NewsLatin AmericaPetro arouses concern over its announcement to assume the regulation of electricity rates

Petro arouses concern over its announcement to assume the regulation of electricity rates

Gustavo Petro traveling to his homeland, Cienaga de Oro, on April 23, 2022. Juan Carlos ZapataJuan Carlos Zapata

The president of Colombia, Gustavo Petro, closed the week with a new announcement that was felt as a “shock” in the electricity sector. He said that his government would directly assume the functions of the Energy and Gas Regulatory Commission (CREG), the independent entity in charge of regulating that market, including rates. Although it is an agency attached to the Ministry of Mines and Energy, it is recognized for being technical and not political in nature, and its independence is guaranteed by law.

The president made the announcement this Friday at the closing of the annual congress of Andesco, the association of public service companies. In this way he responded to the citizen’s rejection of the increase in energy prices. The increases reach 25.9% in the last year, one of the adjustments – along with that of food and non-alcoholic beverages – that has most pressured inflation in the country. On the Caribbean coast, where Petro was for the closing of the event in Cartagena, electricity increases are close to 50%. Mayors and governors of the region have joined the protest of users who have seen the cost of their bill double.

The CREG is an entity created as an independent body from the Government. After the country experienced energy rationing in the early 1990s, so severe that it temporarily changed its time to make better use of the sunny weather, a major reform was made to the sector to depoliticize it. Access to private capital was allowed, the functions of generating, transmitting and marketing energy were separated, and an independent entity was created to regulate it, the CREG. In the style of the board of directors of Banco de la Republica, it is headed by commissioners chosen by the president, but with a fixed period of 4 years that coincides with that of his successor, who cannot remove them. The entity has been eminently technical.

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The path to assume the functions of the CREG that President Petro opened is based on an article in the Development Plan of his predecessor, Ivan Duque. According to the interpretation of the current Government, it would allow it to approach the objective of modifying components of the energy tariff (there are six: generation, transmission, distribution, commercialization, restrictions and losses), an alternative that already raised by the Minister of Mines and Energy, Irene Velez and her recently appointed deputy minister, Belizza Ruizas a solution to the crisis. “We are going to use that article. We first have a space for dialogue, but Duque enabled us and the Congress of the Republic to assume the functions of the CREG,” Petro said before the businessmen.

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However, experts from the electricity sector agree in warning that the interpretation is imprecise because the article referred to would only allow the government to assume functions to modify tariff formulas when it comes to “the inclusion of new agents, activities or technologies”, as indicated by the same norm. That is, when other services are included in the chain, such as the storage of solar energy with the use of batteries.

In addition to legal doubts, there are also concerns about the implications that this decision could have on the quality of energy service provision derived from fewer investments. “We all agree that it is necessary to look for ways out for the value of the invoice, which has skyrocketed because the inflationary impact for the producer is much higher than expected, but there may be irreparable and very costly effects in the end because the provision of the service is damaged”, assures Camilo Sanchez, president of Andesco.

One of the reasons why the presidential announcement took the audience in Cartagena by surprise is that the day before, Minister Velez declared herself optimistic about the results that the “agreement for tariff justice”a conversation table that she herself announced and that has the participation of companies.

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“We are sitting with the government. There is a greater will on the part of distributors and marketers in search of solutions in two directions: the relief of rates and guarantee the sustainability of the provision of the service”, said Jose Camilo Manzur, leader of the Colombian Association of Energy Distributors, Asocodis.

“Legal certainty is very important in this sector. The most important thing is the consultation table that we continue looking for proposals to lower the rate in a coherent and technical way and not simply make a political decision that can cost the sector and the user too much”, adds Sanchez. Currently, more than 80% of the energy distributed in Colombia corresponds to contracts that are already agreed between generators and marketers.

Beyond the crisis caused by the rise in rates, the president has also spoken of a new model, “where the public and the private can be allied knowing that the public service is only an instrument to guarantee a universal right and therefore not it works exactly like a market,” he said at the same congress. “We are not going to nationalize public services either,” he clarified. His words, however, left more questions than answers.

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Source: EL PAIS


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