Portugal ends long-term power contracts; EDP secures hydro

Portugal has ended long-term power purchase agreements (PPAs) that tied most electricity producers to national power grid REN, liberalizing for market competition about 80 percent of total power production in the country.

At the same time, utility Energias de Portugal (EDP) secured long-term rights to continue operating its Portuguese hydroelectric projects totaling 4,095 MW.

REN and EDP said an agreement terminating the PPAs was signed June 15 by EDP Chief Executive Antonio Mexia and REN Chief Executive Jose Penedos in a ceremony attended by Economy Minister Manuel Pinho.

The PPAs were an obstacle to competition in the market for electricity production in Portugal and their end is essential for the creation of a single electricity market in the Iberian Peninsula encompassing Portugal and Spain (MIBEL).

The end of 32 PPA contracts, which are equivalent to 7,760 MW of production, is expected to take place July 1. Only two PPA contracts will remain after that date.

Henceforth, EDP is to compete directly in the markets with other players like Spain’s Endesa and Iberdrola to sell its production to electricity distributors. Pinho said getting rid of the PPAs should lead to reductions in electricity rates.

The electricity producers will be compensated for the end of the PPAs through adjusted tariffs paid by consumers during the next 20 years.

REN also signed an agreement for future transfer to EDP of the concessions for use of hydroelectric projects beyond what would have been the term dates of the PPAs.

�With the transfer of the above hydro concessions, EDP assures the rights to operate under market conditions 26 hydro plants with 4,095 MW of installed capacity after the term of their PPAs for a period that will last in the average until 2047,� EDP said.

In return for that transfer, expected in the next two years, EDP is to pay the government 759 million euros (US$1 billion)

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