[Economics] What can be done to lower electricity prices?

[Draeno]

 

As long as the government of President Petro persists in getting its hands on the electricity tariff scheme seeking to alleviate the pockets of lower-income Colombians, the ability to pay of companies in the sector could be jeopardized.

The underlying motivation for this intervention (which we will see while the concept of the Council of State is released) is to lower electricity rates in the country, which also have their part in the rise in inflation.

However, it is not very clear what the intention of President Gustavo Petro is when he intervenes in commissions in which there is ministerial and National Planning representation, because in the end the decisions that are made there are not approved behind the backs of the ministers and the director of the DNP.

Trying to avoid reaching these extremes, the different electrical business segments are exploring actions to make these breaks in rates a reality.

The truth is that "the existence of a clear tariff framework has allowed this industry to benefit from stable and predictable income, even in scenarios of economic slowdown", according to the rating firm BRC Ratings.

For the president of the Colombian Chamber of Energy (CCE), Carlos Alberto Zarruk, "in determining prices, technical analysis should prevail, because otherwise it could affect the financial sustainability of the companies that provide the service , which would put the country's energy security at risk.

The handbrake that the Council of State has provisionally placed on Petro's claims does not seem to be enough to give companies in the electricity sector peace of mind. A high voltage is perceived between businessmen. For this reason, they agree that some points of the tariff scheme should be reviewed, but within the framework of legal stability and business security.

It is a message that also comes from the Colombian Association of Electricity Distributors (Asocodis): its director, José Camilo Manzur, considers that "all these reviews are carried out under the institutional framework of the sector, in which we have been for the last 30 years and has borne great fruit.

It must be said that part of the most marked rate hike in some markets has international ingredients: after the pandemic, nobody imagined a Russian invasion of Ukraine with the excessive growth in energy prices, which accentuated inflation, especially among producers . One of the tariff ingredients that has put pressure on the cost of electricity has been the Producer Price Index (PPI).

Despite these considerations, the main players in the Colombian electricity sector agree that actions should be implemented to achieve control over the price of electricity. “The best way to ensure efficient rates without directly intervening in prices is by increasing competition. And for that, two minimum conditions must be met: that the rates cover the costs of providing the service and that there be stability in the rules. Otherwise, it will be difficult to attract new investment to the sector”, says the former Minister of Mines and Energy, and current director of the Regional Center for Energy Studies (CREE), Tomás González.

A tepid tariff agreement
In this field there are no magic formulas to press a considerable drop in the price of electricity rates. Since last year, the Minister of Mines and Energy, Irene Vélez, has gotten her hands on the matter with the pact for tariff justice, without fully achieving the objectives of the initiative.

"In order to find solutions that allow adjusting electricity rates in Colombia, it is essential, initially, to take into account the particularities of each region, as in the case of the Caribbean and Valle del Cauca, whose rates differ significantly from the national averages," he points out. Juan Ricardo Ortega, president of Grupo Energía Bogotá.

In terms of tariffs, an important balance is required between efficient tariffs, minimizing the impact on users, "but at the same time guaranteeing the future provision of the service in which the sector can advance, increase coverage, improve the quality of service, adapt and modernize networks and accelerating the energy transition”, Manzur points out.

Analysts and unions from the sector and production hope that the actions taken will not lead the country to experience dire situations that other countries in the region have experienced in their electrical system. "That what has happened in other Latin American countries, where that balance was not maintained, will not happen to us," asserts the director of Asocodis.

 

https://www.elespectador.com/economia/que-se-puede-hacer-para-bajar-los-precios-de-la-electricidad/