NERA Launches the Fourth CESUR Auction for Procurement of Electricity Baseload Contracts in Spain

23 January 2008

Madrid/23 January 2008 -- NERA Economic Consulting today announced the launch of the fourth auction for electricity supply to be held in Madrid on 13 March 2008. In accordance with Spanish Ministerial Order ITC/400/2007, the purpose of this auction is the procurement of power on behalf of the main distribution companies in Spain and Portugal. CESUR auctions complete the range of possibilities for the distribution companies to buy energy for supply to captive customers (and, in the future, energy for the supply of last resort).

NERA has formulated the design of the auctions and has managed the process of each CESUR auction since March 2007. Similar to previous auctions, the fourth CESUR auction will use a multiple-round descending clock auction format, and bids will be submitted online. Under this format the Auction Manager names a price at the beginning of every round and bidders submit the quantities they want to sell at that price. The auction is called a descending clock auction because prices "tick down" throughout the auction, starting high and gradually being reduced until the aggregated supply bid is sufficient to meet the load to be procured.

In each of the three previous CESUR auctions, the distribution companies purchased 6,500 MW of base load for the supply to tariff customers in peninsular Spain, to be delivered over the following quarter. The fourth CESUR auction will feature a simultaneous auction of two products: a three-month base load product, which consists of the supply of a constant amount of energy in each of the hours of its Delivery Period (April, May, and June 2008), and a six-month base load product, which consists of the supply of a constant amount of energy in each of the hours of its Delivery Period (from April 2008 to September 2008, both included).

The amount to be purchased in the 13 March auction has not been determined yet. The Secretaría General de Energía, SGE, will announce the characteristics of this auction, including the range of energy amounts to be purchased, later in the process.

Agents entitled to participate in the CESUR auctions are electric power producers (both under ordinary and special regime), resellers, external agents, and qualified consumers. In order to participate in the auction, market agents must fulfill the prequalification and qualification requirements. The prequalification process is now open to all interested agents. The deadline to prequalify for the March auction is 7 February 2008. Agents who have prequalified for a prior auction (September or December 2007) are automatically prequalified for the March auction. The prequalification guide is available at the auction web site ( All prequalified agents are allowed to submit comments to the supply contract and draft auction rules, which are also available on the auction web site. On 24 January, NERA will hold an information session for those agents interested in participating in the March auction.

The prior auction, held in December 2007, began with a starting price of 85€/MWh for the three-month base load product, with 24 domestic and international sellers participating in the bidding. The auction closed after 14 bidding rounds, at a price of 64.65 €/MWh. The product was awarded to 23 sellers. The bilateral base load contracts resulting from the auction were assigned to the main distribution companies in Spain and Portugal according to the pre-established percentages in the legislation (Endesa 35%, Iberdrola 35%, EDP 12%, Fenosa 11%, Hidrocantábrico 4%, Viesgo 3%). These contracts cover approximately 30% to 40% of the energy for captive customers supplied by the distribution companies in Spain.

The acquisition cost of the contracts resulting from the auction is part of the authorized costs of the distribution companies. The CESUR auctions reduce the utilities' exposure to spot market price fluctuations, thereby benefiting consumers. In the future, the prices of the contracts acquired in these auctions will be used to determine the tariffs for the supply of last resort.

The CESUR auctions are designed and managed by NERA Economic Consulting, with the support of the legal firm Garrigues. The Comisión Nacional de Energía (CNE) supervises the development of the auction and validates its results to ensure that the auction has been transparent, objective, and nondiscriminatory.

To obtain further information about the CESUR Auctions, please visit:

All the information contained in this notification is subject to change following comments by participants or as a result of regulatory decisions.

NERA Economic Consulting (, founded in 1961 as National Economic Research Associates, is a unit of the Oliver Wyman Group, an MMC company.

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