· Published in Cities versus multinationals

Switching off Spain’s Electricity Oligopoly. Three proposals to dismantle the corporate power of Spain’s electricity companies

In Spain, as in other countries, the electricity sector remains dominated by a handful of large companies, powerful enough to impose their interests and hinder the energy transition. Movements against energy poverty and green cooperatives show a path towards greater energy democracy, but a third pillar is also needed: the remunicipalisation of electricity grids.

Spain is a paradigmatic example of how private companies can form a cartel to control a strategic sector such as electricity, thereby perpetuating a fossil and nuclear-based model and ensuring huge profits through abusive electric bills. Challenging the hegemony of Spain’s electrical oligopoly – Endesa, Naturgy (formerly Gas Natural Fenosa), Hidrocantábrico, Iberdrola and Viesgo – is a huge undertaking, but different proposals developed by civil society are starting to gain ground and chip away at their omnipresent power. This article aims to highlight how the Energy Poverty Alliance (APE), the Energy Sovereignty Network (Xse) and green electricity co-operatives are creating a counter-power in Spain’s electricity sector.

Firstly, we should clarify the particularities of the corporate-dominated electricity sector in Spain as compared to other European countries. Do Spanish private corporations have greater power than those of Germany or France? The answer is yes. It is important to understand that the current situation is the result of a historical process in which private companies have always played a central part since the dawn of electrification. Although the 1930s had opened up the path throughout Europe to a nationalisation of the electricity sector, aiming to undertake major public works to revive the economy and generate jobs after the 1929 crash, the electricity sector in Spain remained primarily private. The creation of public utility companies Empresa Nacional de Electricidad, S.A. (ENDESA) in 1944 and Empresa Nacional Hidroeléctrica del Ribagorzana (ENHER) in 1949 were the only tools used by the Franco regime to maintain a certain degree of government control over the sector. But during the 1980s, these companies were privatised. So one could say that the electricity oligopoly was forged during two dictatorships: it was created and shaped during the Catholic dictatorship in Spain, and then internationalised during the capitalist dictatorship. This most certainly gives it a specific character. The almost hundred-year-long control of this oligopoly has allowed it to influence and co-dictate the laws governing the sector, disregarding regional laws designed to prevent energy poverty. Such power has also enabled it to influence relevant politicians, tamper with the market and put pressure on subcontractors, in addition to implementing a long string of fraudulent practices. It is thus inevitable that any attempt to transform the sector will collide with the interests of the electricity oligopoly.

Although confronting this kind of corporate power is a truly complicated affair, in recent years important experiences have emerged that have gradually eroded its foundations. Perhaps one of the most relevant is the Catalan Parliament’s unanimous approval of Act 24/2015, providing for urgent measures to tackle housing emergencies and energy poverty. This small yet astonishing miracle was the result of a popular legislative initiative by the Platform for People Affected by Mortgages (PAH) and the Alliance against Energy Poverty (APE). The PAH and APE were formed following the economic crash and have succeeded in assisting those affected by mortgage loans and high bills to access basic services, at a time of staggering increases in unemployment and reduction of family incomes.

The Energy Poverty section of Act 24/2015 is based on a very simple principle: the precautionary principle. Electricity companies were no longer allowed to cut off their customers’ electricity without first checking their economic situation with social services, a kind of presumption of innocence for payment default: “People don’t pay because they can’t pay. If not, prove it.” It should be said that the 2008 financial crisis caused a massive increase in energy poverty in Spain, both due to the exponential increase in unemployment, which reached a staggering 27% in 2013 (almost 60% among young people), and to the unchecked rise in electricity prices, making them one of the most expensive in Europe.

Act 24/2015 put an end to electricity shut-offs and was the perfect instrument for exposing the practices of corporations. Their initial reaction was to ignore the Act, given that it was a regional one, and then only partially comply with it. Now they send threatening letters to local governments, urging them to share the burden of the accumulated debt, otherwise they will resume shut-offs.

Working to guarantee basic rights is just one half of the struggle. This is complemented by proposals to create alternatives that will displace the oligopoly corporations from their dominant position. Of course, green cooperatives are the most visible part of these alternatives.

Ironically, most green cooperatives have arisen thanks to the liberalisation of the electricity sector and its division into four basic activities: sales, distribution, transportation and generation. Although some of them are also interested in electricity generation, they are mostly focused on sales, an activity that is purely market-based: they purchase electricity on the market and sell it to their clients. In 2011, the National Commission on Markets and Competition recorded just over 100 retailers in Spain, but by September 2019 this figure had risen to 558. Green cooperatives, however, play a key role in increasing the number of people who have become energy-literate under this system, taking an active part in decision-making and in the management and operations of the cooperatives. This new group of activists promoting and leading the green transition are well aware of the harm caused by corporations. They blow the whistle on them, report them and encourage the public to switch to cooperatives. This voluntary “sales department”, which would be the envy of any Business School, has achieved impressive results in terms of members. Som Energia, the most successful cooperative in Spain, had 12,000 members in 2013, and boasted 60,000 as of September 2019. As a result, its staff has increased from 12 to 73 over the same period. Over 10 other cooperatives have a similar philosophy and approach. These include Noxa Enerxía, LaCorriente, Megara Energia, GoiEner, La Solar, AstuEnerxía and EnergÉtica.

As a consequence, the number of people exercising energy democracy has increased, and this is the cooperatives’ most tangible political achievement: a constituency interested in transforming... interested in transforming the electricity sector from the bottom up. Moreover, in the case of Som Energia, the cooperative’s values have transcended the electricity sector and become a “brand” present in a number of sectors. For example, Som Mobilitat, a cooperative dedicated to electric mobility, has a participative governance system that is very similar to that of Som Energia, or Som Connexió, which operates in the telecommunications sector, and the recently-established Som Biomassa, focussed on locally-produced pellets in the Pyrenees. This domino effect is, undoubtedly, yet more proof of the cooperative movement’s success: cooperatives have become democratising instruments that generate trust among a growing sector of the population, fed up with the ill-treatment and abuse of large corporations.

Another aspect, however, is that, despite this new surge in democratisation, the corporations in the oligopoly do not appear to be very concerned about it. As mentioned previously, there are 588 retailers in Spain, but these large corporations continue to be profitable. This is because the profit margin in selling electricity is usually very small (between 3 and 5%) and because it does not involve strategic control over the sector. Generating and distributing electricity is far more profitable. In strategic terms, there is no doubt that electricity distribution will play an increasingly important role in the energy transition. Distribution includes the underground cables and power-lines in our towns and cities as well as electricity meters. It plays an important role in the future of decentralised renewables, and will play an even more important one with greater electrification, electric mobility, self-consumption and Smart Meter data management. It is the distributors, 98% of which are controlled by the oligopoly, which connect users to the network, and which also shut them off. But perhaps the most relevant factor is that electricity distribution is a regulated activity. At the beginning of each year, the Official State Gazette informs the distribution companies of the revenue they will receive for renovation, maintenance and extension operations. The companies, therefore, know in advance how much they will earn and usually reduce costs to maximise their earnings by implementing abusive practices that affect workers, mostly subcontractors, and clients, and are particularly belligerent in regards to the role they play in energy poverty. On the other hand, these corporations are also aware that distribution will play a key role in the green transition, and this means power and business. Ironically, despite the fact that they are great defenders of global capitalism, privatisation and the free market, they have no qualms about carrying out a government-regulated activity that is well paid and provides financial security.

Controlling distribution is key to decentralising energy production. This is why the Energy sovereignty network (Xse), a political coalition for electricity transformation, set up in Catalonia in 2013 by green organisations, groups and cooperatives, has developed a key demand: to take back ownership and management of distribution networks through remunicipalisation. The city of Cádiz now has its own distributor (55% of which is owned by the municipality) along with towns such as Centelles and Almenar in Catalonia, as well as the local cooperatives of Crivillent, Alginet and many other towns in the Region of Valencia.

Remunicipalisation has met with technical and legal difficulties due to the fact that there is no way to reclaim electricity distribution under Spanish law. The Xse has held a number of both local and international debates, and conducted a study with feasible legal options for embarking on the path to remunicipalisation. However, the “Cities for Change”, the transformative and ground-breaking candidates that entered Spanish municipal governments in 2015, including Ada Colau’s Barcelona en Comú, were not focused on reclaiming distribution networks. It is, however, crucial that physical assets be freed from the grip of the oligopoly.

These three examples, the Energy Poverty Alliance and Act 24/2015, the green cooperatives and the creation of a democratising critical mass, together with Xse’s remunicipalisation of the distribution network, constitute a series of proposals which directly and indirectly take power away from large corporations. Whether it be the APE’s subsistence-level activism, defending the basic rights of the impoverished, or through the empowering projects of cooperatives and the Xse, these all represent ways of dismantling corporate power in Spain’s electricity sector. The political will of institutions, however, is a different matter, as revolving doors between the public and private sectors cause damage to the separation of powers. But this political environment will change with a social majority that demands and advocates change, establishing alliances with other sectors and other actors, creating a coordinated mobilisation that calls out for basic services to remain in the hands of public-community alliances. Bringing the public on board provides no guarantees, but bringing the community on board may just well guarantee everything.

By Alfons Pérez

Alfons Pérez (@Alfons_ODG) is a member of the Debt Observatory in Globalisation (ODG). His work has focused on the world of energy, climate and finance. He is also a member of the Network for energy sovereignty in Catalonia.

Illustration: Eduardo Luzzatti.

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