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Spain regulator slams decree that would halt power plant closures

Spain's market and competition regulator CNMC has slammed a proposedgovernment decree which effectively would allow it to block power plantclosures, force their continued operation or oblige generators to sellunwanted plants via auction.

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* Decree allows 'too much discretion, on shaky legal ground': CNMC

* 3 GW of closures would not affect system, report says

* Recommends focus on revising existing closure legislation

The official regulator's report on the draft decree published lateWednesday says that the proposals allow "too much discretion and are on shakylegal ground" and also fall outside of existing national and EU laws.

In November, the government published its proposals to halt plantclosures "if this threatens security of supply or if it might result inunfavorable effects on electricity prices." The move followed an applicationby the country's largest generator Iberdrola, to close its last two remainingcoal-fired plants in Spain, with a combined capacity of 830 MW.

However, in the report, the CNMC estimates that the Spanish system couldeasily absorb the closure of as much as 3 GW of coal-fired capacity by 2020(or one third of existing capacity) without it materially affecting thesystem's balance.

This is firstly because the system has a supply overhang of roughly twicethe peak national demand of 46 GW, but also because a further nearly 9 GW ofrenewable capacity (mostly wind and PV) is scheduled to come online before theend of 2020.

Spain's largest generators have also slammed the proposed decree forbeing unconstitutional and constraining free enterprise.

The owners of coal-fired plants have already been forced to decide whichplants they want to operate beyond a 2020 deadline for emissions compliance,with only a handful having begun work on installing the required emissionabatement retrofits.

One of these, Endesa, has complained that there is still not a clearenough strategy for it to reach conclusive decisions on two of its plants thathave been earmarked for closure.

In its recommendations, the CNMC said that the government should focus onrevising all the existing procedures for opening new plants, mothballingexisting plants and permanent closures.

The report also slammed the proposed method of assigning unwanted plantsby auction to a third party, arguing that if a company decides to close aloss-making plant, any likely investor would share the perception.

The possibility of offering incentives for continued operation would alsolikely contravene EU state aid regulations, it added.

--Gianluca Baratti, newsdesk@spglobal.com

--Edited by Jonathan Dart, jonathan.dart@spglobal.com