: Agenda and other relevant information
The Dutch Ministry of Foreign Affairs organises on Wednesday, December 16th a meeting about the current politics in Spain
The Dutch Ministry of Foreign Affairs organises on Wednesday, December 16th a small meeting about the current political events in Spain. Together with several company representatives, think tanks and other distinguished personalities we wish to discuss the opportunities and challenges that Spain is currently facing. We will start the meeting with a presentation on the upcoming national elections by the former correspondent Merijn de Waal (now editor at the Dutch newspaper NRC), followed by a presentation on Spain's energy policy by Anna Herranz-Surrallés (University of Maastricht). After that we will enter into a discussion with a panel on the opportunities and challenges for Spain in the coming years, including the political uncertainty in Catalonia. Léon Cornelissen (Chief Economist at Robeco), Maartje Wijffelaars (Risk Analyst at Rabobank) and Piet Holtrop (HOLTROP S.L.P Transaction & Business Law) have already confirmed their participation in the panel.
- Royal Decree Law 14/2010 brings radical feed in tariff cut for PV
- A closer look at retroactivity in Spanish Law
- RDL14/2010 infringes Directive 2009/28/EC
- The increasingly inaccurately called electricity sector reform: one step closer to abyss
- Will RD1565/2010 cause a shakeout in the Spanish PV sector?
- When the client became the bank’s insurer
- Sol(d) Out - a film about the renewables sector by the filmmaker César Vea
- July 2016, European State Aid Law Quarterly: "Electric Generation and State Aid: Compatibility is the Question"
- Supreme Court has doubts about the "Electricity Tax"
- Financing sustainable change: spend-to-save