Electricity sector points out dangers due to government announcements

In the midst of the controversies that the Ministry of Mines and Energy is experiencing due to the decision not to award new oil and gas exploration and production contracts, a series of concerns have been generated in the electricity sector as well.

(Read: Energy and gas unions pronounce on rate control).

This related to two main issues: the reliability charge auction and the supply of natural gas for thermal generation.

Regarding the first issue, sectors have requested that the bases be presented for a reliability charge auction, since sIt is estimated that there will be a deficit between 2025 and 2026according to the projections of the Mining and Energy Planning Unit (Upme), as shown in the graph.

Therefore, to supply this demand that would remain unattended, unions, companies and Experts have pointed out the urgent need to put an auction on the market of firm energy that avoids a scenario of neglect. However, with the focus on other portfolio themes, this seems to have faded into the background.

Although the Energy and Gas Regulation Commission (Creg) confirmed to Portafolio that progress is being made on the document so that it goes on the market and that it would set out the conditions for this tender, so far it has not come out. Additionally, President Gustavo Petro indicated on his Twitter account that he will resume “lThe functions of control and general policies for the administration of public services that the presidency had delegated to the regulatory commissions”.

According to Nicolás Arboleda, Baker McKenzie’s senior associate on mining and energy issues, to do this, the president would have two discussions. The first one is whether the president can take on all the functions or only some, given that they were all delegated by law. The second would be how he would resume his functions, given that they were granted by law, it is likely that he cannot resume them by means of a decree, but rather that he must proceed through Congress.

(In addition: After statements by the Vice Minister of Energy, they request the resignation of Vélez).

However, Arboleda points out that in the event of an economic emergency being declared, the President could skip the passage through Congress. Neverthelessthis could be sued since it breaks principles of administrative independence.

In fact, the Commission issued a statement in which it stated that “theRegulatory bodies must have an independent nature to ensure that their decisions are objective, impartial, consistent and technical. This allows regulated agents, as well as the general public, to perceive objectivity, neutrality and transparency on the part of the State”.

One pPossible intervention would once again jeopardize the progress of the auction. “If an auction is not held, the situation could be very complex from 2025 onwards,” said Alejandro Castañeda, president of the National Association of Thermal Generating Companies, Andeg.

However, one of the additional risks added to this situation is that the projects that were scheduled to enter the National Interconnected System, such as those of the 2019 auctions. Many of these have shown delays in their progress, for reasons related to the environmental license and negotiations with the communities. This is the case of the Collector, the transmission line that will connect the non-conventional renewable projects that are being built in La Guajira.

(See: The law on which Gustavo Petro relies to adjust rates).

However, the issue of thermal generation has also generated concern over the decision not to award new oil and gas exploration contracts. According to the most recent Natural Gas Market Report 2022 – 2027 of the Natural Gas Market Manager, thermal generation is the second largest consumer, after industry.
By 2023, gas contracting for this sector represents 30% of the total.

This means that in a natural gas deficit scenario, one of the major affected parties would be electricity generation. In fact, Castañeda points out that there is already a deficit for 2027 in natural gas, which could be corrected with the Regasificadora del Pacífico, which has not yet been assigned.

Castañeda pointed out that the risk of a shortage generates uncertainty for investors, so the expansion of the system may not occur to the same extent that demand requires it.

After more than two years of heavy rains, one of the effects that is expected to be produce an El Niño phenomenon in the coming months, that is to say that there are droughts. Among the effects that this has is that the reservoirs have a drop in their levels, putting hydraulic generation at risk.

In part this anda is being reflected in the water contributions, this is close to the historical average, having fallen in recent months, according to data from XM, operator of the electricity market.

(Keep reading: Did the minister lie?: The answer is yes and I have proof, says Ruiz).

This is partly explaining the high energy prices on the stock market. To this is added that the projects of La Guajira have not entered to give peace of mind to the system.

DANIELA MORALES SOLER
Journalist Portfolio