The liberalization of the electricity sector in Spain, which began on January 1, 1998, and culminated in 2003, had the objective of generating a more competitive market, from which a better customer service would emanate. More than 25 years have passed and, although steps have been taken in the right direction, there are also distortions and structures remain that evidence, in certain aspects, an imperfect and asymmetrical liberalization.
It was in 1996, when Europe approved Directive 96/92/EC on common rules for the internal market in electricity, which was transposed into Spanish law through Law 54/1997 on the Electricity Sector. This regulation determined the birth of the electricity production market, known as the wholesale market, which began its operations on January 1, 1998.
A shift was made from a centralized optimization model to another operation model based on the free prices of the agents, and the figure of the market operator was created, represented by the Spanish Electricity Market Operator Company (OMEL) -current OMIE-.
The liberalization, they explain precisely at OMIE, began then, “on the supply side, with the introduction of competition in the generation of electric energy and, on the demand side, with the creation of the figure of the retailer and with the right of large consumers to participate directly in the market”. To these large consumers, they add, “the rest were gradually added, until, in January 2003, all of them were recognized the right to choose their electricity retailer”.
Currently, the basic norm that regulates the structure and functioning of the sector is Law 24/2013, of December 26, of the Electricity Sector.
Market share
Before this historic change, activity in the sector was concentrated in five companies with a significant vertical structure, which exercised a tight oligopoly that, by territories, translated into de facto monopolies. With liberalization, a better distribution of the market was sought, which would contribute to providing a more complete service with a better quality/price ratio for the end user. Has this really been achieved?
To answer that question, the best option is to compare the market share of incumbents in the energy sector and in other also liberalized sectors, such as telecommunications or rail transport. The corollary, as will be seen, shows that the process has certain shortcomings and denotes an asymmetric liberalization.
Energy Vs. Telecoms Vs. Rail transport
The year 2003 will be taken as the year of the complete liberalization of the energy sector. The latest official data from the National Commission for Markets and Competition (CNMC) are from the first quarter of 2025 (i.e., 22 years after liberalization) and show that the five incumbent groups have lost between 15 and 20 percentage points (pp.) of market share. In the same period (22 years since its liberalization, which was in 1997), Telefónica lost 55 pp. Currently, Telefónica's loss is around 60-65 pp.
Between these same two sectors, another comparison can be made, in this case, taking into account the moment in which the Regulated Tariff by the Government (PVPC) appeared, something that happened in 2014, that is, 11 years ago. In the energy sector, 11 years after liberalization, incumbents had lost 8 pp. In telcos, those 11 years were met in 2008, then, the loss was 20 pp.
Another comparable sector, although its liberalization is more recent (2019), is that of rail passenger transport. In the third quarter of 2025 (six years later), Renfe has lost 38 pp. on average in all corridors and 50 pp. in the Madrid-Valencia one. In six years since the liberalization of the energy sector (2009), the incumbents had lost only 1.8 pp.
As a result, the market power currently held by the five major energy companies, the same ones that formed the original oligopoly, is 80% of the free market compared to the greater competition in the other two sectors: Telefónica barely retains a third of the national market and Renfe little more than half.
Where is the client?
The final purpose of this liberalization was to eliminate entry barriers so that new competitors, under the same rules of the game, would energize and balance market shares by bringing an offer of more transparent, competitive, and fair prices, as well as a substantial improvement in the service and attention the consumer received, given the expected competitive tension.
This is the classic example of a virtuous circle brought about by a well-planned liberalization thanks to technological and commercial innovation that results in better customer service with better prices, because the appropriate market development incentives have been given: same rules of the game for everyone, transparency, and non-discrimination.
However, that claim has not been reflected in more balanced market shares with new agents, thanks to the loss of market power of the traditional incumbents in the energy sector. The latter continue to operate as large verticalized groups, and, therefore, applying commercial policies often subsidized, compensated, or favored by the part of their vertical corporate business that does not follow the rules of liberalization by belonging to the regulated activity.
Thus, this partial and imperfect liberalization has resulted in an extraordinary retention of market power in the hands of the usual ones and very few incentives, therefore, for innovation. New modes of commercial and technological activity would have benefited millions of customers with transparent tariff offers and a real service orientation very far from the perception and opinion of the vast majority of its users, who still feel squeezed at the service of large corporations that need to maximize margins and cash flows to offer dividends and maintain structures more typical of the 20th century than of the 21st century.
The inertia of the industrial era is clearly reflected in a late adoption of process digitalization and commercial operations compared to other strategic sectors also strongly regulated and originating in state monopolies, such as telecommunications or the financial sector.
Unlike these sectors, the regulatory landscape of the sector has also been a faithful reflection of this inertia: the protection of the electricity consumer has historically been relegated to lower-hierarchy regulations —royal decrees and regulations—, or to generalist laws unrelated to the specific complexity of the energy market, such as the Customer Service Law.
That pending issue has begun to be rectified, although reactively and in the heat of a geopolitical crisis. Royal Decree-Law 7/2026, of March 20, approved as an urgent response to the impact of the Iran war, modifies Law 24/2013 of the Electricity Sector and elevates for the first time to the rank of law specific consumer rights: the obligation of notification with at least one month's notice before any modification of the contractual conditions, the right to terminate the contract without any cost upon receiving that notice, the prohibition of unilaterally modifying fixed-price contracts before their expiration, and the requirement for price comparisons before and after any revision.
That it had to be an emergency decree, due to an external conjuncture, the vehicle that finally grants legal status to such elementary rights is, in itself, an unequivocal indicator of the 30 years of regulatory inertia that consumers have suffered, and of how deeply normalized certain deficiencies have become, not completely resolved, that in other liberalized markets would have been unacceptable.
Regulated tariff and social bonus
The Royal Decree approving the General Regulation on Supply and Contracting, in force since February of this year, presented, on the one hand, discrepancies with the Customer Service Law and, on the other, deficiencies for not fully transposing the Directive (EU) 2019/944 on common rules for the internal electricity market. The subsequent and very recent RDL 7/2026 has partially corrected this situation by elevating to the rank of law —directly modifying Law 24/2013— certain consumer rights in the contractual relationship with their suppliers.
However, this partial correction does not resolve the core of the problem: the lack of alignment with Directive 2019/944 regarding the design and scope of the regulated tariff, which continues to generate a void in the harmonization of the Spanish electricity market with European standards, and it is precisely in that area where the deepest distortion for free competition is concentrated.
The survival of the regulated tariff (PVPC) since 2014 contradicts the framework established by the Directive -exceptional, transitory, and restricted to vulnerable groups- and turns it into just another market tariff. The difference is that the Government sets it and it is applied generally, whether or not the person who avails themselves of it is vulnerable. The most distorting addition is that only companies constituted as last resort retailers (CUR) can offer it, for the most part linked to the old oligopoly, and which are the only ones enabled to grant the social bonus, financed, however, by all users of the system.
Given the complaints from free market retailers, the Administration argues that they too could access the regulated tariff by creating their own CUR. What that argument eludes is the real cost of the operation: administration, brand, and infrastructure separate from the main activity, that is, more burdens and more barriers to yield to an anomaly that the complete transposition of European regulations should have prevented. Sources from the sector formulate it with a direct question: “Wouldn't it have been more logical -and more beneficial for the vulnerable themselves- to circumscribe the PVPC from the beginning to the collective that justifies its existence?”
The result of not having done so is that one third of the residential market -8 million customers, a figure much higher than that of truly vulnerable households- remains in the hands of the large electricity companies that own the main CURs, de facto excluded from the free market. A captive clientele that, to worsen the picture, is today directly exposed to the price volatility generated by the geopolitical crisis surrounding Iran: the same state intervention that was supposed to protect the consumer chains them to the most volatile wholesale market index in decades.
Sources from the commercialization sector demand what the rest of Europe applies: that the PVPC be restricted to vulnerable consumers, that the CURs continue managing it as a social bonus, and that this social bonus be invoiced with the Ministry's logo and not with that of private companies, given that the entire electricity system finances them. While that does not happen, "a de facto state intervention in prices prevents the organic functioning of the free market and the beneficial objectives for society that were set as the reason for liberalization”, they underline.