The decision helps better align Telefónica’s colocation prices with its costs, although the CNMC pushed back against retroactive adjustments to historic charges
Telefónica allowed to charge more up-to-date energy prices for colocation: On 23 February 2023, the CNMC issued a decision that will allow Telefónica to charge more up-to-date energy prices for its colocation services. The decision follows a letter from Telefónica sent in May 2022, which requested modifications to its wholesale access offer, specifically regarding the energy billing mechanisms for equipment co-located in its exchanges. The CNMC alerted other operators of its intention to consider the request, with Colt, Evolutio, Orange and Vodafone all providing submissions to the process. Following the latest wholesale local access market review, Telefónica is subject to a range of obligations, such as the provision of colocation. Within its reference offer, the service is defined as including air conditioning and lighting, as well as the provision of electricity to power the colocated equipment.
Increased energy prices trigger a rethink: To date, the energy billing system has followed a fixed or ‘flat’ price scheme, with the wholesale access offer estimating a monthly amount that each operator must pay Telefónica for colocated equipment, which is independent of their actual electricity consumption. Prices are calculated in advance, but due to the process of collecting invoices from the various exchanges, there is a one-year delay between the time Telefónica pays its suppliers and when it can bill other operators for electricity usage. This is considered workable in an environment of stable prices; however, the sharp rise in energy prices since the second half of 2021 has caused the estimates for co-located equipment to be well below the actual costs incurred by Telefónica, which it argues would be ‘burdensome’ even if recovered a year late.
CNMC sees the rationale behind Telefónica’s proposals: Telefónica sought closer alignment of real world costs to those in its reference offer, proposing to eliminate the 12-month delay through: i) billing that calculates estimates using prices updated monthly; and ii) a complementary semi-annual adjustment based on the prices it actually incurs. The CNMC stated that the operator’s proposals were justified, considering that they would correct the prevailing time lag and account for volatility in electricity prices, with the adjustment process able to identify any potential distortions. Consequently, the regulator approved Telefónica’s request to adjust energy billing procedures. This may be a rare example of where the regulator has listened, although the CNMC did reject a request for the adjustment of historic six-month periods prior to its decision, stating that it would not undertake a retroactive review of wholesale prices.
