1703945826
Last week, the Energy and Gas Regulatory Commission (Creg) published a draft resolution that would give it free rein to intervene in the wholesale energy market given the high prices offered by generators, particularly hydroelectric plants.
This intervention would initially last until April 30, 2024 and would set a limit of 532 pesos per kilowatt hour offered by generators in energy exchange.
(Also read: Creg will intervene in the energy market due to producers’ high prices)
An analysis by Alejandro Lucio, director of Óptima Consultores, shows that this intervention that the Creg wants to carry out would have serious consequences for some beneficiaries and others.
Non-manufacturing marketers and traders also have their own vision for this measure (see: “Energy users have stopped saving about $1.7 billion”).
The main beneficiaries would be the users, but not all, but only those supplied by companies that are to some extent dependent on the price of energy on the exchange because they have not secured all their electricity through bilateral contracts.
Therefore, users who have secured their energy in contracts at a fixed price will experience a significant increase in their monthly bill due to restrictions (a component of the energy tariff) that take into account the difference between the new intervened exchange price and the cost of thermal production.
In this sense, the National Association of Generating Companies (Andeg) also notes that this intervention is “ineffective” since, although it aims to help the end user, the measures taken have the opposite effect.
With what the proposal proposes, they will end up paying a lot more for their bills
“Marketers who have done enough homework and have contracts with stable prices to meet almost 80 percent of the demand related to the El Niño phenomenon will end up with much more to their advantage with what the proposal proposes Paying bills means an increase in restrictions of about 350 pesos per kilowatt, which is more than 30 percent of the final tariff,” says Alejandro Castañeda, executive director of Andeg.
Another winner would be the hydroelectric generators, which would run counter to the Creg’s aim of using the intervention to “prevent the abuse of the dominant position of the generators participating in the energy exchange”.
The expert assures that although the revenues of water producers will be limited, they will continue to generate significant revenues at the recommended price of 532 pesos. “On the one hand, they reduce their margin, but on the other hand, they are given preference to buy on the stock exchange if they cannot earn at a lower price,” he adds.
He also points out that the Creg, which wants to limit the market power of water producers, will ultimately be doing them “a favour”. And according to the company, Colombia’s electricity generation market is an “oligopolistic market” where only three operators have 65 percent of the system’s installed capacity. In addition, 66 percent of the installed capacity is hydroelectric power plants.
(Read also: Unicentro’s success is not the only one that Dian has sealed; in 2023 there will be 355 closures)
On the side affected by this intervention, the heat generators would be affected. Alejandro Lucio affirms that the operation of these plants will be limited to a margin of 5 percent, that is, they will produce at cost price.
Heat workers are punished when they are needed most
This 5 percent would not cover other operating costs and increasing financial costs. “By penalizing hydroelectric generators that are perceived to be manipulating the price, thermal generators are penalized when they are needed most,” he adds.
And the thing is that during an El Niño phenomenon, such as the one currently occurring, the production of thermal power plants increases significantly to ensure electricity supply, as the drought causes hydroelectric plants to reduce their energy production.
This is the same position that Andeg represents, assuring that the intervention proposed by the Creg is “inappropriate” because it undermines the work that the sector has done to maintain the system and reliability in critical moments such as El Niño -Phenomenon to ensure drastic changes.
Therefore, the union warns that “by moving from prices to costs, the value of the energy produced remains unknown, affecting the reliability of the system until April 2024.”
Ultimately, users pay higher energy costs due to the reliability.
Furthermore, she considers that the proposal is “ineffective” because the maximum prescribed value is set on assumptions that do not exist, i.e. of the country’s fixed energy, leaving 70 percent of thermal power plants underpaid, without the possibility of recovering the invested capital and without profitability.
Another loser from this intervention would be investments in the new generation in Colombia. According to the director of Óptima Consultores, this measure will have delicate implications for the reliability fee auction scheduled for February 2024 to procure the electrical energy necessary to cover a deficit planned for 2027-2028.
“In the middle of a reliability fee auction where the thermal power plants are offering the most reliability for the system, this is a very worrying sign for this process,” he says.
If the thermal power plants decided to present themselves – says Alejandro Lucio – the premium for reliability in this type of intervention signals would be much higher. “Ultimately, users pay higher energy costs due to reliability or, in the worst case, the entire system and the country due to a lack of necessary energy in times of water shortages (probable power outages in the future),” adds Lucio.
(Also read: These devices can help you save energy in December)
Photo:
Guillermo González – Archive / EL TIEMPO
This scenario would jeopardize investments of more than $2.5 billion
For Andeg, the “uncertainty and instability” that arises regarding investment signals could lead to companies suspending their participation in the reliability fee auction.
“This scenario would jeopardize investments of more than 2.5 billion dollars, which would pose a long-term risk to energy supplies and undermine the objectives of the fair energy transition proposed by the national government,” warns the managing director of Andeg.
Meanwhile, Alejandro Lucio points out that “a manual reduction in the stock market price does not solve the structural problems of the system, but rather aggravates them by allowing new investments, the participation of new projects in expansion auctions and new projects exploited through the sale of long-term investments, be discouraged.” Term contracts. Duration”.
On the contrary, she believes that the overexposure of marketers, and therefore users, to the stock market should be solved through greater reporting and not by changing the short-term market model.
In addition, other temporary measures should be considered, such as: B. enabling shorter term contracts in Sicep, easing the conditions for transfer to the tariff and enabling “pay what is generated” contracts for the regulated market and many others.
#Energy #tariffs #wins #loses #Cregs #intervention #market #Sectors #Economy