Spanish authority fines Iberdrola €25m in first REMIT market manipulation infringement decision

By Peter Willis, Hermenegildo Altozano


On 24 November 2015, the Spanish Comisión Nacional de los Mercados y la Competencia (the national competition and markets authority) fined Iberdrola Generación €25 million for manipulating the Spanish wholesale electricity market. This is the first decision by a national regulatory authority imposing a fine for an infringement of the prohibition in REMIT on market manipulation.


The CNMC found that between 30 November and 23 December 2013, Iberdrola engaged in a strategy of raising prices for its hydroelectric plants on the rivers Duero, Sil and Tajo. The effect of this was that whereas at the end of November Iberdrola had 45 GWh being dispatched at prices of around €70/MWh, with average daily prices at around €45-55/MWh, this reduced to 13 GWh per day over the period. Similarly, whereas at the end of November volumes of around 40-50 GWh at a price higher than €90/MWh remained undispatched, this increased to a volume of around 105 GWh in December. This undispatched output remained in excess of the average day-ahead market price despite the fact that the day-ahead market price increased from around €53/MWh on 30 November to about €80-90/MWh between 12 and 21 December. 

The CNMC found that Iberdrola's strategy, which consisted of reducing the quantity of electricity from its hydroelectric plants dispatched in the day-ahead market, was not justified by any exhaustion of its hydroelectric capacity, because the volumes held in its reservoirs were higher than those in previous years, even though Iberdrola then generated more, at lower prices. The hydroelectric reserves available to Iberdrola's plants during the period in question did not justify the reduction in output that was observed. The CNMC drew support for this conclusions, from Iberdrola's own past conduct, when it dispatched larger volumes of hydroelectric generation at times of lower reserves and lower prices.

In the same way, Iberdrola's strategy, consisting of withholding this capacity and thereby reducing its hydroelectric output that was dispatched in the day-ahead market, was not justified by expectations of future prices, because forward contracts were indicating prices lower than those applicable in the day-ahead market. 

The CNMC concluded that Iberdrola's strategy was intended to cause entry by higher-priced CCGT plants, thereby securing a higher market price than that which would otherwise have arisen. This meant an increase in the market price of some €7/MWh, benefiting Iberdrola's inframarginal plant. The estimated benefit for Iberdrola was around €21.5 million, for the period between 30 November and 23 December – around 9% of its revenue in the day-ahead market in that period.

Application of REMIT

At the time, the Spanish Electricity Law prohibited energy market manipulation, but the CNMC defined the manipulation by reference to REMIT. It noted that this type of conduct, which leads to artificial market prices that do not correspond to available production capacity or to fundamental market data, constitutes typical market manipulation prohibited by REMIT. Article 5 of REMIT prohibits this conduct, providing that "Any engagement in, or attempt to engage in, market manipulation on wholesale energy markets shall be prohibited". Recital 13 explains that "Manipulation on wholesale energy markets involves actions undertaken by persons that artificially cause prices to be at a level not justified by market forces of supply and demand, including actual availability of production, storage or transportation capacity, and demand".

ACER's guidance on REMIT, at paragraph 6.4.2d, sets out further details of this type of conduct:

"Actions undertaken by persons that artificially cause prices to be at a level not justified by market forces of supply and demand, including actual availability of production, storage or transportation capacity, and demand ('physical withholding'): This is for example the practice where a market participant decides not to offer on the market all the available production, storage or transportation capacity, without justification and with the intention to shift the market price to higher levels, eg. not offering on the market, without justification, a power plant whose marginal cost is lower than the spot prices, misusing infrastructure, transmission capacities, etc., that would result in abnormal high prices."

The CNMC therefore concluded that Iberdrola's conduct constituted an infringement of REMIT and a serious infringement of the Spanish Electricity Law. In setting the level of the fine at €25 million, it took into account the already raised market prices at the relevant time, the duration of the manipulation (which it considered "long" at 3 weeks), the significant impact of the manipulation and the benefit to Iberdrola.

Iberdrola has a right to appeal against the decision.


This is an important decision, providing an early indication of how one national authority at least has interpreted the prohibition on market manipulation in REMIT. A particularly interesting feature of the investigation is that the Spanish competition authority (the predecessor of the CNMC) has in the past used competition law on a number of occasions to tackle similar withholding practices by major generators affecting the "technical restrictions" market. The authority lost a number of these cases on appeal, underlining the difficulties of establishing that physical withholding practices constitute an abuse of a dominant position. Indeed, the Commission specifically highlighted this issue as a reason for the introduction of the tailor-made energy market abuse regime established by REMIT.