Changes to the reliability charge?

Regulation & Policy    Dec 9, 2021 6:19 PM

Energy sector associations criticized possible changes to the reliability charge.

The entities sent a letter to the President Iván Duque, asking him to review the changes to the reliability charge scheme proposed by the Energy and Gas Regulatory Commission (CREG), El Heraldo reported.

The associations asked for a rigorous cost-benefit and regulatory impact analysis on this proposal.

“The analysis should be conducted in the context of the energy balance, considering the progress of generation projects about to start with energy delivery commitments,” Acolgen, Andeg, Andesco, Asocodis and Naturgas said in the letter to the President.

The proposal, in Resolution CREG 133 of 2021, changes the way the reliability charge is paid to existing power generation plants in the country.

“The current scheme has predictability in its favor, we are not talking about stability in the rules of the game because we know that regulatory changes can occur,” Andeg’s Alejandro Castañeda said.

The new proposed scheme does not consider predictability (future projections), which is what allows companies to develop their investment plans to maintain generating plants in the conditions required to meet demand.

“The CREG proposes a contest in which the existing plants, thermal and hydraulic, are going to fight to see who has the lowest charge and who asks for the highest charge,” Castañeda explained.

With this scheme, it is expected that some power plants would be left out of the resource allocation of the charge and others would have a lower remuneration since the lowest proposals will be prioritized in the auction.

“This implies that one or two plants will be lost every time an auction is held, representing around 450MW, which with the current situation of Hidroigtuango and the delays of renewables are fundamental,” the expert said.

The new scheme could affect the long-term investment decisions of these companies and the reliability of the energy service in the short and medium term, both in situations of critical water levels and system contingencies, the associations warned.

The fuel supply chain is also impacted by the development of long-term contracts, and of course this affects investor confidence.

Bottom-Line: The sector and the associations must be heard before making these changes.

This proposal implies a great risk, considering that the country needs invest in generation projects due to the high uncertainty regarding Hidroituango’s entry into operation.

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