Following instructions from investigating judge Ismael Moreno, the Civil Guard has raided Iberdrola headquarters in Bilbao and Madrid in search of incriminating evidence.
The company says it is “offering complete cooperation,” but denies “having carried out any fraudulent manipulation whatsoever.”
This is the first time that the Anti-Corruption Attorney’s Office has taken an energy utility before a criminal court. The move is based on “a crime against the market and consumers, as per article 281 of the Penal Code,” explains the prosecutor. This article makes provision for prison sentences of one to five years.
Under the Spanish system, the most expensive power plant sets the market price
In 2015, Spain’s competition watchdog, the CNMC, slapped Iberdrola with a €25 million fine over the same case.
Consumer associations have been complaining for years about rate hikes during the worst of the winter season, and the issue of fuel poverty has attracted headlines in a country with high consumer rates: a Eurostat survey showed Spain ranking in the top five for household consumer prices in 2015 in the European Union.
Electricity companies are the target of much criticism in Spain, where consumer associations have asked why the government does not do more to encourage self-generation by households using solar power.
The company says that its behavior during the winter of 2013 was “perfectly rational and legitimate” and that the competition watchdog interpreted the facts “in a biased and incorrect manner.”
Judge Moreno will now investigate the alleged manipulation that took place between November 30 and December 23, 2013. The allegations created a scandal at a time when Spain was grappling with a severe economic crisis, forcing the government to overhaul the entire system for setting electricity prices in Spain.
The company says its behavior was “perfectly rational and legitimate”
Following an investigation, the CNMC fined Iberdrola €25 million in November 2015 for manipulating the Spanish wholesale electricity market.
The competition authority determined that the company had deliberately manipulated the market by playing with the output at its hydroelectric power plants on the Duero, Sil and Tagus rivers. This was done by withholding the amount of electricity dispatched from these plants, even though there were large reserves, thereby causing higher-priced combined-cycle plants to enter the market.
Under the Spanish system of electricity auctions, the most expensive power plant sets the price for all the others. In the end, all plants, no matter what it costs them to produce their own electricity, will follow the most expensive plant. If less electricity is available, for instance because some plants withhold their output, the market price goes up.
The government suspended the electricity auction of December 19, 2013 after noticing “anomalous movements.” The watchdog opened an investigation that resulted in the multi-million euro fine.
The prosecutor wants the judge to take a statement from the legal representative of Iberdrola as part of the preliminary inquiry and to request certified records of the plants’ reserves between 2011 and 2013 from the Spanish national grid, Red Eléctrica de España.
English version by Susana Urra.