What's behind the blackout reporting 'war': Industry, businesses, and citizens await a 'culprit' to claim responsibility

Red Eléctrica and the production and distribution companies are risking hundreds of millions to find out who was responsible for the blackout that left the entire Iberian Peninsula without electricity for almost a full day on April 28. Almost two months later, industrial plants and businesses of all kinds are still waiting to find out who or what was responsible in order to file their claims for economic losses that have not yet been quantified but will be " significant " and that consumers will also be able to claim. They will have to do so in the courts , while the electricity sector is also awaiting the National Commission for Markets and Competition ( CNMC ), which can impose fines of up to 60 million and withdraw operating licenses from those who eventually fail to comply with the investigation it is also conducting into the historic national zero.

The multi-million-dollar claims that whoever is found responsible will face are the key element in the already completed and ongoing investigations into the blackout. This week, the Ministry for Ecological Transition published its report, which apportioned blame between Red Eléctrica—for failing to "sufficiently" program grid voltage control—and the electricity companies—for also failing in their responsibility to control voltage and for improper grid disconnections.

The following day, Red Eléctrica counterattacked with its own analysis of what happened, with a report that ignores some of the conclusions of the vice president, Sara Aagesen , and places all responsibility on the owners of all types of electricity generation plants, both renewable - it identifies the initial failure in a photovoltaic plant in Badajoz -, combined cycles for not having provided backup to the system and possibly other technologies for having disconnected from the grid when the voltage was still within normal ranges. If the conclusions of the company chaired by Beatriz Corredor can be considered partial, those drawn by the electricity companies are no less so, which blame the blackout entirely on Red Eléctrica for not having adequately scheduled the backup that the electrical system needed to cushion fluctuations such as those that ended up bringing it down and criticizes the state company for " not assuming its technical responsibilities." This Monday, AELEC will present another analysis, prepared by "independent experts," on the "events leading up" to the blackout.

In any case, both Aagesen and Corredor were careful to make it clear that their conclusions have no legal force . "It's not a judicial review," the vice president warned on Tuesday. The electricity sector, but also the industrial sector and, in general, the productive fabric, remain expectant for the "verdict " that entities with greater coercive power may issue. This is especially true for the CNMC (National Commission for the Promotion of Energy and Mines) and the courts , although sources in the industrial sector are also waiting to see what the European investigation, the one being carried out by ENTSO-e , the association that brings together EU electricity operators, including Red Eléctrica, has to say. For weeks, electricity companies have not hidden their lack of confidence in the impartiality of this body. However, if they have to choose between the conclusions of the Ministry or Red Eléctrica, they stick with those yet to be issued by ENTSO-e, if only because their prestige is also at stake.

Missing trains, shut-down industrial plants, closed shops

But beyond the " reputational damage" alluded to this week by the electricity employers' association, what is at stake in the question of who was responsible for the blackout is something that has to do with hundreds of millions of euros in damages due to the power outage suffered for almost a day by companies of all kinds, the industry—including the so-called "electro-intensive" industry, a major consumer of electricity—and also any private citizen with insurance who claims damages.

According to the Organization of Consumers and Users ( OCU ), claims can be made for anything from a lost train ticket to spoiled food in the refrigerator, to personal injury due to accidents resulting from the blackout or problems caring for sick people, all caused by the lack of electricity. A few days after the blackout, the OCU informed citizens of their rights and also asked the governments of Spain and Portugal to determine its cause as soon as possible. It is important that this be documented because if the blackout is ultimately ruled an extraordinary circumstance, "force majeure," consumers will not be able to collect their compensation.

The industrial sector, including heavy industry, a major consumer of electricity and comprised of steel and metalworking plants, chemical plants, paper mills, and ceramics plants, is also awaiting a firm conclusion and continuing to calculate. This sector was forced to shut down on April 28 due to a power outage.

According to sources in the steel industry, a damage assessment is still being conducted, which is "very complicated" due to the different types of plants or processes, or even because not all of them were without power for the same number of hours, depending on when the supply was restored in different parts of the country. Something similar is happening in the chemical industry, which still cannot provide an estimate of the extent of the damage caused by the blackout for plants that, in some cases, took almost a week to return to full operation, with the costs this may have entailed. While awaiting a "rigorous" assessment of the cost, the situation has not changed much since, just two days after the blackout, this industrial sector

The food distribution sector is beginning to have an initial, "conservative" estimate of losses, raising the losses incurred that day by supermarkets, self-service stores, and distributors to "a minimum of 53 million euros," primarily due to fresh, refrigerated, and frozen products that had to be discarded for sale because the cold chain could not be guaranteed and, due to the exceptional nature of the situation, could not be donated. This sector will also calculate costs associated with fuel for generators and increased security.

CNMC sanctions; the final word is in the courts

Given this situation, liability for the blackout will be settled by the CNMC, in the form of any sanctions imposed on electricity sector players, and, above all, by the courts, which will ultimately be the court of appeal for those seeking to file a claim or challenge any third-party claims.

As the regulator of the electricity sector, the CNMC is already conducting its own investigation into the blackout, for which it has opened a preliminary investigation and is requesting information from various stakeholders in the sector. This body has the power to sanction anyone whose preliminary investigation reveals someone responsible and deduces "serious or very serious violations." The corresponding disciplinary proceedings will be initiated. For example, because Red Eléctrica failed to properly schedule the system's backup or because of the internal "failures" that the operator attributes to the "zero" plant, the Badajoz photovoltaic plant where it places the origin of the first "forced" oscillation. It could also do so at the request of the Ministry for Ecological Transition, which, however, has not identified a specific "culprit" and has stepped down from its role as judge.

According to the CNMC, in this case the maximum fine is €60 million , a figure it considers "proportionate to the potential severity of the violations" and which has "deterrent effect." However, it could also impose "complementary sanctions," which are not monetary but could include disqualification or withdrawal of authorization to operate in the electricity market for anyone deemed to be the perpetrator of a serious or very serious violation.

However, the CNMC's scope extends only to players in the electricity sector , not to companies or citizens. "In these sanctioning procedures, the CNMC does not and cannot resolve claims for damages that companies or consumers may file," clarify sources from the agency, who emphasize that "this will require recourse to the courts."

This is exactly what the OCU advises consumers to do when there is a firm liability. On the other hand, this is what the electricity companies also plan to do to challenge compensation they assume will be forthcoming in the future. This is because the only way for a citizen to claim for lost banknotes or a supermarket for spoiled food is through their respective insurance companies, which, in turn, will claim from retailers and distributors such as Iberdrola, Endesa, or Naturgy, which also produce electricity. By not admitting fault in the blackout, the companies plan to challenge and claim from the party they consider truly responsible, Red Eléctrica.

That is the intention, whether it involves first-instance courts or international courts for the resolution of commercial disputes . This second option, in courts where, for example, renewable energy investors are holding Spain accountable for the sun tax, would also be perfectly feasible for potential claims by electricity companies if they are forced to pay compensation for the blackout. Similarly, Red Eléctrica will refuse to pay . "At no time has it breached a protocol, regulation, or regulatory aspect; it has acted diligently, and we do not understand why there is any kind of coverage ," stated Roberto García Merino , CEO of its parent company, Redeia, this week.

According to legal sources familiar with these processes, it is always possible for a foreign shareholder of the company —something all of them have, including the listed company Redeia—to file claims against something that happened in Spain. Spain is a signatory to bilateral investment treaties with almost all countries, particularly the United States, where the court where these potential disputes would most likely result is the World Bank's International Centre for Settlement of Investment Disputes , to whose treaty it is also a signatory, as well as the Energy Charter, from which it has withdrawn but which will not cease to be binding for another 20 years. The issue is that, according to the sources, these international courts typically take 5 to 7 years to resolve cases, and until then, the eventual winner would not receive payment or would be exempt from paying.

In Spain, electricity companies, businesses, and citizens have the option of going to court, although it is unlikely to be the only legal avenue currently open . The day after the blackout, National Court Judge José Luis Calama initiated a preliminary investigation to investigate whether cyber sabotage or an attack on critical infrastructure that could be considered a terrorist offense was behind it. This week, Aagesen ruled out the cyberattack hypothesis—"It is concluded that there is no evidence of a cyberincident or cyberattack as the cause," he said—and although the proceedings in the National Court are still under a secret summary, judicial sources rule out this criminal avenue as the best way to address claims that, as everyone expects, will be oriented toward a possible malfunction of the electrical system. If an appeal is filed in the Court, in any case, it should go to the Administrative Litigation Division.