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Spain's power tariff deficit widens to June

Source: Reuters - Mon 13th Sep 2010

Spain's shortfall between regulated power tariffs and generation costs widened by 2.59 billion euros in the first six months of 2010, 20 percent higher than expected by sector regulator CNE.

The widening of the deficit, which accounts for about 14 billion euros of government-backed debt sitting on utilities' balance sheets to end-2009, was largely caused by the payment of subsidies for renewable energy generation, the regulator said.

Spain has pledged to erase this debt to utilities by 2013 through a variety of measures including the issue of securities which qualified banks can trade. The government is expected to issue 3-5 billion euros of these securities in September.

Lucrative subsidies for renewable energy made Spain one of the biggest green energy markets in the world through the 1990s and 2000s, but have also pushed up generation costs to high levels.

Other factors which have pushed up Spain's tariff deficit, which consumers are expected to pay for with higher power tariffs in the long term, are the cost of supplying electricity in its island chains and the country's moratorium on new nuclear power stations.

Some analysts questioned whether Spain will keep to its tariff deficit securitization timetable after its government debt was attacked by speculators over the summer, sending borrowing costs for the government soaring.

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