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COMPARATIVE ANALYSIS OF INTERNATIONAL ELECTRICITY PRICES
2 STUDY DONE BY:
La Unidad de Planeación Minero Energética UPME, entidad adscrita al Ministerio de Minas y Energía de Colombia.
La Cámara de Grandes Consumidores de Energía y Gas de la ANDI. WITH COOPERATION FROM:
La Asociación Interamericana de Grandes Consumidores de Energía Eléctrica INTERAME. AND FINANCIAL SUPPORT FROM:
La Corporación Andina de Fomento – CAF
La Fundación para la Educación Superior y el Desarrollo –FEDESARROLLODISEÑO DESIGNED AND PRINTED BY: Milenio Editores e Impresores OFFICIAL TRANSLATION BY: Las Traducciones EU www.lastraducciones.com Milenio Editores e Impresores Printed in Bogotá, D.C., Colombia © All rights reserved
3 Ta bl le e o of f C Co on nt te en nt ts s T ab CH AP PT TE ER R I I. . I IN NT TR RO OD DU UC CT TI IO ON N. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . 11 C HA 1 1 1.1 BACKGROUND ............................................................................................................................................. 11 1.2 UPDATING OF 2003 SURVEY ........................................................................................................................ 12 1.2.1 Scope ....................................................................................................................................................... 12 1.3 DOCUMENT LAYOUT.................................................................................................................................... 14 CH AP PT TE ER R I II I. . C HA CO MP PA AR RA AT TI IV VE E A AN NA AL LI IY YS SI IS S O OF F R RE EG GU UL LA AT TO OR RY Y A AN ND D L LO OA AD D F FR RA AM ME EW WO OR RK KS S .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . 16 C OM . .. 1 6 2.1 ELECTRICITY CONSUMPTION PATTERNS ....................................................................................................... 16 2.1.1 Population and GDP.................................................................................................................................. 16 2.2 REGULATORY MODELS................................................................................................................................ 19 2.3 POWER LIMITS for ACCESS to NON‐REGULATED MARKETS in EACH of the COUNTRIES ................................. 22 2.4 COMPOSITION OF GENERATING ASSETS....................................................................................................... 22 2.5 RATE MODELS FOR ELECTRIC ENERGY TRANSMISSION SYSTEMS................................................................... 23 2.6 TAXES, CONTRIBUTIONS AND OTHER CHARGES............................................................................................ 24 CH AP PT TE ER R I II II I. . C CO OM MP PA AR RA AT TI IV VE E A AN NA AL LY YS SI IS S O OF F .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . 28 C HA . .. 2 8 EL EC CT TR RI IC CI IT TY Y P PR RI IC CE ES S F FO OR R V VO OL LT TA AG GE E L LE EV VE EL LS S O OV VE ER R 5 57 7. .5 5 K KV V . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . 28 E LE 2 8 3.1 ELECTRICITY PRICES UPDATED 2003. ........................................................................................................... 28 2.1.1 Ongoing Information System. ................................................................................................................... 28 CH AP PT TE ER R I IV V. . RE SU UL LT TS S A AN ND D C CO ON NC CL LU US SI IO ON NS S . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . 33 C HA R ES 3 3 4.1 PRICES 2003................................................................................................................................................. 33 4.2 PRICE COMPARISON FOR 2000 AND 2003 .................................................................................................... 37 4.3 COMPARISON WITH PRICES IN SOUTH AFRICA ............................................................................................. 37 AR GE EN NT TI IN NA A. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . 41 A RG 4 1 5.1.1 MAIN INDICATORS.................................................................................................................................... 41 5.1.2 DESCRIPTION OF ARGENTINEAN ELECTRIC SYSTEM ................................................................................... 42 5.1.2.1 Generation System...................................................................................................................................... 42 5.1.2.2 Transmission System.................................................................................................................................. 43 5.1.3 REGULATING FRAMEWORK............................................................................................................................ 43 5.1.3.1 The Wholesale Electric market (CAMMESA) ............................................................................................... 44 5.1.3.2 The Regulating Body ENRE .......................................................................................................................... 44 5.1.4 RATES STRUCTURE FOR FINAL USERS ........................................................................................................ 44 Co st ts s o of f G Ge en ne er ra at ti io on n. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . 45 C os 4 5 Co st ts s o of f T Tr ra an ns sm mi is ss si io on n. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . 45 C os 4 5 Co st ts s o of f D Di is st tr ri ib bu ut ti io on n. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . 45 C os 4 5 5.1.5 SUBSIDIES AND TAXES.................................................................................................................................... 46 5.1.6 MARKET OF LARGE CONSUMERS............................................................................................................... 47 5.1.6.1 GUMA.......................................................................................................................................................... 47 5.1.6.2 GUME .......................................................................................................................................................... 47 5.1.6.3 GUPA ........................................................................................................................................................... 48 5.1.7 ON SUSTAINABILITY OF THE ELECTRIC SECTOR AND RATES OF ELECTRICITY. .............................................. 48 5.1.8 INFORMATION PERMANENT SYSTEM........................................................................................................ 48 5.1.8.1 Methodology to calculate prices of Big Consumers.................................................................................... 48 5.1.8.2 Prices for March of 2003 ............................................................................................................................. 49 5.1.8.3 Prices as of December of 2003.................................................................................................................... 51 Mean monomial price + Price of Distribution + National Taxes without IVA =.................................................... 51 5.2.1 MAIN INDICATORS.................................................................................................................................... 52 Figure 5.1 STRUCTURE OF THE BOLIVIAN AND ELECTRICAL SECTOR.............................................................. 53 5.2.2.1 Power Generation System...................................................................................................................... 53 5.2.2.2 Power Transmission System ............................................................................................................ 54 5.2.2.3 Power Distribution System .............................................................................................................. 55 5.2.3 REGULATORY FRAMEWORK ...................................................................................................................... 55 5.2.3.1 The Wholesale Electrical Market. ........................................................................................................... 55 5.2.3.2 The Regulating Entity. SUPERELE ............................................................................................................ 56 5.2.3.3 Rate Structure for End Users............................................................................................................ 56
4 5.2.4 THE LARGE CONSUMER MARKET............................................................................................................... 57 5.2.5 THE PERMANENT INFORMATION SYSTEM ................................................................................................. 57 5.2.5.1 Price Methodology for Large Consumers.................................................................................................... 57 5.2.5.2 Prices for 2003................................................................................................................................. 58 5.3.1 MAIN INDICATORS.................................................................................................................................... 59 Table 5.12 ECONOMIC INDICATORS FOR BRAZIL........................................................................................... 60 5.2.2 DESCRIPTION OF THE BRAZILIAN ELECTRICAL SYSTEM ............................................................................... 60 5.3.2.2 Transmission System................................................................................................................................... 62 5.3.2.3 Power Distribution System .............................................................................................................. 63 5.3.3 REGULATORY FRAMEWORK ...................................................................................................................... 63 5.3.3.1 The National Agency of Electric Energy –ANEEL............................................................................... 63 5.3.3.2 Electricity Market–MAE‐ ........................................................................................................................ 63 5.3.4 ENERGY CONSUMPTION ........................................................................................................................... 65 5.3.5 RATE STRUCTURE FOR LARGE CONSUMERS............................................................................................... 66 5.3.5.1 Generation prices: ........................................................................................................................... 66 5.3.5.3 Distribution Costs............................................................................................................................ 66 5.3.6 TAX ON MERCHANDISE CIRCULATION AND SERVICE RENDERING (ICMS).................................................... 66 5.3.7 SURVEYS................................................................................................................................................... 67 5.2.5 THE PERMANENT INFORMATION SYSTEM ................................................................................................. 69 5.3.8.1 Methodology for viewing prices for Large Consumers............................................................................. 69 5.3.8.2 Prices for March 2003 ............................................................................................................................ 69 5.3.8.2 Prices for October 2003.......................................................................................................................... 72 5.4.1 MAIN INDICATORS.................................................................................................................................... 73 5.4.2 DESCRIPTION OF THE CHILEAN ELECTRICAL SYSTEM .................................................................................. 74 5.4.2.1 Power Generation System ............................................................................................................... 75 5.4.2.2 Power Transmission System ................................................................................................................... 76 5.4.3 REGULATORY FRAMEWORK ...................................................................................................................... 78 5.4.3.1 The Regulating Entity. CNE............................................................................................................... 78 5.4.3.2 Rate Structure for End Users............................................................................................................ 79 5.4.4 THE LARGE CONSUMER MARKET............................................................................................................... 80 5.4.4.1 Average energy prices for "Free customers" of the SING North System ............................................ 80 5.4.5 THE PERMANENT INFORMATION SYSTEM ................................................................................................. 81 5.4.5.1 Prices for September 2003............................................................................................................... 81 CO LO OM MB BI IA A .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . 83 C OL . .. 8 3 5.5.1 MAIN INDICATORS ................................................................................................................................... 83 5.5.2 DESCRIPTION OF THE ELECTRICAL SYSTEM OF COLOMBIA ......................................................................... 84 5.5.2.1 Generation System 66............................................................................................................................ 85 5.5.2.2 Transmission System.............................................................................................................................. 85 5.5.2.3 International Connections ............................................................................................................... 86 5.5.2.1 Local Distribution System (LDS). ...................................................................................................... 87 5.5.3 REGULATORY FRAMEWORK ...................................................................................................................... 87 5.5.3.1 Energy and Gas Regulation Commission – CREG‐ .................................................................................... 88 5.5.3.2 Superintendence of Domiciliary Public Services – SSPD‐................................................................... 88 5.5.3.3 Mining‐Energy Planning Unit ‐UPME‐ ..................................................................................................... 89 5.5.3.4 Operation Management and Market Administration .............................................................................. 89 5.5.4 RATE STRUCTURE OF FOUR END USERS ..................................................................................................... 89 Cost of Generation .................................................................................................................................................. 90 Transmission Costs ................................................................................................................................................. 90 5.5.4.3 Distribution Costs................................................................................................................................. 90 5.5.4.5 Recognized fraction to cover losses..................................................................................................... 91 5.5.4.6 Other Costs.................................................................................................................................................. 91 5.5.4.7 Connection Costs......................................................................................................................................... 91 5.5.5 SUBSIDIES AND CONTRIBUTIONS .............................................................................................................. 91 5.5.5.1 Solidarity Scheme........................................................................................................................................ 91 5.5.5.2 Solidarity Fund for Subsidies and Income Redistribution – FSSRI‐.............................................................. 92 5.5.5.3 Financial Support Fund for the Energization of Interconnected Rural Zones. ............................................ 92 5.5.6 SURVEYS................................................................................................................................................... 92 5.5.7 LARGE CONSUMER MARKET ..................................................................................................................... 93
5 5‐5.8 THE PERMANENT INFORMATION SYSTEM................................................................................................. 95 5.6.1 MAIN INDICATORS.................................................................................................................................... 97 5.6.2 DESCRIPTION OF THE ELECTRICAL SYSTEM ................................................................................................ 98 5.6.2.1 Generation System ................................................................................................................................ 98 5.6.2.2 Transmission system.............................................................................................................................. 99 5.6.2.3 Distribution System ......................................................................................................................... 99 5.6.3 REGULATORY FRAMEWORK ...................................................................................................................... 99 5.6.3.1Consejo Nacional de Electricidad (The National Electricity Council) –CONELEC‐....................................... 100 5.6.3.2 El Centro Nacional de Control de Energía (The National Center of Energy Control) ‐CENACE‐ ................ 100 5.6.3.3 Mercado eléctrico mayorista –MEM‐ (Electrical wholesale market) ........................................................ 101 5.6.4 SUBSIDIES AND CONTRIBUTIONS ............................................................................................................ 103 5.6.5. THE LARGE CONSUMER MARKET............................................................................................................ 104 5.6.6 SURVEYS................................................................................................................................................. 104 5.6.7 PERMANENT INFORMATION SYSTEM...................................................................................................... 105 5.6.7.1 Methodology for Great Consumer Prices. ................................................................................................ 105 5.7.1 Principal benchmarks.............................................................................................................................. 108 5.7.2 Description of the Mexican electrical utility system................................................................................. 109 5.7.2.1 Power Generation System.................................................................................................................... 109 5.7.2.2 Transmission........................................................................................................................................ 110 5.7.2.3 Distribution ............................................................................................................................................... 111 5.7.3 Regulatory Framework ........................................................................................................................... 111 5.7.3.1 Current Outlook ........................................................................................................................................ 111 5.7.4 Billing Structure ...................................................................................................................................... 114 5.7.5 Permanent Information System .............................................................................................................. 117 5.7.5.1 Procedure for setting the Large User rates............................................................................................ 118 5.8.1 Principal indicators ................................................................................................................................. 121 5.8.2 Description of its power system .............................................................................................................. 122 5.8.2.1 Power Generation System......................................................................................................................... 122 5.8.2.2 Transmission System................................................................................................................................. 122 5.8.3 Regulating framework ............................................................................................................................ 123 5.8.4 STRUCTURE OF RATE............................................................................................................................... 123 5.8.5 PERMANENT SYSTEM OF INFORMATION................................................................................................. 123 5.8.5.1 Procedure of setting of rates for Big Users ............................................................................................... 124 5.9.2 DESCRIPTION OF THE PERUVIAN ELECTRIC SYSTEM ................................................................................. 126 5.9.2.1 Generation System................................................................................................................................... 126 5.9.2.2 Transmission system ................................................................................................................................ 127 5.9.2.3 Distribution System................................................................................................................................... 127 5.9.3 REGULATORY FRAMEWORK .................................................................................................................... 128 5.9.3.1 The Regulator Body OSINERG................................................................................................................... 128 5.9.3.2 The Committee of Economic Operation of the System – COES – made ................................................... 129 5.9.3.3 Regulation for Expansion of the Peruvian Electric System........................................................................ 129 5.9.4 RATE STRUCTURE FOR END USERS .......................................................................................................... 129 5.9.4.1 Setting of Rates in Bar for Regulated Users .............................................................................................. 129 5.9.4.2 Distribution prices ..................................................................................................................................... 130 5.9.4.3 Other Costs................................................................................................................................................ 130 5.9.4 TAXES AND CONTRIBUTIONS .................................................................................................................. 131 5.9.5 MARKET OF BIG CONSUMERS. ................................................................................................................ 131 5.9.5.1 Procedure of Rates setting for Non Regulated Users................................................................................ 132 5.9.6 SURVEYS................................................................................................................................................. 132 5.9.7 Permanent Information System .............................................................................................................. 133 5.9.7.1 Prices for Dember 2003............................................................................................................................. 133 5.9.7.1 Prices for December 2003......................................................................................................................... 134 5.10.1 MAIN INDICATORS................................................................................................................................ 136 5.10.2 DESCRIPTION OF ELECTRICAL SYSTEM ........................................................................................... 137 5.10.2.1 System of Generation .................................................................................................................... 138 5.10.2.2 Transmission ................................................................................................................................. 138 5.10.2.3 Distribution ................................................................................................................................... 138 5.10.2.4 Interconnections ........................................................................................................................... 138
6 5.10.3 REGULATORY FRAMEWORK........................................................................................................... 139 5.10.3.1 Current Situation..................................................................................................................................... 139 5.10.4 Rate Structure ...................................................................................................................................... 139 5.10.4.1 Generation ........................................................................................................................................ 140 5.10.4.2 Transmission...................................................................................................................................... 140 5.10.4.3 Distribution and Marketing ..................................................................................................................... 141 5.10.4.4 Rates for Big Users .................................................................................................................................. 141 5.10.5 Taxes and Rate Subsidies ...................................................................................................................... 142 5.10.6 Sustained System of Information .......................................................................................................... 142 5.10.6.1 Procedure to Define Big Customer Rates................................................................................................ 142 5.11.1 Principal benchmarks .................................................................................................................... 144 5.11.2 Power System Description ............................................................................................................. 145 5.11.2.1 Generation System ........................................................................................................................ 145 5.11.2.2 Transmission System.......................................................................................................................... 146 5.11.2.3 Distribution System................................................................................................................................. 146 5.11.3 Regulatory Framework.......................................................................................................................... 146 5.11.3 Rate Structure for End Users.......................................................................................................... 147 5.11.5 Taxes .................................................................................................................................................... 148 5.11.6 Large Consumer Market........................................................................................................................ 148 5.11.6.1 Guayana Area .................................................................................................................................... 148 5.11.4 Information System....................................................................................................................... 148 5.11.7.1 Venezuela (excluding Guayana).......................................................................................................... 149 5.11.7.2 Venezuela (Guayana) ......................................................................................................................... 149 VI . A AN NN NE EX XE ES S . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . 1 15 52 2 V I. 6.1 MAIN INDICATORS..................................................................................................................................... 152 6.2 DESCRIPTION OF THE ELECTRIC SYSTEM ..................................................................................................... 153 6.2.1 Generation System ................................................................................................................................ 153 6.2.2 Transmission .......................................................................................................................................... 153 6.3 REGULATORY FRAMEWORK....................................................................................................................... 154 6.3.1 Current Situation .................................................................................................................................... 154 6.3.2 Planned changes .......................................................................................................................................... 154 6.4 STRUCTURE OF RATES................................................................................................................................ 156 6.4.1 Rates for Large Users .............................................................................................................................. 157 6. 5 P PE ER RM MA AN NE EN NT T I IN NF FO OR RM MA AT TI IO ON N S SY YS ST TE EM M. . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . 1 15 59 9 6 .5 . .. 6.5.1 Procedure for setting rates for Large Users.............................................................................................. 159
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CHAPTER I. INTRODUCTION 1.1 BACKGROUND eeking to objectively analyze how competitive the supply of energy is for industries which consume large amounts of electricity in Colombia, the Unidad de Planeación Minero Energética UPME, with the support of the National Industrialists Association ANDI – Chamber of Large Energy and Natural Gas Consumers, retained during 2001 a comparative survey on electricity prices paid by Colombian industry as compared with those in force in other countries 1 . S
The main purpose of the survey was to evaluate the competitiveness of 2000 electric energy prices in the main intensive‐electrical industrial sectors in our country as compared with the prices in Argentina, Brazil, Canada, Mexico, Venezuela and South Africa. Energy prices were analyzed for mining, iron and steel, textile, cement, wood pulp and paper, and sugar industries. A diversity of regulations in force was encountered among the countries studied, with different degrees of development as regards the electricity sector regulation and transformation processes. It was also found that there are different conditions to access non‐regulated markets and that fees in general vary according with the voltage level to which users are connected. When considering taxed fees it was found that: within the mining sector, Colombia’s fees were much higher than Venezuela’s. Brazil’s and South Africa’s, and comparable with non‐ferrous mining sector in Argentina; within the iron and steel sector, Venezuela and Brazil had lowest fees, and Argentina and Mexico fees higher than Colombia's; within the cement sector, it was noticed that exception made of a producer in Alberta (Canada), Colombia had the lowest prices; within the textile sector, Colombia’s fees were lower than Venezuela’s and Mexico’s; within the paper sector, fees were higher than average fees in Canada and lower as compared with all other countries under study; within the sugar sector, it was found that prices in Colombia were lower than those in Brazil and Argentina and higher than those in Mexico. The following chart shows average prices of energy for year 2000 in each of the countries that were analyzed: TABLE 1.1 ELECTRIC ENERGY PRICE COMPOSITION FOR 2000 BY COUNTRY Prices Electric power, Year 2002 (Cents of American dollar for kWh) Country Generation Transmission Subtransmission Distribution Other (1) Taxes (2) Contributions Total TDC (Average) Colombia Argentina Brazil Canadá (Alberto) (3) México Sudáfrica Venezuela Venezuela (Guyana) 1 International comparative analysis of electricity prices in the Colombian industrial sector UPME. ANDI. Consorcio Consultores Unidos ‐Consultoría Colombiana‐. February 2002 11 The survey concluded that the factor having the highest incidence on final prices for the sectors studied in Colombia is the 20% contribution (tax) levied on the electric energy bill and intended for the Electrical Sector Solidarity Fund; however, from an electric energy costs viewpoint, the taxes are not the only factor that have a great impact on the electric energy cost for the domestic industry. Other reasons may be found when comparing generation, transmission and distribution charges, and other charges such as restrictions, cost of regulatory and controlling agencies and special funds, which increase the final price of energy. 1.2 UPDATING OF 2003 SURVEY 1.2.1 Scope Given the present regional processes for integration and internalization of economies and the ongoing free trade treaties, plus structural energy industry changes underwent by some countries in the region, it is necessary to revise our country’s industries actual competitive framework as compared with all Latin American countries, including Mexico. The comparative survey on the prices of electricity for large industrial consumers was updated in development of the UPME‐ANDI inter‐institutional Agreement, with the cooperation of INTERAME and the financial support of the Andean Development Corporation ADC, taking the recommendation of developing an ongoing information system that allows periodically knowing the evolution of energy prices for the industrial sector in countries of interest into consideration. This time the updating task has only focused on energy prices, without analyzing the share of electricity costs in the structure of the industrial sector costs in each of the countries. On a later date the scope will be extended to Central American countries, the United States of America and Canada, and to all consumption sectors. 1.2.2 Methodology Reports of specialized agencies were looked up, among them those of the Regional Energetic Integration Commission – ICID, the Latin American Energy Organization – OLADE, the Economic Commission for Latin America and the Caribbean – ECLA, the Latin American Integration Association – LAIA, the World Bank and World Economic Forum, among others. TABLE 1.2 REGIONAL SOURCES OF INFORMATION CEPAL ALADI Economic Commission for Latin America and of the Caribbean www.cepal.org Latin American Association of Integration www.oladi.org CIER OLADE Commission of Regional Energy Integration www.cier.org.uy Latin American Organization of Energy www.olade.org Information was gathered consulting the various agencies related to the electric sector, in each of the countries under study. The following were taken as official sources: wholesaler operators in each of the countries, its controlling authorities, electric energy dispatch centers and the members of the Inter‐American Association of Big Energy Consumers (INTERAME by its name in Spanish).
12 Reports were taken from the relevant websites, which will be consulted on a regular basis to permanently update the costs of energy. The following table shows the sources of information of operating and regulatory agencies in each of the countries; in some countries other sources are mentioned. Relevant websites have been mentioned where possible. TABLA 1.3 INFORMATION SOURCES FROM COUNTRIES IN STUDY Country Operator Regulator Other Fonts ARGENTINA CAMMESA ENRE AGUEERA BOLIVIA CNDC OVERCOME HIM BRAZIL ONS ANEEL ABRADEE CHILE CDEC CNE CDEC­SING COLOMBIA MEM CREG ISA UPME ECUADOR CENACE CONELEC MEXICO CFE CRE PARAGUAY ANDE PERU OSINERG URUGUAY UTE URSEA VENEZUELA CAVEINEL FUNDELEC CTE EDELCA Surveys were conducted with industrialists in some of the countries under study to verify the quality of information. The surveys in Ecuador were conducted by Ecuador’s Association of Big Electricity Consumers (EGRANCONEL by its name in Spanish); in Peru by the Peruvian Association of Energy Intensive
13 Consumers (ACIDE by its name in Spanish); in Brazil by retained consultants 2 and in Colombia by the National Industrialists Association (ANDI)’s Chamber of Big Energy and Gas Consumers. Information regarding Argentina was improved and verified by the Association of Big Electric Energy Users of the Argentinean Republic AGUEERA. Survey results were compared against the information obtained from the websites of operation and regulatory agencies in the countries under study, and an individual methodology for each country was implemented on the grounds of such comparisons, so as to make later updating and comparing of energy costs for big industrial consumers easier. 1.3 DOCUMENT LAYOUT he comparative analysis of regulatory frameworks as regards the big electric energy consumers’ fees is presented in the first place. Aspects are described in relation with the market model in each country, power limits that allow consumers accessing the free market (non‐regulated), the composition of generation assets, taxes and subsidy models and contributions in force in each country. T
Then, total fees applied to industries connected at voltage levels above 57.5 KV are compared; for Colombia, consideration is given to industries connected at level voltage 4 (>60 KV). Different from the prior survey no particular industrial sectors are compared, since in no country electricity fees are differentiated by type of industry. Following, results and conclusions are presented analyzing the total price as well as each of the components thereof, and 2003 results are compared against 2000, identifying key issues that had an impact on the changes thereto. Lastly, a detail report is submitted for each of the countries under study. The reports contain relevant macroeconomic indicators, general description of their electric systems, regulations in force and the market of big energy consumers. They also include a description of the existing structure to determine electricity fees applicable to all consumers, as well as a summary of surveys carried out, in order to have first‐hand information regarding the fees paid by big consumers. The chapter ends with a section on the permanent information system to update on an ongoing basis the prices paid by big energy consumers in each of the countries. The document has two attachments. The first one contains information regarding fees applicable to big consumers in South Africa. It has been our desire to keep the information regarding this country up to date, mainly for its being a direct competitor of Colombian mining industry, and an important reference point for its having the most competitive fees worldwide. The second attachment presents the methodology to convert different binomial and mix fee models to an equivalent monomial fee and being able to compare them with monomial fees in force in Colombia. 2 CH Consultoria e Engenharia S/C Ltda. Analysis of survey information in Brazil. Dec. 2003 14 15
CHAPTER II. COMPARATIVE ANALIYSIS OF REGULATORY AND LOAD FRAMEWORKS 2.1 ELECTRICITY CONSUMPTION PATTERNS I
n order to have a clearer picture of the countries included in this updating of the survey on international electricity prices for the industry, included herein there is a comparative analysis of certain macroeconomic parameters regarding electricity consumption. 2.1.1 Population and GDP. The following charts compare population and Gross Domestic Product GDP in the countries under study, using CEPAL 3 2003 figures. With 177 million inhabitants, Brazil is the most populated country and that with the highest DGP in the region, with 765,000 million of 1995 US dollars. Mexico follows, both in population and GDP, with values slightly higher than half of Brazil’s. Colombia is the third most populated country in the area and the fourth after Argentina as regards 2003 GDP. Uruguay, Paraguay and Bolivia are the countries with the lowest population and GDP. Resulting GDP per capita as shown in chart 2.3 indicates that Southern Cone countries Argentina, Chile, Uruguay and Brazil, together with Mexico widely exceed the other countries under study with values higher than US$4,000 of 1995 per inhabitant. Andean Community countries, Venezuela, Peru and Colombia follow with values around US$2,400 per inhabitant. The countries with the lowest GDP/capita index are Ecuador, Paraguay and Bolivia. CHART 2.1 POPULATIONS OF COUNTRIES UNDER STUDY 3 CEPAL. www.cepal.org 2003 Preliminary report 16 CHART . 2.2 2003 GROSS DOMESTIC PRODUCT CHART 2.3 GROSS DOMESTIC PRODUCT PER CAPITA FOR 2003. 2.1.2 ELECTRICITY CONSUMPTION PER CAPITA IN LATIN AMERICA. One of the most important indicators to know the degree of development of a given country is the electricity consumption per capita. Venezuela, Chile and Argentina occupy the top places among the countries under study, and Colombia occupies one of the lowest, above Ecuador, Paraguay and Bolivia in 2002.
17 CHART 2.4 ELECTRICITY CONSUMPTION PER CAPITA IN LATIN AMERICA. Source: ICID: 1990 and 1995. Years 2000 and 2002 calculated from the information available regarding total energy demand and population It can be noticed that during the period 1990 to 2000 Colombia and Venezuela were the only countries showing a decrease in the consumption per capita. Colombia’s decrease contrasts with the important Chilean growth during the last decade. Both countries had a 1,050 kwh/inh consumption per capita in 1990, and whilst Chile reached 2,469 kwh/inh in 2002, Colombia dropped to 817 kwh/inh in the same year. Latin American average in turn is slightly below worldwide average 4 , as shown in the following chart, which includes the United States of America with 12,700 kwh/inhabitant‐year, Mexico with 1,600 kwh/inhabitant‐year, Costa Rica with 1,353 kwh/inhabitant‐year and El Salvador with 537 Kwh inhabitant‐year. CHART 2.5 ELECTRICITY CONSUMPTIONS PER CAPITA WORLDWIDE 2001. 2.1.3 Electricity consumed in the industrial sector in percentage terms This indicator shows the usage of electric energy by the industrial sector as a percentage of total energy consumed in each of the countries. Chart 2.6 compares this indicator on the grounds of 2002 5 figures. Stand out Chile with 67%, Mexico with 60%, Peru with 54%, Venezuela with 46% 4 ISA. Investment Decisions. Driving Forces and Decelerators. Conference during the XXXVII Meeting of ICID’s High Executives Viña del Mar. Nov 2002 5 Energetic Information Summary on Regional Energetic Integration Commission ICID. 2003
18 and Brazil with 44%. During 2202 Colombian industrial sector consumed only 33% of energy invoiced at a national level. This percentage is lower than Latin American average which reaches 43% and is only higher than that of Ecuador, Bolivia, Uruguay and Paraguay. CHART . 2.6 PERCENTAGE USAGE ELECTRIC ENERGY BY INDUSTRIAL SECTOR It is important noticing that contrary to the main competitor countries in Latin America, Colombia’s residential sector consumes more electricity than industrial sector. This indicator shows that in general the county has less energy highly‐consuming companies, mainly in mining and steel and iron industries than those in the area countries, despite of their having similar geological characteristics. 2.2 REGULATORY MODELS. lectric sector regulation models in force in all eleven countries under study are different, and vary from the Mexico, Paraguay and Venezuela models where electricity Rates applicable on industry are directly regulated by the state, to Colombia and Argentina models where there is competition as regards generation and commercialization activities. In most of the countries the price of electricity for intensive energy consumers can be agreed upon and be freely negotiated with supply agents. In general the trend in all of these countries, even in Mexico, is moving forward to a competitive electrical system with strong presence of private sector which day by day opens further to freely negotiating final consumer Rates. E
The map in Chart 2.7 (next page) shows the degree of development in electrical market regulation in each of the countries As regards the regulatory frame and its relation with the relevant Rate regulation for Big Consumers in each country, the following may be pointed out: ± Argentina: In the wholesaling market, big consumers may enter into fixed term agreements and purchase energy at market prices as well. Depending on its demand, big users are classified as: GUMAS (Grandes Usuarios Mayores or Major Big Users), GUMES (Grandes Usuarios Menores or Minor Big Users) and GUPAS (Grandes Usuarios Particulares or Big Particular Users). The limit to access the non‐ 19 regulated market is 30 KW. ± Bolivia: ± There is a wholesaling market where big energy consumers may also directly participate as agents in such market. Non‐regulated consumers may enter into supply agreements with generators or distributors, on freely agreeable conditions as regards prices and quantities of energy and peak power. Should a non‐regulated consumer fail to enter into supply agreements for all or part of the demand, it may purchase energy from the spot market, having previously entered into an adhesion contract with the Comité Nacional de Despacho de Carga. The limit to access the non‐regulated market is 1MW. CHART 2.7 DEVELOPMENT STAGE OF MARKET MODELS IN LATIN AMERICA FOR LARGE CONSUMERS ± Brazil: Big consumers may access wholesaling market to purchase electric energy. Transportation charges are a function of the energy delivery and receipt points, calculated with nodal factor methodologies. Additionally, by means of Resolution 282 of 1999 the Electric Energy National Agency (Agencia Nacional de Energía Eléctrica‐ANEEL) established that transmission system fees are shared between
20 generation and demand in a proportion of 50% and 50%, respectively. The limit to access the non‐regulated market is 3 MW. ± Chile: Big users may directly negotiate the electricity supply prices and conditions with generation and distribution companies (there are no commercializing agents). Node prices are negotiated which include high voltage generation and transmission costs, in each of the two independent systems, that is to say the central system and the norte grande system where the largest mining industries are located. The limit to access the non‐regulated market is 2 MW. ± Colombia: Big consumers do not participate directly in the wholesaling energy market, and they are represented by traders. They only negotiate generation and commercialization prices which are about 50% of electric energy total price. Transmission, distribution and restriction prices are regulated. Colombia is the only surveyed country where transmission cost is “stamp cost”, that is, it is the same for all consumers regardless of their geochartic location. Colombia is also the only country where agreed upon Rates are monomial. The limit to access the non‐regulated market is 100 KW or 55,000 kWh‐month. ± Ecuador: Large consumers may freely negotiate their Rates with generators and distributors, and actively participate in the board of the National Center for Energy Control (Centro Nacional de Control de Energía ‐ CENACE) and in the wholesale electrical market (Mercado eléctrico mayorista – MEM). The limit to access the non‐regulated market is 860 KW. ± Mexico: Big consumers are not allowed to freely negotiate their Rates. There is a government electricity sector where the Electricity Federal Commission (Comisión Federal de Electricidad, a government agency) is in charge of production, transmission and distribution of electric energy, as well as of proposing applicable Rates on the grounds of a regional Rate and voltage level system. ± Paraguay: Large consumers are not allowed to freely negotiate their Rates. There is a government electricity sector where the Electricity National Administration (Administración Nacional de Electricidad – ANDE, a government agency) is in charge of production, transmission and distribution of electric energy. ± Peru: Large consumers may freely negotiate their bar prices, which include generation and transmission costs. They do not negotiate the cost arising from using sub transmission and distribution systems, which are regulated by OSINERG. The limit to access the non‐regulated market is 1 MW ± Uruguay: Large consumers may directly act as participant agents in the market, or enter into agreements with a commercializing agent to represent them. They also have the option to continue being regulated customers of the distributor serving them at the Rates fixed by the regulating body. The limit to access the non‐regulated market is 250 KW.
21 ± Venezuela: Large consumers are not allowed to freely negotiate their Rates. Rates are directly regulated by the government for each of the companies, on the grounds of regional Rates and voltage levels. There is a big difference in the prices charged in the Western region and those of the Guiana where prices are fixed by EDELCA and where most of the industries with the highest consumption of electricity in the country are located. Finally it is worth mentioning that in no country there is an explicit differential Rate by type of industrial sector. The differences from one user to the other are mainly the result of the voltage level they are connected to; and in some cases they are given by reasons of geochartic location, by transmission charges as a function of distance and by different regional and municipal taxes. 2.3 POWER LIMITS for ACCESS to NON­REGULATED MARKETS in EACH of the COUNTRIES . T he following chart compares consumption levels as from which big energy consumers may freely negotiate their energy Rates in each of the countries under study. CHART 2.8 COMPARISON OF POWER LIMITS TO ACCESS NON­REGULATED MARKETS Note: In the case of Colombia the limit is 100 KW or 55,000 kWh. For their having regulated models, Mexico, Venezuela and Paraguay do not allow the free negotiation of Rates for big consumers. In Brazil, only consumers with consumptions higher than 3 MW may freely negotiate their Rates, and it is expected that the limit to expand the free client market be soon reduced. Colombia and Argentina have the lower limits to access the free market. 2.4 COMPOSITION OF GENERATING ASSETS. T
he composition of generating assets in each of the countries is a factor which in the first instance determines how expensive the electric energy service may be. The map in Chart 2.9 shows actual composition of generation installed capacity in each of the surveyed countries as of December 2003. The value in GW of total installed capacity in each country is also mentioned. 22 CHART . 2.9 INSTALLED CAPACITY IN GW AND COMPOSITION OF GENERATING ASSETS IN EACH OF THE COUNTRIES The largest generation installed capacity in the region is Brazil’s with 87 GW, a little more than twice Mexico’s with 40 GW. Mexico in turn doubles Argentina and Venezuela which generation installed capacities are 24 GW and 20 GW, respectively. The latter double Colombia and Chile which in turn double Peru and Paraguay. The countries with the smallest installed capacity are Ecuador, Uruguay and Bolivia with 3 GW, 2GW and 1 GW, respectively. Generation installed capacity by country shows that in Paraguay, Uruguay, Brazil, Venezuela, Colombia, Peru and Ecuador hydro‐electricity prevails, whilst in Argentina, Bolivia, Mexico and Chile thermal generation prevails, mainly on natural gas. Despite having a mainly thermal generation mix, Argentina has the lowest generation costs of around 0.8 US$/Kwh as a result of the high devaluation early in 2002. All electricity and natural gas Rates remained in Argentinean pesos, bringing as a consequence that industrial consumers had their energy Rates in dollars reduced to one third; nevertheless, these measures have negatively impacted the generation business. As of the date of publication of this updating report, it was known that the Argentinean government has agreed on gradually raising the natural gas prices until July 2005, and the relevant increases in generation costs will be transferred to big consumers accordingly. 2.5 RATE MODELS FOR ELECTRIC ENERGY TRANSMISSION SYSTEMS S
urvey updating has made it possible to know in a greater detail the existing models to transfer the costs of national transmission interconnected systems to final users. In all countries under study, exception made of Colombia, transmission costs in voltages higher 23 than 220 KV are different for each node in the system and depend on the location and distance from generation centers. In Colombia, transmission costs of the National Interconnected System (Sistema Interconectado Nacional) are “stamp costs”, equal for all consumers regardless of their location within the interconnected system. In all surveyed countries, except Colombia, transmission system costs above 220 KV are added to generation costs to define bar costs, or node costs, as from which high voltage Rates are defined. In Peru and Chile, prices freely negotiated by big consumers are referred to 220 KV connection nodes and are compared against the costs estimated by the regulator for a system’s reference node; it is thus sought that generation and transmission Rates for regulated users fall within a range very close to the average negotiated for free customers. Another aspect that impacts transmission costs transferred to users is the manner in which such costs are split between generation and demand. For instance, in Brazil transmission costs are 50% shared between generation and demand; in Colombian 100% of transmission costs are charged to consumers; in Chile, pursuant to the new law enacted in March 2004, generators pay 80% and demand 20%. It has been additionally found that Colombia is the only country among those under study with a $1/Kwh temporary tax (7 years as from 2003) levied on transmission, with specific destination to the Financial Support Fund for Rural Energy Coverage (Fondo de Apoyo Financiero para Energización Rural‐FAER), equivalent to 6% of the transmission charge which in full is transferred to consumers. 2.6 TAXES, CONTRIBUTIONS AND OTHER CHARGES alue added taxes. In all surveyed countries, exception made of Colombia and Ecuador, the VAT is levied on electric energy, at rates ranging between 10% in Paraguay and 27% in Argentina. VAT may be recovered and therefore it is not a cost to industrialists. V
Brazil has a similar tax called ICMS which is recovered at an average of 90%, depending on the degree of electricity consumption in industry’s productive processes. Contributions. In Colombia, Ecuador and Argentina, big industrial users pay contributions to special funds to subsidize population with low means of support; in Colombia, this contribution is 20% to the Solidarity Fund, whilst in Ecuador is 10% to the FERUM and in Argentina is a fixed charge of $3/Mwh to the Subsidiary Fund, which in average is 8% of the Rate; in Bolivia there is a 3% transfer tax; in Uruguay the sale of electric energy is taxed with the Contribution to Finance Social Security CONFIS, which amounts to 3% or billed amounts. These contributions cannot be recovered, and increase production costs of industrial consumers. Other charges and taxes. Municipal and provincial taxes as well as other charges are common to all countries under study. ± Argentina: There are municipal taxes which range between 0% and 15%, and provincial taxes from 0% to 3%. A 6.38% municipal tax is levied in Buenos Aires. 24 ± Brazil: In addition to ICMS, there are several municipal taxes at different rates depending on the municipality. ± Colombia: There is a 1.5% national stamp tax; a specific tax levied on transmission which amounts to $1/Kwh, allocated to the support fund for interconnected rural zones called FAER. Additionally, there is another $1/ Kwh tax levied on each kilowatt‐ hour generated by generating companies, allocated to a fund established to financially support non‐interconnected zones called FAZNI. This tax is not directly transferred to demand, but it does increase the generation cost structure that generation companies take into consideration when submitting their offers in the energy wholesale market. FAZNI and FAER are temporary taxes, in force until 31 December 2007 and 31 December 2009, respectively. There is no uniqueness when charging for street lighting, which is the responsibility of Municipalities. Some Municipalities do not charge for this service, and others charge up to 18% of the electric energy consumption value. ± Ecuador: A 10% refuse collection tax is levied in most of municipalities; also is a street lightning tax which varies for each municipality but in most cases is levied on industrial sector at a rate of 7%. ± Peru: There is a Camisea project temporary, progressive charge. At present it amounts to US$2/KW‐month and from May 2004 to November 2004 it will reach its top value of US$2/KW‐month. ± Venezuela: The cost of municipal taxes varies in each municipality (it is not the tax which is transferred but the cost, which is a concept accepted by the regulator, since these costs are recognized as part of the companies’ income requirements). For example, the municipal tax in Barquisimeto is 1.8%. In Valencia, 69 $US/MWh is charged for street lightning.
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CHAPTER III. COMPARATIVE ANALYSIS OF ELECTRICITY PRICES FOR VOLTAGE LEVELS OVER 57.5 KV T his updating of the survey confirmed that there are no differential treatments for each type of industry in surveyed countries. Actually, final prices paid by the industry in each of the countries mainly depend on the voltage level they are connected to. For this reason, no industrial sector comparisons are herein included, but comparison by voltage levels. Comparisons are focused on voltage levels higher than 57,5 KV, level as from which the largest high‐consuming industries are connected in all countries under study. 3.1 ELECTRICITY PRICES UPDATED 2003. T
he survey was originally updated for Rates in force as of March 2003. Information obtained from websites and official reports of operation and regulation agencies in the countries under study was validated by applying surveys to the industries in several countries for the same month March 2003. On the grounds of the analysis of results obtained for March 2003, an individual methodology was developed for each country. This will be the methodology applied for further updating energy prices for big industrial consumers, this making an ongoing information system. The ongoing information system developed in this updating work was used to obtain the most updated information regarding Rates in force as of December 2003 to the best possible extent. 2.1.1 Ongoing Information System. Below there is a summary of the methodology developed to update the information regarding big consumer prices in each of the countries under study. ± Argentina: As regards the prices, the cost distribution for GUMAs has been taken as a reference according with information obtained form CAMMESA6. Generation costs include average costs associated with purchases in the fixed term market and spot market7. Transmission component negotiated in the wholesaling market plus average high‐voltage toll charge paid to network operators8 have been included as associated transmission and sub‐transmission charges. Distribution prices are obtained from the information provided by AGUEERA9. Item “Others” includes 28 reserve, associated services and forced generation charges. Taxes and contributions include municipal non‐recoverable taxes, as well as GUMAs contribution in the MEM. ± Bolivia: Total average prices are directly obtained from the CNDC10, from the table that shows the average monomial prices of the Bolivian system for 2003. It also shows generation (energy and power) costs) and transmission tolls. No distribution or other charges are included since the only two big consumers are directly connected to high voltage. Taxes and contributions include Transfers 3%. ± Brazil: Total average prices are obtained from ANEEL11, for each region in Brazil. Generation cost included relates to average Rates for generating companies’ agreements. Transmission cost is the average of transmission system charges approved by ANEEL for non‐regulated users12 Distribution Rates to be applied to non‐regulated consumers connected to each of the distribution systems13 for various voltage levels are set by ANEEL. Taxes include the 10% non‐recoverable portion of ICMS (1.8%). ± Chile: Two Rates are shown since there are two clearly differentiated systems: The Central Interconnected System (SIC) and the Norte Grande Interconnected System (SING), where big consumer are concentrated, specially mining. Total prices refer to average free prices included in CNE’s reports. Generation and transmission charges for each of the systems (SIC and SING) refer to node prices obtained from CNE14 reports. The difference between generation and transmission charges and total free market price relate to sub‐transmission costs and other costs not specifically described. ± Colombia: Total price was taken from the information regarding energy prices for non‐ regulated users available on ISA’s15 website. Generation and commercialization average price refers to average negotiated in the agreements entered into with non‐regulated users, according to the report of the Wholesaling Energy Market 16 for December 2003. Transmission charge is the regulated value as of December 2003. The distribution charge refers to Level 4 distribution value. “Others” include restriction costs, losses and payments to operation, regulation and control agencies. Taxes and contributions include a 20% contribution, but national or municipal taxes are not included. ± Ecuador: Average total prices for big consumers are obtained from Ecuador’s electric sector statistics published by CONELEC17. Generation prices refer to energy, power and PPAs published by CONELEC. The values of the remaining of components including transmission were taken from the price structure for distributors and big users published by CONELEC18 ± México: Prices were taken from the monthly charge information published by the Federal Electricity Commission CFE19. Generation, transmission, distribution and other costs are estimated using the same proportion as in the prior survey wherein generation and transmission represent 81.49% and distribution and others
29 represent 18.29%. ± Paraguay: Total prices are obtained from the Rates published on the National Electricity Administration's Rate Listing20. Generation and transmission prices are obtained from the Rates charged to Very High Voltage clients. Distribution and other prices are obtained from the difference between High Voltage and Very High Voltage Rates. ± Peru: Free prices negotiated by big consumers as of December 2003 (generation and main transmission) are obtained from OSINERG’s Electricity Free Market report dated December 2003, detailed by voltage levels at Very High Voltage (MAT), High Voltage (AT) and Medium Voltage (MT) 21. Average price of main transmission is obtained from the theoretic price chart, PCSPT variable (unit toll charge for connection to the transmission main system) ± Uruguay: Prices are calculated based on Rate Listings published by the UTE22. Rates G.C.5 – Big Consumers and Extra High Voltage Rates are selected out of the Rate Listing. Generation and transmission prices are obtained form Extra High Voltage Rates, and distribution and other prices are obtained from the difference between GC‐5 Rates and Extra High Voltage Rates. Taxes are 3% CONFIS. ± Venezuela: Two Rates are shown due to the difference between the Rates applied in the Guiana (where Big Consumers are concentrated) and the Rates in the remaining of the country. Guiana Rates are reported by EDELCA on CAVEINEL’s23 website and refer to Rates for big consumers connected to the High Voltage system. Consequently, they include generation and transmission costs. Rates in the remaining of the country are regulated and obtained from the resolutions issued by the Ministry of Mines and Energy24.
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CHAPTER IV. RESULTS AND CONCLUSIONS 4.1 PRICES 2003 Table 4.1 summarizes the latest price results as of December 2003. The last chapter of this report presents a description for each of the countries, their electric systems, normativity and detailed methodology for obtaining prices for large energy consumers. The table presents a comparison of the rate structure composition applicable to related industries at voltage levels above 60 KV. The main conclusions or the results obtained are: For total prices Electricity prices paid by large consumers in Colombia are lower than those paid in Ecuador or Mexico, and higher than the remaining eight countries considered in the study. Even though Venezuelan (Guayana) prices and Argentinian prices continue being the lowest of the countries studied, it is necessary to bear in mind that they are the product of the following specific characteristics: In the case of Argentina, their prices are explained because of the strong devaluation of the Argentinian peso that took place in the year 2002 and a later freezing of rates in pesos. These measures, despite the fact that they reduced two thirds of electric energy and natural gas rates, have affected the ability and expansion of electric systems as well as natural gas, which is reflected in the rationing of electric energy. In the case of Guayana in Venezuela, prices reflect geochartic sales of having a large industry very close to hydraulic generation plants at the Central de Gurí. Transmission charges are minimal and there are no distribution costs. Guayana does not have a market for setting prices. Table 4.1 ENERGY PRICE MAKEUP BY VOLTAGE LEVEL Country Generation Transmission Distribution Others Taxes Total Change Rate Ecuador 3 Mexico 4 Colombia 5 Chile (SING 6 ) Perú 7 Chile (SIC 8 ) Brazil 9 Venezuela 10 Bolivia 11 Paraguay 12 Uruguay 13 Argentina 14 Venezuela (Guyana 15 ) Figures in USD$/KWh
33 1 None of the country is included recoverable taxes such as VAT. They only include non‐recoverable national taxes. 2 End of the month exchange rate for the dollar in each country. Notes specific for each country: 3 Ecuador: Includes 10% for FERUM tax. Does not include taxes which vary from municipality to municipality, like garbage collection tax that may be as high as 10 % and the public lighting tax. 4 México: Does not include 15 % VAT. 5 Colombia: Under taxes, includes 20 % for contributions and stamp tax of 1.5 % which is shared with suppliers. Under other charges it includes charges for: restrictions, CREG, CND, SSDD, MEM. generation, and FAER transmission charges. It does not include public lighting tax (0‐15%) nor Stamp Act that vary according to each municipality. 6 Chile (Interconnected System of the North) Prices as of September, 2003. Does not include 19 % VAT. 7. Peru: Includes taxes for the CAMISEA project under the item "Others". No Does not include 19 % VAT. 8 Chile (Interconnected 9 Brazil: Prices as of October 2003. Includes an average amount of nonrecoverable 10 % tax and 18 % ICMS. 10 Venezuela: Does not include 16 % VAT nor municipal taxes. 11 Bolivia: Includes 3 % transference Does not include 13 % VAT. 12 Paraguay Does not include 10 % VAT. 12. Paraguay: Does not include 10% VAT 13 Uruguay: Includes 3 % COFIS tax Does not include 23 % VAT. 14 Argentina: Includes $3/KWh tax for the subsidiary fund and 0.6% for Law 2368. Does not include: 27% VAT, municipal taxes (0‐15%) and provincial taxes (0‐3%)
central system SIC) September, 2003. Does not include 19 % VAT. 34 15 Venezuela (Guayana): Industry in the region of Guayana is supplied by EDELCA and is connected directly to high‐voltage, for this reason it is not considered for distribution charges. Does not include 16 % VAT. Prices in Uruguay, Paraguay, Bolivia, Venezuela (excluding Guayana) and Brazil are in the range of 2 to 3 US$/Kwh. In other words, a large consumer in these countries can pay between 43 to 66 % of the price that large consumer pays for electric energy in Colombia. In the third group, prices range between 3.5 US$/Kwh and 4.7 US$/Kwh and include the countries of Chile, Perú and Colombia. The highest prices found are those of Mexico and Ecuador with rates above 5 US$/Kwh and 6 US$/Kwh, respectively. With regard to generation and transmission prices Adding together the prices of generation and transmission, the price in Colombia is comparable to those of Chile and Peru. The lowest with respect to Mexico and Ecuador, and the highest with respect to countries like Brazil, Venezuela, Paraguay, Bolivia and Uruguay. Considering only the generation component, excluding Mexico in Ecuador, the prices in this activity in the countries considered for the study are below 3 US$/kwh. Excluding Argentina, the lowest price found is Venezuela in Guayana and Brazil with 1.77 US$/Kwh. The price for generation in Colombia is higher than that of Venezuela (Guayana), Uruguay, Paraguay, Bolivia and Brazil. The price for generation in Brazil is 29 % lower with respect to the generation price in Colombia. With regard to transmission, the highest prices belong to Andean countries, Perú, Colombia and Ecuador, with amount ranging near 0.6 US$/Kwh. The price of transmission in Colombia with respect to Brazil and Mexico is higher by 66%. Figure 4.1 COMPARISON OF POWER GENERATION PRICES AND FINAL PRICES FOR INDUSTRY BILLING Figure 4.1 is a comparison of the generation prices and the final rates for large consumers for all countries studied in regular US dollars. Analysis in this in the figure shows the final prices for large consumers in Colombia almost double the prices of power generation. Charges regulated in transmission, distribution and contribution correspond to nearly 50 % of the end price. In Argentina, Brazil and Perú generation costs correspond approximately to 60% of the total price and 40%
35 correspond to other components. In Ecuador and México the power generation component that represents 77% of the total price. In Distribution Prices For the distribution segment detailed information was obtained for only three countries. The largest sum corresponds to Brazil with 0.97 US$/kwh, followed by Colombia with 0.58 US$/Kwh. Taxes Figure 4.2 shows total taxes, broken down into recoverable and nonrecoverable. It is evident that nonrecoverable charges are higher in Colombia with a total of 22%, followed by Ecuador with 10% and Argentina with 8%. Figure 4.2 COMPARISON OF TAXES AND CONTRIBUTIONS The country that pays the most taxes is Argentina with 35% on energy prices. Nevertheless, only eight % correspond to costs, since the industrial consumer can recover 27 % of corresponding VAT. In Argentina, Bolivia, Uruguay and Brazil are large consumer pays between 86% and 94% less nonrecoverable taxes 6 on energy consumption then what Colombia pays. Figure 4.3 TOTAL PRICE OF ENERGY AND NONRECOVERABLE TAXES Nonrecoverable taxes in Colombia are equivalent to 0.80 US$/Kwh and correspond largely to a 20 % contribution, in this back but One of the biggest burden for large consumers in Colombia. 6 VAT paid by industrial consumer energy invoices is a recoverable tax, since it is cross‐linked with VAT sales tax its product.
36 Without energy consumption taxes, energy prices in Colombia would be comparable to those in Chile (SIC) and lower energy prices than in Perú and Chile (SING). 4.2 PRICE COMPARISON FOR 2000 AND 2003 In the following charts you can see the majority of countries in the study for the year 2000, improved competitiveness in energy prices. However, Colombia showed no major changes while Venezuela, Brazil and Argentina significantly lowered their consumption prices. Figure 4.4 Figure 4.5 ENERGY COMPARISON PRICES BANK FOR 2000 AND 2003, IN US DOLLARS ENERGY COMPARISON PRICES BANK FOR 2000 AND 2003, IN US DOLLARS Year 2000 Colombia: Prices in current dollars, for large consumers suffered modifications in their structure, and in such a way that they diminished by 1.7 %, explained mainly by the drop in other components (restrictions), which grew to 80 %. In another front, generation increased by %, transmission by 10.7 % and distribution by 60 %. Devaluation for the period comprised between December 2000 and 2003 was 33%. Brazil: Prices in current dollars, for large consumers suffered modifications in their structure, and in such a way that they diminished by 23 %, explained mainly by the drop in all components including taxes, which grew to 100 %. Devaluation for the period comprised between December 2000 and 2003 was 60% Argentina: prices in dollars for large consumers showed a decrease of 65 % explained by a strong devaluation in currency between December 2000 and December 2003. 4.3 COMPARISON WITH PRICES IN SOUTH AFRICA As was mentioned at the beginning of this document, current energy prices have been updated in South Africa, since this country is a direct competitor of the mining industry in Colombia in which the electric
37 component is an important issue within its cost structure (in the case of nickel it represents 30 % of the total cost of production). South African information can be updated permanently with the monthly reports with ESKOM which offers electric energy service to a great majority of large users. Web page: es.esk www z om.co.za. 27 “International Comparative Analysis of Electricity Prices in Colombian Industrial Sector”. UPME. ANDI. Consorcio Consultores Unidos ‐ Consultoría Colombiana.. February 2002.
38 CHAPTER V
ANALYSIS OF COUNTRIES INCLUDED
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ARGENTINA 5.1.1 MAIN INDICATORS Official Name: Area: Population: Capital City: Currency: Republic of Argentina 2.766.889 km2 38,401,000 inhabitants. Buenos Aires Argentinean peso
41 Tabla 5.1 ECONOMIC INDICATORS for ARGENTINA ECONOMIC INDICATORS 1999 2000 2001 2002 2003 Population (Thousands of Inhabitants) to GDP (Millions of constant dollars of 1995) to Variation (% GDP per CApita (US$) Inflation (%) b It appraises from Change to End Year ($/ US $) b Devaluatin (%) Installed capacity (MW) c Generation of Electric power (GWh) d Demand of Electric power (GWh) d Losses (%) d Energy consumption per capita (KWh) Sources: a. Latin American Association of Integration ‐ ALADI ‐ Information years 1999‐2002. Economical Commission for Latin America and the Caribbean – CEPAL ‐ 2003, Preliminary Report 2003. b. ANDI, Center of Economic Studies based on information of IMF, Economist, Warburg Dillon Read and Journalistic information. c. CAMMESA. Annual Report 2002. Information for 2003. Data herein correspond to the monthly report as of December 2003. d. Commission of Regional Energy Integration ‐ CIER 5.1.2 DESCRIPTION OF ARGENTINEAN ELECTRIC SYSTEM Argentina is one of the first countries in the world realm in having undertaken the restructuring of electric sector, encouraging the competition in the generation and trading of energy. Likewise, one of the few countries where the participation of Big Users as market agents is Argentina. Following there is a brief description of the Argentinean electric system, its regulating framework and the currently applied rates structure. 5.1.2.1 Generation System As of December 2003 the electric sector in Argentina consisting of MEM, and MEMSP of Patagonia system without including self‐producers was cared for by 23,757 MW of installed capacity, with a share of 40% of hydroelectric energy, 56% of thermal energy and 4% of nuclear energy (28). MEM installed power, without considering Patagonia system or self‐producers, by the end of 2003 reached a total of 22,979 MW. TABLE 5.2 POWER GENERATION CAPACITY IN ARGENTINA AS OF DECEMBER 2003 INSTALLED CAPACITY (MW) Thermal Vapor I upset Combined Cycle Gas Hydraulic Nuclear Total MW MEM MEMSP TOTAL
42 a.: Note: The total amount includes 4 MW Diesel. Auto‐producers are not included therein. During 2002 practically all generation projects were completed which had been started some years before, which were projects that consolidated the profile of thermal generation towards the new combined cycles. Energy generated by cycles combined by the end of 2003 was about 27% of the total power generation. 5.1.2.2 Transmission System SADI (Argentinean System of Interconnection) comprises 9,101 Km. of lines of 500 kw, 1,403 Km. of lines of 220 kw, and 11,636 Km. of lines of lesser voltage levels (29). TABLE 3 5.3 LENGTH OF ARGENTINEAN SYSTEM OF INTERCONNECTION LINES. SYSTEM OF IT TRANSPORTS 550kV 220 kV 132 kV 66kV 33 kV TOTAL km High Voltage Distribution Troncal The high voltage interconnection system was divided into seven companies by the time the privatization process took place. The first company corresponds to the System of Transport in High Voltage, TRANSENER which comprises as a whole a 500 kw network and some lines of the Coastline System using 220 kw. The remainder is made by six regional transport companies, which are known as Transport Companies by Trunk Distribution (DISTRO). Each company has an effective independent contract of concession. 5.1.3 REGULATING FRAMEWORK By January 1992 Law 24.065 was enacted, which constitutes the regulating framework of the electric sector in Argentina, together with its regulation decrees, among which the most remarkable are: Decree 1398 of 1992 and 186 of 1995. Decree 1192 of 1992 is also very important as this is the provision whereby CAMMESA was created. Within the framework of provisions set forth in Law 24.065, and in its regulating decrees and resolutions issued by the Secretariat of Energy following that Law, the resulting structure of the electric market presents at this time the following characteristics:
Electric business is divided into the following activities: generation, transmission, and distribution together with traders participation.
Transport and electricity distribution are deemed as public services while the generation activity, under any of its modalities, is aimed totally or partially to supply energy to a public service, will be considered herein as a general interest activity.
Consumers are divided into Big Users and Final Users. The former
become agents of the Electric Market.
The state withdraws from its management role and passes into the role of regulator.
The existence of a term market (MAT) and a " spot " market for the purchase and sale of energy.
Distributors can buy energy from the market at a stable price which is updated on a quarterly basis.
Generators can sell energy to the market through a " spot " price either hourly or in advance.
The necessary generation to meet the demand requirements is determined as a function of the economic cost of operation of the electric system.
Hourly spot prices are marginally determined in conformity with the costs required to meet the ensuing demand unit.
MEM is opened to exchange operations with the neighboring countries allowing the export or imports of energy through contracts among private companies that comply with the requirements of the regulating framework.
43 The Technical Function of Transport can be provided by any agent of the market.
Distribution and transport activities, due to their monopoly characteristics, constitute regulated activities which additionally require the granting of concessions. However, the expansion of the transport network is subject to mechanisms of the market.
Electric generators should obtain a concession on an exclusive basis if they exploit
hydroelectric stations, while the thermal power stations require an authorization
only to become connected to the network. Electric generators regulation only reaches the issues related to public security and environmental protection.
Participants of some specific stage within the electric chain are not allowed to operated within any other stage in the chain.
Article 30 of Law 24.065 imposes that carriers (either as individuals, or as majority proprietors, and/or as holders of stock packages by means of which they have access to the control of the transport concessionaire company) shall not be authorized to buy or sell electric power.
Independence of carriers is intended to assure the free access by third parties to the network, what should also be guaranteed by distributors whenever they have their capacity of distribution network available.
Competition is stated through a wholesale electric market (MEM) wherein producers, carriers, distributors, big users and traders converge. 5.1.3.1 The Wholesale Electric market (CAMMESA) Article 35 of Law 24.065, Decree 1192 of July 1992 provided the creation of the Administration Company of the Wholesale Electric Market . ‐CAMMESA ‐, (Compañia Adminsitradora del Mercado Mayorista Electrico, S.A. CAMESA) to be in charge of the National Market of Cargo. Its main functions include the coordination of dispatch operations, the responsibility for the setting of wholesale prices and the administration of economic transactions which are carried out through SADI. CAMMESA which is a company of private management with a public corporate purpose. The stock package of CAMMESA is the property of the agents of the Electric Wholesale Market by 80%, while the remaining 20 % is in the hands of the public ministry which assumes the representation of the general concern and of the potential users. This 80 % is integrated into equal parts by the Generating Agents, Carriers , Distributors and Big Users having a 20 % share for each. 5.1.3.2 The Regulating Body ENRE Law 24.065 creates, within the environment of the Secretariat of Energy of the Ministry of Economy and Works and Public Services, the National Electricity Regulating Entity ‐ENRE ‐, which is in charge of preventing the anticompetitive, monopoly or discriminating behaviors, as well as the arising of situations that lead to the abuse of dominating position, the compliance with environmental controls, the granting of certificates of convenience and public need for the expansion of the transport system, the access authorization to the existing transport capacity of new generation plants, and the control of stock holdings. In the field of transport, this law regulates the remuneration and the control of the quality of activities, foreseeing penalties for non‐compliance. ENRE is also responsible for settling the controversies arising between users and concessionaires and among the agents of the wholesale electric market. 5.1.4 RATES STRUCTURE FOR FINAL USERS
44
Rates applicable to final users and big consumers reflect the costs corresponding to processes of each of the links in the chain, power generation, transport and distribution. Costs of Generation For a generator linked to MEM its generation cost is stated by the operation cost plus the cost of transport from its connection node to the market. The farther from the loading center and as less reliable is the bond of transport, the more expensive becomes energy provided from such node. The generator also receives a remuneration for the power placed to the system availability, either under operating conditions or under the cold reservation system. This remuneration has a variable component which is increased if the demand has the risk of not being met in the system. To guarantee the technical operation of the system additional services are also remunerated, such as regulation of frequency and control of voltage. Generators not having any contracts, will sell all their production to the Spot Market, receiving for their production the prices that are effective on an hour to hour basis in the market. When a generator has contracts of supply with a Distributor or with a Great Bigger User, it charges for each hour for its production as follows: If it produces the level of its contract its generation will be considered in the term market. When its production is over or under the values of the contract, differences are traded in the Spot Market as surpluses or deficits settled according to the effective values in the market at that hour. Costs of Transmission Transport, due to its monopoly characteristics, constitutes a regulated activity and it requires in addition, the granting of concessions. Transport is remunerated through fixed charges of connection and of capacity of transport, and variable charges as a function of losses and according to the probability of failure of lines, being a fixed charge, the total regulating amount. Remuneration fixed to carriers also covers operation and maintenance costs for its system. Expansion of the network of transport is subject to the market operations. In that sense, the expansion of transport should be encouraged by its users who should request the expansions to the System of Transport as required, to improve its linking to MEM, becoming liable for the costs of expansions in its influence area. Costs of Distribution An important key for assuring the development of the Market is found in concession contracts granted by the National State to distributors. According to these contracts, the distributor should guarantee adequate supply levels to meet its demand. This guarantee can be procured in the market through term contracts under conditions of quantity and prices freely agreed with generators. That portion of the demand of distributors that is not subject to contractual relationships in the term market will be channeled through a stabilized seasonal price on an every three months basis. Term contracts, in turn, add more backup to future activities of the market agents, offering them stimuli for the expansion of the generation and transport capacity. Seasonal Prices are revised quarterly, to offset the volatility of prices in the Spot Market to end users. Law 24.065, Article 36 determines that the Secretariat of Energy will determine that demanding parties (distributors) pay an even rate that is stabilized every ninety (90) days, as measured on reception points, which shall include what generators receive for the items stated in the preceding parachart herein, and costs of transport between the supply and reception points.
45 Article 40 of Decree 1398 of 1992 defines rates as follows:
Item a) Cost inherent to distribution for each level of voltage that will integrate the rate of concession will be made by the following items: 1. The marginal or economic cost of networks placed to user's disposition, affected by coefficients representing the technical losses associated to the different voltage levels . 2. Operation/maintenance costs, considering as such the inherent expenses to the operation and maintenance of networks placed to users' availability, and 3. Trading expenses, which are included to measurement and administrative expenses, that are related to the attention to users. Item b. Distribution costs will be assigned to the different rates categories keeping in mind: 1. The voltage in which the supply is made, and 2. The modality of consumption of each type of user, and their participation in the load peaks of distribution networks. Item c) The MEM bulk purchasing price will be added to the cost of distribution, taking as reference, the price corresponding to the Spot Market. This purchase price will be multiplied by a factor that represents the technical losses associated to its distribution system, according to the level of voltage of the supply. In the event of buying from the distributor all or one part of the electric power in block, through freely agreed contracts, the price to be transferred according to the rate applicable to end users will be the price corresponding to the spot market. Each distributor will transfer to the end user's rate the price corresponding to the spot market (either that the purchase is made in such an environment or through freely agreed contracts), and/or of contracts transferred in the privatization processes, weighing the proportion that each of these represents in its total purchase. 5.1.5 SUBSIDIES AND TAXES Law 24.065 bans crossed subsidies among users stating in its Article 42 that in no case the costs attributed to services rendered to a user or users' category can be recovered by means of rates charged to other users. The function of granting subsidies in charge of the State is implicit in Article 37 of that Law, where it is stated that generation and transport companies belonging totally or most of it to the national state will be entitled to recover only their operative costs and their total maintenance costs enabling them to maintain the quality, continuity and security of service whose concept and methodology of determination will be established by the Secretariat of Energy. Surpluses resulting from the difference between this value and the price of sale of generated energy, as well as those surpluses resulting between the price of sale of generated energy and the selling price of energy generated by bi‐national entities following their own agreements, or resulting from international interconnections, will integrate a unified fund whose budget will be annually approved by the Congress of the Nation and will be administered by the Secretariat of Energy. That unified fund will be devoted to stabilize, for the period that is determined, the prices to be paid by distributors. The above mentioned secretariat may divide into independent accounts, the resources of the fund, according to their origin and destination, being it possible to establish a system of repayable loans among those accounts. In Article 70 of Law 24.065 the National Fund of Electric Power is organized, which shall be constituted by an overcharge on rates paid by buyers of the wholesale market, that is the distributing utilities and the big users, and with the reimbursements plus their interests of loans made with the resources of the Fund.
46 Secretariat of Energy will have the power to modify the amount of that overcharge, up to twenty percent (20%) in more or in less, according to the economic variations that operate in the industry subsequently to the law effective date. In Argentina there exists a taxes system that are charged to the electric power rates, being IVA the most representative tax burden with 27% (for industry and trade), additionally there are other taxes according to Law 23.681 (0.6%), Municipal tax (which varies from 0% up to 15%) and Provincial tax (which varies from 0% to 3%). Additionally, industry pays a contribution to the subsidiary fund of 3 $/MWh, which is included in the electricity rate. 5.1.6 MARKET OF LARGE CONSUMERS The required levels of power to become a Great User have been reduced from the beginning of the validity of the regulating framework from 5000 kW down to 30 kW. Electric power consumers can purchase under two different modalities, through the distributor of their area (traditional method), or directly from a Generator or well known trader. If the second alternative is chosen, the user should fulfill with the conditions required to enter MEM as an Agent thereof. Big Users in the Electric Market respond to three very defined categories for their consumption level: Bigger Great Users (GUMA), smaller Large Users (GUME) and Big Particular Users (GUPA). GUME and GUPA users are not enabled to operate in the spot market and they should not pay the charge for overhead of the market, as its relationship is established with the distributor, in what concerns to the physical operation of the wholesale market. 5.1.6.1 GUMA Conditions for a user to be considered as a GUMA are:
Having, as minimum, in each physical connection point a demand for power for its own consumption larger than or equal to 1 MW and a consumption of energy equal to or higher than 4.380 MWh a year.
Having hired in the term market (MAT) at least 50% of its electric power demand with Generators or Traders of power generation, complying with the minimum of energy foreseen in the preceding item, or else to have effective agreements with traders of demands covering 50% of their demand. The remainder of the demand can be acquired directly in the market, at the price that is applicable in an hourly manner.
The minimum term for each contract in MAT is one (1) month, however there should always exist an availability of three (3) months under contracts. The minimum term of each agreement of demand trading is twelve (12) months.
Install appropriate measurement equipment that allows the measurement of its demand every 15 minutes and that can be read remotely by CAMMESA.
Having an Outline of Relief of Load for low frequency (cutting relay or an agreement with another GUMA for sharing the cuttings).
Making a guarantee deposit covering the amount to be billed by CAMMESA for three (3) months. 5.1.6.2 GUME Conditions to be complied by a user to become a GUME are as follows:
47 Having in each point of physical connection a demand for power for its own consumption of more than or equal to 30 kW and smaller than 2000 kW (triple rate measurement).
Hiring 100% of its electric power demand with a Generator or Trader duly recognized by MEM.
The minimum term of the contract in MAT should not be less than two (2) quarterly periods.
Not having debts pending with the distributor. 5.1.6.3 GUPA Conditions making a user a GUPA are the following:
Having in each point of physical connection a demand for power for its own consumption of more than or equal to 30 kw and less than 100 kw (simple rate measurement)
Hiring 100% of its electric power demand with a Generator or Trader duly recognized by MEM.
The minimum duration of the contract in MAT should not be less than four (4) quarterly periods.
Not having any pending debts with the Distributor. 5.1.7 ON SUSTAINABILITY OF THE ELECTRIC SECTOR AND RATES OF ELECTRICITY. The Argentinean money exchange crisis at the beginning of 2002, resulted in a strong devaluation that made the Argentinean peso, after having a parity with the US dollar, to reach a value of about $3/US dollar. All electricity rates remained in Argentinean pesos, improving thus the competitiveness of industrial consumers to a large extent, who experienced that their rates in US dollars down to one third of their initial amount. However, this has happened to the coast of the sector generating utilities and of the natural gas producing companies that had a reduction in their incomes in US dollars in a proportionate manner. In consequence, under the current circumstances the Argentinean electric sector is not sustainable, because such so reduced rates, fail to produce signals to assure the expansion of the energy supply in Argentina. At the beginning of April of 2004 an Argentinean government's decision was known in the sense of gradually increasing the prices of natural gas until July of 2005, and the subsequent increases in generation costs will be gradually transferred to big consumers. 5.1.8 INFORMATION PERMANENT SYSTEM Final rates information can be permanently updated as paid by the Great Big Users ‐GUMAs ‐, with monthly reports from CAMMESA that are found in their web site, and supplemented with the quarterly reports of distribution costs of AGUEERA. 5.1.8.1 Methodology to calculate prices of Big Consumers Mean prices of GUMAs are obtained directly from CAMMESA (30). The following chart shows the historical evolution of prices of GUMAs, on a month to month basis during 2001, 2002 and 2003.
48
CHART 5.4 MEAN PRICES OF LARGE USERS (GUMAS) These prices include energy costs, dispatched power, term market, additional energy, reservation power, associate services, transport, reagents and forced generation, components of relieves for loads and credit components to GUMEs. These prices do not include distribution costs, national taxes, provincial taxes , or municipal taxes. 5.1.8.2 Prices for March of 2003 For comparative effects with other countries, specific figures have been taken for the updating herein, as of March 2003 as stated below: By March of 2003, the mean price of GUMAs was $31,76/Mwh, equivalent to 1,134 US$/Kwh (31). This price already has included generation costs, transmission costs and other costs associated to generation services. To the above prices, distribution prices and national taxes should be added. National taxes paid by the industry sector are two: A contribution to the subsidiary fund of $3/Mwh, equivalent to 0,107 US$/Kwh, and 0,6% of Law 23,681. IVA Tax of 27% is not included as this is a recoverable tax.
49 The distribution price is obtained from AGUEERA data, corresponding to the first quarter of 2003 (32). The distribution price was 0,107 US$/kwh for high voltage(500 kw ‐ 132 kw) and 0,464 US$/kwh for mean voltage(132 kw ‐ 380 V). In summary, the mean final prices of GUMAs for March of 2003 were: For High Voltage 0 ((500 kw ‐ ‐132 ): k kw): Monomial Mean Price + Price of Distribution + National Taxes without IVA = (1,134+0,107+0,114) = 1,36 US$/Kwh. For medium voltage (132 kw ‐38 ‐380: V): (1,134+0,464+0,117) = 1,72 US$/Kwh. With the purpose of knowing the applicable rates structure to the biggest Big Users in a more disaggregated manner, separating generation costs, transmission costs, and costs for associate services, the following methodology has been developed: Price of Generation The mean price of generation is obtained from CAMMESA from its monthly reports that include price of energy + price for dispatched power + Term Market (33). The mean generation price was $21.22 /Mwh or 0,758 US$/Kwh for March 2003. Price of Transmission The mean price of transmission is obtained from the Annual Report of 2002 from CAMMESA (34). On page 89 of that report, shows for GUMAS >20MW, a value of transport of $1,80 / Mwh. This value can be used for March of 2003, as in conformity with information from AGUEERA it is correct, as it corresponds to about 6% of the mean monomial price, then for March of 2003, the cost of transport is $1,80 /Mwh, that is 0.064 US$/Kwh. Others The cost for other services including the costs of additional energy, reservation power, associate services, reagents, forced generation, components of relieves for loads and credit components to GUMEs, is obtained as a difference between the average monomial prices of GUMAS and the generation costs and the estimated transmission. This means that for March of 2003, the cost of item “others” is the result of $8,74/Mwh, equivalent to 0,312 cUS/Kwh The following chart shows the main components of the electric power rate for the Big Users of MEM as of March of 2003 Table 5.5 COMPONENTS OF ELECTRIC POWER RATE AS OF MARCH 2003 Level of voltage Generation Transmission Distribution Others Taxes Total High voltage (500 kV – 132 kV) Half Voltage (132 kV ­ 380 V) Taxes do not include IVA tax of 27%, or municipal and regional taxes. The above results are consistent with the information submitted by AGUEERA in the report: "Quarterly
50 rates of distribution per industry", for example, comparing the rates with those of the steel mills sector, there exists a small difference that is due to the municipal and regional taxes that are not included in the previous chart. 5.1.8.3 Prices as of December of 2003 Using the same methodology explained in the above item, the rates of GUMAs have been updated according to available information in the web page of CAMMESA (35). The attained results are as follows:
Mean monomial price of GUMAs was $34,77/Mwh, equivalent to 1,185 US$/Kwh (36).
The price of generation was $23,97 /Mwh or 0,817 US$/Kwh
The price of transport of $1,80/Mwh, that is 0.061 US$/Kwh.
Therefore for December 2003, the cost of “others” is $9,0/Mwh, equivalent to 0,307 cUS/Kwh.
The distribution price was 0,107 US$/kwh for high voltage(500 kw ‐ 132 kw) and 0,464 US$/kwh for mean voltage (132 kw ‐ 380 V). In summary, the mean final prices of GUMAs for December of 2003 were:
For high voltage(500 kw‐132 kw): Mean monomial price + Price of Distribution + National Taxes without IVA = (1,185+0,107+0,114) = 1,40 US$/Kwh. For Mean Voltage(132 kw‐380 V): (1,185+0,464+0,117) = 1,76 US$/Kwh. The following chart shows the main components of the electric power rate for the Big Users of MEM as of December of 2003. Table 5.6 COMPONENTS OF ELECTRIC POWER RATE AS OF DECEMBER 2003 Level of voltage Generation Transmission Distribution Others Taxes Total High voltage (500 kV – 132 kV) Half Voltage (132 kV ­ 380 V)
51 BOLIVIA 5.2.1 MAIN INDICATORS Official name: República de Bolivia Area: 1,098,581 km2 Population: 8,908,000 inhabitants Capital: La Paz Currency: Boliviano Table 5.7 ECONOMIC INDICATORS FOR BOLIVIA INDICADORES ECONOMICOS 1999 2000 2001 2002 2003 Population (Thousands of Habitantes) a GDP (Millions of constant dollars of 1995) a Variation (%) GDP per Capita (US$/hab) Inflation (%) b It appraises from Change to End Year ($/US$) b
52 Devaluation (%) Capacity Installed (MW) c Generation of Electric Power (GWh) d Demand of Electric Power (GWh) d Losses (%) Energy consumption per capita (KWh/hab) Sources: a b c. d. Asociación Latinoamericana de Integración ‐ ALADI‐ information for years 1999‐2002. Comisión Económica para América Latina y el Caribe ‐ CEPAL‐ year 2003, Preliminary Reports 2003. ANDI, Centro de Estudios Económicos con base a información del FMI, The Economist, Warburg Dillon Read and newspaper information. SUPERELE Comisión de Integración Energética Regional – CIER 5.2.2 DESCRIPTION OF THE BOLIVIAN ELECTRICAL SYSTEM T
he electric industry in Bolivia involves activities of power generation, transmission, distribution, commercialization, imports and exports. The new structure or the sector determines the vertical separation of activities concerning power generation, transmission and distribution within the National Interconnected System (NIS). Figure 5.1 STRUCTURE OF THE BOLIVIAN AND ELECTRICAL SECTOR 5.2.2.1 Power Generation System The installed power generation capacity for the Bolivian electrical system as of December 2002 was 1.273 MW, of which 456 megawatts, in other words 36 % corresponds to hydroelectric plant capacity and 817 MW to the thermoelectric plants. La energía generada en el año 2002 fue de 4,190 Gwh con un incremento del 5.5% con respecto a la energía generada en el año 2001. 53 La producción de electricidad está a cargo de las siguientes empresas: CORANI, GUARACHI, VALLE HERMOSO, COBEE, RIO ELÉCTRICO, HIDROELÉTRICA BOLIVIANA, SYNERGIA y la compañía Eléctrica Bulo Bulo. The following table shows the power evolution for installed energy generated by the electric system in Bolivia during the period of 1970 ‐ 2002. Table 5.8 EVOLUTION OF INSTALLED POWER AND GENERATED ENERGY 1970 1975 1980 1985 1990 1995 2000 2001 2002 MW GWh 5.2.2.2 Power Transmission System The power transmission company Transportadora de Electricidad TDE is a privately owned monopoly by means of transmission lines, from electrical power plants to the distribution points according to needs. The following table for the high power lines for the Bolivian system. Table 5.9 LENGTH OF HIGH POWER LINES kV 69 115 230 TOTAL km 1.436 1.418 541 3.395 Figure 5.2 CHART OF THE INTERCONNECTION SYSTEM The Main Interconnection System is part of the National Interconnected System 230 kV, 115 kV and 69 kV high power lines going to the following substations for purchase and sale of electricity in the electrical wholesale market. Oruro ‐ Sub stations: Vinto 69 kV, Vinto 115 kV,Catavi 69 kV
54 Chuquisaca ‐ Substations: Aranjuez 69 Kv Potosí ‐ Substations: Potosí 69 kV, Punutuma 69 kV, Don Diego 69 kV La Paz ‐ Subestación Kenko 115 kV Santa Cruz ‐ SubStation Guaracachi 69 kV Cochabamba ‐ Substations: Arocagua 115 Kv, Valle Hermoso 115 kV, Coboce 115 kV, Chimoré 230 kV. 5.2.2.3 Power Distribution System D
istribution of electricity at the consumer centers is done maily by ELECTROPAZ S.A., EMPRELPAZ y SEYSA in La Paz, CRE LTDA. in Santa Cruz, ELFEC S.A. in Cochabamba, ELFEO S.A. in Oruro, CESSA in Sucre and SEPSA in Potosí. As of December 2002 the number of consumers was 965,817 and electricity sales hit 2977.19 GWh. 5.2.3 REGULATORY FRAMEWORK The new regulatory framework proposes that the activities performed by the Bolivian electrical industry and its development must be performed by private initiative, the State assumes full responsibility of formulating policies and approving standards and the Electrical Superintendance acts as the regulating body. The legal framework for electrical industry activities in the Republic of Bolivia and specifically in the Bolivian Wholesale Electrical Market comprises: Electricity Law N° 1604 of December 21, 1994, which defined the principles, the institutional organization, the operational structure and the economic model for the Bolivian electrical sector. These regulations establish the operational and economic treatment of the electrical market, in a broad manner complementing the electrical law. The Operational Standards committee on load dispatch and approved by the Electrical Superintendance in order to set detailed procedures for the coordination and administration of the Electrical Market. 5.2.3.1 The Wholesale Electrical Market. This market is made up of Generators, Transmitters, Distributors and nonregulated consumers, performing operations of purchase, sales and transportation of electricity in the National Interconnected System (NIS). By decree form the Electricity Law, the administration of the wholesale electrical market is the responsibility of the National Committee for Load Dispatch (NCLD). It has been assigned the tasks of planning an integrated operation with with NIS in order to satisfy demand by means of a safe, reliable and cost‐effective operation, for dispatching loads in real‐time, with the least cost and determining transactions. 55 5.2.3.2 The Regulating Entity. SUPERELE The Superintendance of Electricity is the public entity, with national jurisdiction, technical management, administrative and economic autonomy. It was created by means of Law 1600 of 1994 (LEY SIRESE) as part of his Sectoral Regulation System, in order to regulate, control and supervise the activities of the electrical sector. The Superintendent is designated by the President of the Republic, from three candidates presented by two thirds votes by members of the Senate. The superintendent is elected for a five‐ year period, unable to be reelected until five years have gone by. The superintendency of electricity started activities in January 1996. 5.2.3.3 Rate Structure for End Users The principles and concepts for determining electricity prices are the following : Generator to distributor prices (node prices) Node prices are approved every semester by the Superintendency of Electricity. Once the period of validity has terminated and while new prices have not been approved, the old ones and their corresponding formula as continue as valid. The generator to distributor prices are calculated as maximum prices for each node of the Main Interconnection System. The maximum in node prices are comprised of: a) the peak power price and b) the price of energy. The basic peak power price is determined by calculating the yearly investment and the fixed annual operation, maintenance and administration costs corresponding to the most economic generating unit providing additional power during maximum peak hour demand for the system. This figure is increased by a percentage resulting from the consideration of the theoretical nonavailability of the system. The current calculation is performed by applying the rate of the current update stipulated in the Law of Electricity. The basic price of energy is calculated as the average of the marginal costs of the short‐term energy system times the projected demand amounts, updated with the stipulated rate in the Law of Electricity. The update rate is 10 % of the annual real term. This rate may only be modified by the Ministry, by means of a duly fundamented administrative resolution. The new rate may not differ by more than two (2) percentage points from the current rate. Maximum Transmission Prices These prices are calculated by considering the total cost of transmission, which comprises the yearly investments and the costs of operation, maintenance and administration of an economically adapted system of transmission. These prices are set every semester by the Superintendency of Electricity.
56 Maximum Distribution Prices These prices are set by the basic rates and the indexation formulas. Base rates are calculated by taking into account the supply costs and it is worthwhile pointing out electricity purchase (energy, power and tolls), operation costs: maintenance, administration, taxes, depreciation and profits. Base rates are indexed monthly by a calculation of formulaes which reflect not only the distribution variation costs but also the increases in efficiency and a direct transfer of variations in energy and tax purchase costs. Maximum distribution prices are approved every four years. The following table shows the average electricity rates as of November 2003 by company in the National Interconnected System and by consumption sector. Table 5.10 AVERAGE RATE FOR END USERS NOVEMBER 2003 Category/Company ELECTROPAZ Residential General Industrial Mining Illumination Public Others Average CRE ELFEO CESSA SEPSA ELFEC 5.2.4 THE LARGE CONSUMER MARKET L arge consumers with installed capacity of over 1 MW can be constituted as nonregulated consumers (NRC) and operate as agents of MEM. To be constituted as a nonregulated consumer you must first obtain authorization from the Superintendency of Electricity and comply with technical requirements on the CNDC. Nonregulated consumers may sign supply contracts directly with generators or distributors, freely agreeing on price terms as far as quantities of energy and peak power required. Nonregulated consumers are not required to sign supply contracts. If a nonregulated consumer does not have a supply contract for all or part of its demand, it may purchase its energy needs in the spot market, after signing an adhesion contract with the CNDC, establishing payment guarantees and other conditions defined by CNDC. The two largest electric energy consumers in Bolivia are: Inti Raymi, mining company located in Oruro, with a maximum demand of 23.1 MW. The Vinto S.A metallurgical complex, in Oruro with a maximum demand of 3.8 MW. 5.2.5 THE PERMANENT INFORMATION SYSTEM I
nformation continuously updated including the end rates paid by larger consumers in Bolivia with annual reports to CNDC may be found at: www.cnb.net/cndc/. 5.2.5.1 Price Methodology for Large Consumers Average prices for large consumers are obtained directly through CNDC38. The following table 57 shows the monomial prices of the Bolivian system for the year 2003. These prices do not include distribution costs, or national, local and municipal taxes. National taxes paid by industry are the following: A VAT tax of 13 % and a transaction tax of 3 %. The VAT tax is recoverable. For the two largest consumers, information may be obtained directly from the table. The total price for Inti Raymi during 2003 was US$ 2.25/Kwh, while for CM Vinto it was US$ 1.88/Kwh. Generation price corresponds to the sum of energy and power prices. For Inti Raymi it was US $1,96/kwh and for CM Vinto it was US $1.66/Kwh. Table 5.11 AVERAGE MONOMIAL PRICES (US$/MWh) Energy Powers Toll Monomial CRE ELECTROPAZ Retirements FOR Electropaz Retirements FOR Elfeo Total Cobee Arocagua Beautiful V. Coboce Chimore Total Elfeo Vinto Catavi Total Elfeo INITI RAYMI CM VINTO S:A You buy node Potosí Total Electric River Sacaca Ocuri Potosí Don Diego Complex Karachipampa Total – Sepsa Mariaca Sucre Total Cessa Coboce Total MEM Transmission prize for Inti Raymi was US $0.29/kwh and for CM Vinto it was US $0.22/Kwh. 5.2.5.2 Prices for 2003 For 2003 the average rates for the two largest consumers were: Company and Level of Voltage Generation Transmission Distribution Others Taxes Total Inti Raymi ( 110 kV) CM Vinto (69 kV) Figures in USD$/KWh Source: CNDC. Operational Results for National Interconnected System Year 2003 13 % VAT tax is not included in the taxes item
58 BRAZIL 5.3.1 MAIN INDICATORS Official name: Federal Republic of Brazil Area: 8,511,965 km2 Population: 177,400,000 Capital: Brasilia D.F. Currency: Real
59 Table 5.12 ECONOMIC INDICATORS FOR BRAZIL Economic indicators 1999 2000 2001 2002 2003 Population (Thousands of inhabitants) a 168,495 170,693 172,891 175,084 177,400 GDP (Millions of constant dollars of 1995) a Variation (%) 710,596 738,715 749,506 763,750 764,500 GDP per Cápita (US$/hab) Inflation (%) b It appraises from Change to End Year ($/US$) b Devaluation (%) 1.00 3.96 1.46 1.90 0.10 4,217 4,328 4,335 4,362 4,309 8.9 6.00 7.70 12.50 11.00 1.79 1.96 2.32 3.53 2.89 9.30 18.67 52.27 ­18.23 73,712 76,255 82,458 86,940 Installed capacity (MW) d 68,181 Generation of Electric power (GWh) d 334,716 348,909 328,509 344,644 ND Demand of Electric power (GWh) e 292,677 283,257 290,466 ND 307,529 Losses (%) d 12.55 11.85 15.5 15.7 ND Energy consumption per capita (KWh/hab) 1,737 1,802 1,638 1,659 ND Sources: a Asociación Latinoamericana de Integración ‐ ALADI‐ information for years 1999‐2002. Comisión conómica para América Latina y el Caribe ‐ CEPAL‐ year 2003, Preliminary Reports 2003. b ANDI, Centro de Estudios Económicos con base a información del FMI, The Economist, Warburg Dillon Read and newspaper information. d. Capacidade Instalada : Capitulo 9, Anexo A, Tabela 1 Balango Energético Nacional 2003 Electrobas, Boletin Anual 2000/2001/2002 5.2.2 DESCRIPTION OF THE BRAZILIAN ELECTRICAL SYSTEM In 1993, the Brazilian electrical system and began a new phase as a result of Law 8631 of 1993, looking for more security for the agents involved in commercial electric energy transactions. Nevertheless, two years later, when the constitutional definition of concessions and permits was regulated, the necessary conditions were established to reorganize the sector, making it possible to privatize electric services. In 1996, the Brazilian government developed a new electric sector model. This model introduce competition in the power generation, distribution and commercialization segments. At the same time, the Regulatory Agency was created for the electric sector. It was named ANEEL, which was in charge of establishing regulatory basis for the new electric markets. The Brazilian electric sector, as it is in most countries, was conceived under a model of vertically
60 integrated companies in development of the different sector activities. With the changes in the Brazilian electric sector, it was proven that there was significant progress in the volume of investments, as well as the presence of companies with different organizational structures. The restructuring broke the vertical company's scheme owned by the State and divided the companies according to their activities (generation, transmission and distribution). The different market agents, associated with generation, transmission and distribution activities, participate in the wholesale electric energy market (MAE) by managing ASMAE and under regulations dictated by ANEEL (National Electric Energy Agency). The MAE was in the process of initiating in the year 2000, with a gradual transition and establishing of rules and regulations to be governed by the market. The following chart shows the composition of the current electric sector agents. Chart 5 5.3 PARTICIPATING AGENTS IN THE BRAZILIAN ELECTRIC SECTOR MAE functions shall be assumed by the CCEE according to Law 10.848 of March 15, 2004. Operationally, the country has been divided into the following regions: North System: Estados de Rondonia, Acre, Amazonas, Roraima, Pará, Amapá and Tocantis. Northeast System: Maranhao, Bahía, Piaui, Ceará, Rio Grande do Norte, Paraiba, Alagoas, Pernambuco and Sergipe. West Central System: Mato Grosso do Sul, Mato Grosso, Goias and Distrito Federal South System: Paraná, Santa Catarina and Rio Grande do Sul. Southeast: Minas Gerais, Espirito Santo, Rio de Janeiro and Sao Paulo The following chart the present the physical location of each of the subsystems, along with their principal characteristics.
61 Chart 5.4 BRAZILIAN ELECTRIC SYSTEM DIVISION BY SUBSYSTEMS The Brazilian power generation system is the largest in the region with an installed capacity of 87 GW as of December 2003. 78 % of the installed capacity comes from hydroelectric plants, thermoelectrics represent 20 % and the remaining 2 % is generated by nuclear plants. In spite of the fact that Brazil's hydroelectric plants are found in the seven large basin regions throughout the huge country, there is no optimum use of the complementary provisions of the different basins, because the interconnection levels among regions do not allow interchanges between systems. There is interconnection with Paraguay in 6370 MW, with Argentina in 2000 MW, and with Uruguay in 70 MW. The interconnection with Venezuela of 200 MW serves an isolated northern region of the system. The next table summarizes the current power generation capacity installed as of December 2003, according to reports by ANEEL on April, 2004. Table 5.13 INSTALLED POWER GENERATION CAPACITY FOR 2003 TYPE QUANTITY CAPACITY IN MW CGH: Central Generating Hydroelectric EOL: Eolian PCH: Small Central Hydroelectric UHE: Hydroelectric factory UTE: Thermoelectric factory UTN: Factory Nuclear Water heater TOTAL 86,941 5.3.2.2 Transmission System
62 The Brazilian electric interconnected system currently links five operational subsystems.
South and southeast, Central‐Western, next to the hydroelectric plant at Itaipú, the main plant in the system.
Southeast
Central‐Western and North.
North and Northeast. The basic transmission grid is composed the lines with current equal to or higher than 230 Kv. Until now, in Brazil the vast amount of electricity has been transmitted from 138 KV up to 760 KV which was a transmission line built for exclusive use between Itaipú/Ivaipora that is not part of the national transmission system and was focused on facilitating energy transportation purchased from Paraguay. 5.3.2.3 Power Distribution System There are currently 47 distribution companies in Brazil, which are responsible for 98 % of the energy supplied to the market. 5.3.3 REGULATORY FRAMEWORK R
egulations are designed so that expansion will take place by means of demand from distributor contracts and large consumers. The transmission expansion system evolved from a centrally planned procedure and from bids to execute works within the plan. The central mechanism to assure wholesale market of supply is the obligation that regulations impose on distributors to enter into contracts for more 85 % of their energy demand, with a two‐ year anticipation. The remaining 10 % must be contracted without any term limits. 5.3.3.1 The National Agency of Electric Energy –ANEEL ANEEL is the regulatory entity in Brazil. It is an entity dependent of the Ministry of Mines and Energy, created by law 9,427 of December 26, 1996. Its principal functions are to regulate and watch over power generation, transmission, distribution and commercialization of electric energy, attending claims from agents and consumers, maintaining equilibrium between the parts for the benefit of all; mediating conflicts of interest among the sector agents and their consumers; awarding, permitting and authorizing installations and energy services; guaranteeing fair rates; watching over the quality of services; demanding investments; stimulating competition among market operators and assuring globalization of services. Its mission is to provide favorable conditions for the energy market to develop in Brazil, with equilibrium between agents and the benefit to society. 5.3.3.2 Electricity Market–MAE­ MAE is the wholesale and electrical market where energy is purchased and sold by means of 63 bilateral contracts and short‐term negotiations. Its objective is to effectively guide the market and promote its continuous development. It was instituted in August of 1998 my Market Agreement, which regulates commercial activities of the wholesale market. Making part of the agreement for Market Rules and Procedures. The Rules are regulate price formulation in MAE, the mechanism of reassigning energy, comprising submarkets and price differentiation, the operation of thermal electric plants, international transactions, sanctions to market agents and standards on energy metering. The submarkets in which MAE subdivided are:
Southeast Area
South Area
Northeast Area
Northern Area
Central ‐ Western Area The procedures establish working standards to implement Market Agreements. The gradual implementation of the spot market was set after resolution 290 of August 3, 2000 in ANEEL. The government will soon publish regulations that will transform the MAE in the chamber of commerce for electric energy ‐CCEE. The CCEE will not only supervised auctions and act as a liquidation agent, just like the MAE does now, but will also handle contracts and supervised auctions for new generation capacity. All energy sales must be done through auctions at CCEE. The following are some characteristics of the Brazilian market. Grid Access Consumer direct access to the market is in the period of transition, stipulated by federal Laws 9,074 of 1995 and 9,648 of 1998 that foreseen a market liberation of the so‐called territorial captive market for distributors. As of July 2000, consumers with a load equal to or higher than 3 MW surfaced at equal voltage levels or higher than 69 kV, may access grids and by energy from any supplier. Regulations and charges of Transmission System Transmission agents are public service entities with power grids equal to or larger than 230 KV, and have concession contracts granted by the Federal Union and represented by ANEEL. There are currently 20 concession transmission companies and the main part of the basic grid is operated by ONS, by means of service contracts belonging to the Electrobas System. It is important to mention that transporting agents are not part of MAE. On another front, any agent who buys or purchases energy and has to make use of the Main Grid has a right to do it based on Free Access Criteria to the Main Grid. All transporting companies have the obligation to sign usage contracts for the transmission system and connection contracts with those interested agents in the free access systems, specifying general conditions for the service contract, among which are the following: The amounts of usage
64 in peak hours and regular hours, with a capacity demand of the connection, the metering mechanisms, and the quality and penalization characteristics. ANEEL establishes, by resolution based on proposed amounts by transporters, the payment for the installation of the Basic Grid. Payment must cover operation and maintenance costs and the investment. These amounts are reviewed annually. Resolution 281 of October 1, 1999 establishes the general conditions for contracting transmission and distribution services at voltage levels equal to or greater than 69 kV, including users charges and connection to the systems, as the following subsections show. Additionally, ANEEL establishes by resolution 282 of 1999 that the transmission rates for the system are to be shared between generators and dealers (50%‐50%). Charge per Use Articles 13 to 17 of ANEEL Resolution 281 establish procedures related to charges for use, which should be sufficient for rendering services, including the working costs for ONS (national electric system operator) and the compensation for the deficit or surplus of the prior year. ANEEL Resolution 281 establishes general access conditions, including the use and the connection to the electric energy transmission and distribution systems, October 1, 1999. The methodology is based on node rate calculations, which bears in mind the sensitivity of line flows regarding injected power or delivered to a certain node. Usage quantities are determined as the maximum amount concentrated and the effective amount used. Charge per Connection ANEEL article 18 of resolution 281 establishes that connection charges for the transmission and distribution systems are the responsibility of the user, and as such, are subject to free renegotiation between the parties. Connection charges must cover the incurred costs for the connection project, including the construction, fitting, metering, operation and maintenance of the connection point. Penalty Charges (Using a Larger Load than Contracted) In the event that the amount used exceeds 5% of the quantity contracted, there shall be a penalty rate charge was figure is three times the regular rate for the period and established (Peak and off peak). 5.3.4 ENERGY CONSUMPTION T
he following table shows annual energy consumption for the consumer sectors for the period comprised from 1999 to 2002. In 2002, the industrial sector was the principal consumer with 44% of energy demand, followed by the residential sector with 25%, the commercial sector with 16% and others with 15%. 65 Table 5.14 ANNUAL CONSUMPTION BY SECTORS FOR THE PERIOD FROM 1999 ­ 2002 (GWh) Residential Industrial Comm Rural room ercial Total 1999 2000 2001 2002 Source: www.abradee.com.br; Asociación de Empresas Distribuidoras de Brasil. 5.3.5 RATE STRUCTURE FOR LARGE CONSUMERS A ccording to current legislation, after July 2003, ANEEL will be able to lower the mentioned limits; however currently (October 2003) these limits remain the same. The final prices for electric energy for nonregulated users depend largely on contracted prices and a small percentage on the spot market prices. The final rate is comprised of the costs of: Generation, transmission, distribution and commercialization; the commercialization costs are included within the distribution rate. 5.3.5.1 Generation prices: Generation prices are negotiated by agents involved in the negotiation. 5.3.5.2 Transmission Cost The transmission service costs for electric energy are comprised of a charge for each agent and an additional charge to pay the National Operator of the Electric System. The approved charge for each transporting company is defined by the Agencia Nacional de Energía Eléctrica (ANEEL) and the ONS which is a private institution in charge of operating the national electrical system; this agency determines how produced energy will arrive at the consumption centers. Total charges for the national transmission system must be divided between users of the basic transmission grid, which are: The Generators, Free Users, distributors and electric energy import export agents. The way these costs are divided is provided by ANEEL resolutions that establish the charges to be paid by the different user agents for the basic transmission grid. 5.3.5.3 Distribution Costs ANEEL establishes system usage rates for electric energy distribution to be applied to free consumers and generators connected to this system. 5.3.6 TAX ON MERCHANDISE CIRCULATION AND SERVICE RENDERING (ICMS) T
his is the state tags created by the federal Constitution of Brazil, sanctioned on October 5, 1988, and administrative and received by the different States, for this reason each State is free to set the amount and determine any exemptions. This tax applies to all commercialization stages, 66 starting from the manufacturing or importing up to the end consumer. The seller in each case acts as the retention agent – any exemptions, incentives and reductions are established by agreements and signed by the States of the Republic and the Federal District, for any special treatment applied. Proportional fees are set according to the essential criteria of the difference merchandise. There are currently three levels of proportional fees: Proportional fees of 7% and 12% are applied, among others to various food products of popular consumer value and some agricultural and industrial items, while certain proportional fees of 20%, 25% and even 30% are applied to alcoholic beverages, tobacco, cigarettes, perfumes and cosmetics, furs, firearms and ammunition, leisure vessels, etc. Proportional fees for electric service vary between 17% and 25% and are applied differently for each state, 18% being the most common fee applied electric bills for large consumers. Recovery of ICMS invoiced on the electric bills that depends on how much the productive process weighs on energy consumption for each company. Therefore the recovered value varies from case to case, but according to estimates from and external consultant hired to perform industrial surveys on electrical consumption in Brazil, it is estimated that in average 90% of ICMScan be recovered. 5.3.7 SURVEYS F
or the present update a Brazilian consulting company was hired to perform the surveys for the industrial sector and the information was complemented with additional items obtained through companies affiliated to the chamber of large energy and gas consumers of the ANDI. Information on 33 companies was obtained, 13 of which are connected at a voltage equal to or higher than 138 KV. The surveys cover the sectors of mining, ceramics, breweries, metallurgical, metal, textile, sugar and paper. The following table describes the basic information for the companies who answered the surveys. Table 5.15 No. Company City COMPANIES SURVEYED State Region Voltage KW 1 2 3 4 5 6 7 8 9 10
11
12
13
14
15 67 16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
The surveys found variations in electricity rates offered to industry, depending on their location and the voltage level supplied. The average found for companies connected at a voltage level of 138 KV or higher was US $2.99/KWH. The average for six aluminum, nickel and metal mining companies was US $1.80/KWH. These figures contrast with the statistics issued by the consultant and obtained from ANEEL with regard to the period from January to August 2003 and shown in the following tables: TABLE 5.16 and 5.17 AVERAGE RATES PER CONSUMPTION CLASS You rate Médias for Classe of Consumption ­ Aneel Regional and Brazil (R$/MWh) You rate Relating ao anus 2003 ­ Janeiro to August Classe of Consumption North Northeast Southeast Sul Center­west Brazil Residential Industrial Commercial Rural To be able to Public Ilumincao Pública Public Service Own Consumption Total average rates
68 You rate Médias for Classe of Consumption Regional and Brazil (US$/kWh) You rate relating ao anus 2003 Janeiro to August Classe of Consumption Cámbio 1 US$/R $ North Northeast Southeast Sul Center­west 2.85 Brazil Residental Industrial Comercial Rural Capacity Public Public lighting Public service Own consumption Total average rates The average rates for the industrial sector (for all voltage levels), in the period comprised between January and August 2003, for the whole country was US $0.038/ Kwh. This figure permits the conclusion that the average amount found in the surveys is reasonable, since for levels of high‐ voltage the average rates must be below the average for the country, as pointed out here. An important point of reference for the high‐voltage rates is the average for the industrial sector farther north region, since it is a region where a large number of great industrial consumers are situated. The average rate (US$0.024/ Kwh ) for this region is the lowest. Nevertheless, this amount is higher than that found in the surveys performed on the six mining companies (US$0.018/kwh). 5.2.5 THE PERMANENT INFORMATION SYSTEM Y
ou can permanently update information on rates paid by the Large Consumers in Brazil, with the information available on the ANEEL web page, by doing the following: 5.3.8.1 Methodology for viewing prices for Large Consumers. Using ANEEL, there is information for each of the regions of Brazil and for each consumer sector the average energy rates in real/kwh and in US$/kwh. 5.3.8.2 Prices for March 2003 For comparative effects of the study as of March 2003, use the reference rates for the industrial sector, north region, chose January to August period, which has pointed out earlier was US$2.4/Kwh. Rate components. Generation Costs In order to find out the rate structure applicable to Large Consumers, broken down further, separate generation costs, transmission costs, and distribution costs, you may use the following methodology: Generation prices can be obtained from contracts between generation and distribution companies 69 or between distributors. The amounts shown on the following table are for the companies with the most users during the year 2002, however the information presented corresponds to contract in force until 2003 and in some cases they extend until 2004. Contract information has energy demand prices, in other words binomial rates. For comparative effects, mononomial rates have been converted to their equivalent amount using a typical load curve (factor 0.83) or the industrial sector. Table 5.18 REGION ENERGY CONTRACTS BETWEEN MAIN BRAZILIAN COMPANIES SALESPERSON BUYER LEVEL SUPPLY IT DEMANDS ENERGY MONOMIAL RATES R$/kW R$/MWh US$/kWh NORTH NORTH NORTH NORTH NORTH NORTH NORTHEAST NORTHEAST NORTHEAST NORTHEAST NORTHEAST NORTHEAST NORTHEAST NORTHEAST NORTHEAST NORTHEAST NORTHEAST CENTER­WEST CENTER­WEST CENTER­WEST CENTER­WEST CENTER­WEST SOUTHEAST SOUTHEAST SOUTHEAST SOUTHEAST SOUTHEAST SOUTHEAST SOUTHEAST SOUTHEAST SOUTHEAST SOUTHEAST SOUTHEAST SOUTHEAST SOUTHEAST SOUTHEAST SOUTHEAST SOUTHEAST SOUTHEAST SOUTHEAST SOUTHEAST SOUTHEAST SOUTHEAST SOUTHEAST SOUTHEAST SOUTHEAST SOUTHEAST SOUTHEAST SOUTHEAST SOUTHEAST SOUTHEAST SOUTHEAST SOUTHEAST SOUTHEAST
70 SOUTHEAST SOUTHEAST SOUTHEAST SOUTH SOUTH SOUTH SOUTH SOUTH SOUTH SOUTH SOUTH SOUTH SOUTH AVERAGE ARITHMETIC TOTAL 8.84 50.84 50.86 The arithmetic average for contracts resulted in a monomial rate equivalent to R$50.86/kwh or US$1.47/kwh, using an exchange rate of 3.45 R/US of 2003. Rate components. Transmission Costs These figures may be obtained from the ANEEL publication on their web page for free users. The average national load for electric energy transportation or free users or large consumers is 3.49 R$/kW during peak hours. Using a load factor of 83 % or a typical industry, the transportation costs result in: 3.49/ (0.83*730) = 0.00576 R$/Kwh, equivalent to US$0.17/Kwh, with an exchange rate of 3.45 R/US. Rate components. Other distribution costs ANEEL established is the rates for use of the electric energy distribution system to be applied to free consumers and generators connected to each distribution system. The rates are different for the different levels of voltage. The average national charge of voltage levels above 69 KV is 14.41 R$/KW during peak hours and 2,86 R$/KW during nonpeak hours. Using a load factor of 83 % for a typical industry, the distribution costs result in: (14.41+2.86*0.83)/(0.83*730) = 0.0277 R$/Kwh. equivalent to US$0.80/Kwh. with an exchange rate of 3.45 R/US. The ICMS charges are added to the above figures, which according to estimates from Brazilian consultants, hovers around 10 % of the average national ICMS of 18 %. The following table shows the main components of the electric energy rates for Large Consumers in Brazil or March 2003. TABLE 5.19 ELECTRIC RATE COMPONENTS FOR 2003 Level of Voltage Generation Transmission Distribution Others Taxes Total High voltage (69 kV ­ 138 kV) Half Voltage (30 kV ­ 44 kV) Low Voltage (2.3 kV ­ 25 kV
71 For taxes, a 10 % average amount of 18 % ICMS is used. This does not include municipal or regional taxes. The resulting rates of US$2,48/Kwh, is consistent with the chosen reference rate of US$2,4/Kwh, and it is also consistent with the information obtained from the surveys for the present study, as was previously mentioned. 5.3.8.2 Prices for October 2003 Using the same methodology explained in the prior item, rates have been updated according to the information available at the ANEEL web site. For the northern region the average rate for the industrial sector is R$67.99/kwh. In other words, in terms of local currency, the rates have stabilized. The same figures in Reales for rate components are maintained, according to the ANEEL web site information. In terms of dollars, the average exchange rate for petroleum, between January and October 2003 was 2.86 R/US58, with a revaluation of 17%. For that reason the rates in dollars have increased in the same proportion. The following table shows the main components of the electric energy rates for Large Consumers in Brazil or October 2003. TABLE 5.20 ELECTRIC ENERGY RATE COMPONENTS FOR OCTOBER 2003 Level of Voltage Generation Transmission Distribution Others Taxes Total High voltage (69 kV ­ 138 kV) Half Voltage (30 kV ­ 44 kV) Low Voltage (2.3 kV ­ 25 kV Banco Central de Brasil. www.bcb.gov.br For taxes, a 10 % average amount of 18 % ICMS is used. This does not include municipal or regional taxes.
72 CHILE 5.4.1 MAIN INDICATORS Official name: Republic of Chile Area: 756,626 km2 Population: 15,784,000 inhabitants Capital: Santiago de Chile Currency: Chilean peso
73 Table 5.21 Economic indicators ECONOMIC INDICATORS FOR CHILE 1999 2000 2001 2002 2003 Population (Thousands of Habitantes) a GDP (Millions of constant dollars of 1995) a Variation (%) GDP per Cápita (US$/hab) Inflation (%) b It appraises from Change to End Year ($/US$) b Devaluation (%) Installed capacity (MW) c Generation of Electric power (GWh) c Demand of Electric power (GWh) c Losses (%) c Energy consumption per capita (KWh/hab) Sources: a b c. Asociación Latinoamericana de Integración ‐ ALADI‐ 1999‐2002. CEPAL, 2003. ANDI, Centro de Estudios Económicos con base a información del FMI, The Economist, Warburg and journalistic formation Comisión de Integración Energética Regional ‐ CIER 5.4.2 DESCRIPTION OF THE CHILEAN ELECTRICAL SYSTEM T
he Chilean electric sector is constituted by four systems distributed all along its geocharty which are isolated among themselves: The Central Interconnected System‐SIC‐, which is predominantly a hydroelectric system, provides 90% of the population with energy and 75% of all electric energy demand; the Norte Grande Interconnected System –SING‐, predominantly thermoelectric serving the main mining centers in the north of the country; and the Aysén and Magallanes Electric Systems, in the south of the country with less then 1% of the demand. The Central Interconnected System (SIC), is the main electrical system in the country, and delivering electricity to more than 90% of Chile's population; it extends between the localities of Taltal and Chiloé and has around 64.33% of the installed capacity in the country. The SIC supplies consumption destined principally to regulated clients (60% of the total). The Norte Grande Interconnected System (SING) covers the territory between the cities of Arica and Antofagasta and supplies electric consumption to regions located in I and II, with a 34.83% of installed capacity and the country. Approximately, 90% of SING and some shunt is composed of large clients, miners and industrialists. The rest of consumption is concentrated in distribution companies that provide energy for clients under price regulations. 74 The Aysén System attends consumption for the Región XI and the Magallanes system supplies energy to the Región XII, both with a 0.84% of the country’s installed capacity. Activities of generation, transmission and distribution are performed by companies controlled in their totality by private capital; while the State merely exercises regulation, audit and planning functions to guide investments in generation and transmission. 5.4.2.1 Power Generation System The power generation system is characterized by a competitive market, with clear scaled diseconomies with variable operational costs and in which prices tend to reflect a marginal production cost. The SIC System has an installed capacity of 6.733 MW as of December 2002 and it is made up of 20 power generation companies that along with other transmission companies, make up the Centro de Despacho Económico de Carga del SIC (CDECSIC). The power generation conglomerate is constituted by 60 % of hydroelectric reservoirs and passing plants and 40 % of thermoelectric plants fueled by coal, fuel oil, diesel fuel and natural gas or a combination. During the year 2002, the maximum demand reached 4.878 MW, with a gross electric power generation of 31.971,3 GWh. Table 5.22 TYPE OF PLANT INSTALLED CAPACITY OF THE SIC SYSTEM INSTALLED GROSS POWER (MW) INSTALLED GROSS POWER (%) Thermoelectric Hydroelectric TOTAL A total of six power generation companies operate in the SING System and together with a transmission Company they make up the Centro de Despacho Económico de Carga del SING (CDEC‐SING). SING as an installed capacity of 3645.1 MW, as of December 2002. The power generation area is eminently thermoelectric, constituted by 99.63 % of thermoelectric plans running on coal, diesel fuel and natural gas combination. There are only two hydroelectric units, which represent 0.37 % of the installed capacity. During the year 2002, the maximum demand reached 1420 MW, with a gross electric power generation of 10,399.6 GWh. Table 5 5.23 INSTALLED CAPACITY OF THE SING SYSTEM TYPE OF PLANT INSTALLED GROSS POWER (MW) INSTALLED GROSS POWER (%) Thermoelectric Hydroelectric INSTALLED TOTAL
75 The SING system has an installed capacity of 23.41MW as of December 2002 a month and it is constituted 63.86 % by thermoelectric plants, 27.68 % hydroelectric and 8.46 % of eolian enrgy plants. Everything is run by one company, EDELAYSEN S.A., which develops all the activities of generation, transmission and distribution of electric energy, serving a total number of about 20,000 clients. The Magallanes System is constituted by a three electric subsystems: The subsystems at Punta Arenas, Puerto Natales and Puerto Porvenir, in the Región XII. Installed capacity for these systems, as of December, 2002 was 58.5 MW, 4.2 MW and 1.8 MW, respectively, each of them being 100% thermal. Everything is also run by one company, EDELMAG S.A., which develops all the activities of generation, transmission and distribution of electric energy, serving a total number of about 46,000 clients. Figure 5.5 INSTALLED CAPACITY – CHILE Figure 5 shows the installed capacity of the four interconnected systems as of December 2002. 5.4.2.2 Power Transmission System The power transmission system is mainly comprised of electric lines property of the power generation companies, electric lines owned by customers and lines owned by transmission companies. Every high‐power line or substation with voltage over 23 KV is considered part of the transmission system. Lines with voltage below that figure are considered part of the distribution system. Transmission is of free access to generators by means of toll payments. The transmission company is not responsible for investing in new lines or extending the power grid. The most representative transmission systems are the SING and SIC, which cover the largest percentage of Chilean territory. The following two tables show the longitudes for transmission lines with voltages over 66 KV, for the two main transmission systems in Chile, SIC and SING. These figures are as of December 2002. Table 5.24 LENGTH OF SING TRANSMISSION LINES, AS OF DECEMBER 2002. VOLTAGE(kV) LENGTH APPROX. (km) (%) 345 220
76 110 66
TOTAL 5408 100,00% Table 5.25 LENGTH OF SIC TRANSMISSION LINES AS OF DECEMBER 2002 VOLTAGE(kV) LENGTH APPROX. (km) (%) 500 220 154 110 66
TOTAL 11.226,90 100,00% SIC operates 31 energy distribution companies, which together serve a total of 3,850,000 customers. SING operates three energy distribution companies: EMELARI S.A. which provides energy for the city of Arica, ELIQSA S.A. that takes care of Iquique, y ELECDA S.A., supplies power to Antofagasta, and a part of SIC, corresponding to the area of Taltal. Jointly these three companies serve a total of nearly 230,000 customers. The distribution companies are natural monopolies that operate under a concession regimen of public utility distribution, with a service obligation and with rates regulated to supply regulated customers.
77 5.4.3 REGULATORY FRAMEWORK T
he Chilean electric sector is regulated by Decreto con Fuerza de Ley ‐DFL‐Nº 1 which contains the “General Law of Electric Services” which is in force since 1982. This decree is ruled by Decreto Supremo Nº 327 of 1997. Current legislation establishes as a basic premise that the rates should represent real generation, transmission and distribution costs of electricity associated an efficient operation, so that adequate signals be delivered both to companies as well as individual consumers, with the objective of having the optimum electrical system developed. One of the general criteria is price freedom for those segments where competition conditions are observed. Therefore, power supply to end‐users was connected voltage is less than or equal to 2MW, the law establishes price regulation. For end users whose power demands are over 2 MW, the law provides price freedom, presupposing that they have negotiating capacity and the possibility of receiving electric energy from other sources, such as self generation or direct supply from generating companies. 5.4.3.1 The Regulating Entity. CNE The principal State organism that participates in regulating the electric sector is the National 78 Energy Commission (CNE), who is in charge of drafting and coordinating plans, policies and standards necessary for proper functioning and development of the national electric sector, watching over compliance and offering assistance to government entities in all matters related to the Government. Other entities that participate in the Chilean electric sector are the dispatch centers or Centros de Despacho Económico de Carga (CDEC), the Ministry of the Economy, Promotion and Reconstruction, the Superintendance of Electricity and Fuels (SEC), the National Commission of the Environment (CONAMA), the Superintendance of Stocks and Insurance (SVS), the municipalities and the competent defense organisms. 5.4.3.2 Rate Structure for End Users For electric systems whose size is 1500 kilowatts of installed power generation capacity, the law distinguishes two levels of prices to be set: 1. Prices at a transportation‐generation level, called “Node Prices" and those defined for all generation‐transportation substations from which the supply is done. Node prices have two components: The price of electric energy and the price of peak power; 2. Distribution Level Prices These prices are determined based on the sum price of the node, established that the point of connection with the distribution installations, and of an added value because of the concept on distribution. Generating companies may commercialize their electric energy and power in one of the following markets: Large Consumer market, at a price freely agreed upon; Distributor company market, at Node Price, since they are regulated price customers; and To the Economic Cargo Dispatch Center or Centro de Despacho Económico de Carga of the CDEC System, at a marginal hourly cost. The price that distributors may charge users located in the distribution area, for performing the service of electricity distribution activated by the following equation: End‐user price = Node Price + Added Value for Distribution. Node Price Node prices are set every six months in April and October of each year. They are determined by the National Energy Commission (CNE), who by means of a Technical Report communicate their results to the Ministry of the Economy, Promotion and Reconstruction, who in turn proceeds to set the price by means of a decree published in the Official Newspaper. The policies of true costs and the absence of scaled economies in the power generation segment, permit setting prices with marginal costs for suppliers, constituted by two components: The basic price of electric energy: Average time for marginal costs of the electric energy system, operating at a minimum cost updating the operation and rationing, during the period of the study; and The basic price of peak power: Annual marginal cost of implementing installed capacity of the
79 electric system considering more economic generating units, determined to supply additional power during maximum peak hours annually, incrementing the reserve theoretical power margin by an equal percentage for the electric system. For each of the substations in the electric system, it is necessary to calculate a penalization factor and a power actor that when multiplied by the corresponding basic price of electric energy and peak power will determine the price of energy and power for the corresponding substation; Distribution Added Value ‐VAD‐ The VAD is set every four years by the Ministry of the Economy, Promotion and Reconstruction, by means of a Technical Report from the CNE and it is basically a cost average that incorporates investment and functioning costs of a model or theoretical company operating within the country, which is efficient in its investment policies and management, so that the VAD does not necessarily recognize effective costs incurred by distributing companies. 5.4.4 THE LARGE CONSUMER MARKET E
nd consumers may be free customers or regulated customers.Regulated customers that have the right to purchase electricity at prices and quality determined by pertinent authorities. Free customers are those whose power consumption is more than 2 MW. These customers negotiate prices and supply conditions directly with the generating or distributing companies (there are no commercializing agents). At a national level, these free customers represented 55 % of the total electric energy consumption in Chile for the year 2001. 5.4.4.1 Average energy prices for " Free customers" of the SING North System The prices shown in the following table correspond to the North System, and correspond to the average price paid by all free customers within the system, at a 220 KV level. A great majority of these customers are copper mines. The average amount is a lot higher than the market price (February 2003) that have free customer buy, things depending on the volume of the contract, the price may be in the range of US$ 3.3 to 3.8 cents /kWh. The difference is due to the fact that during the last three years the price dropped drastically because of generation with natural gas, but there are still many contracts with the previous prices (10 years or older) that are still in force. Table 5.26 AVERAGE ENERGY PRICES FOR SING FREE CUSTOMERS Average Prices Free C. Published amt (2) (US$/kWh) (1) Comp. Energy Comp. It potentializes (4) (US$/kWh) (US$/kWh­mes) Taxes (%) (5) Oct­94 Apr­95 Oct­95 Apr­96 Oct­96 Apr­97 Oct­97 Apr­98 Oct­98 Apr­99 Oct­99 Apr­00 80 Oct­00 Apr­01 Oct­01 Apr­02 Oct­02 Near future (3) Apr­03 Oct­03 Apr­04 Oct­04 Apr­05 Oct­05 Apr­06 Oct­06 Apr­07 Oct­07 Apr­08 Oct­08 Apr­09 Oct­09 Apr­10 Oct­10 Apr­11 Oct­11 Notes: 1) Total monomial price (includes energy and power), does not include taxes. 2) Figures up to October 2002 correspond to amounts published every six months by the CNE. 3) These future amounts are estimated according to Free Customer contracts and their validity dates are more a market price estimate that will later be replaced. 4) The amounts published are only monomial, because the energy and power components are estimated using average percentages in known contracts. 5) The only tax added is the energy tax and the general VAT tax (value‐added tax). 5.4.5 THE PERMANENT INFORMATION SYSTEM G
iven that the law establishes regulated prices for electric energy service to charge end users whose energy consumption is lower than 2 MW, prices may not vary moved by more than 10 % from the effective average prices of free users, it is possible to obtain the average amount paid by three users from the SIC and SING every time node prices are set by the national energy commission for SIC and SING. This occurs in the months of April and October each year. 5.4.5.1 Prices for September 2003 For comparative effect with other countries, for this update figures have been taken from the following reports: “Node Price Set, October 2003. Final Technical Report”, from CNE. Average free prices for the SIC system obtained from the above‐mentioned report are $25.03/Kwh, equivalent to 3.71 US/kWh. For the SING System, average free prices are $29.8/kWh, or 4.41 US/kWh. These prices do not include the 19 % VAT tax. 81 Rate components for Free SIC customers From the same reports for setting the node prices you can be good news in the average power generation cost for each system and transmission and other costs. In SIC, the basic price of electric energy is $15.86/kwh at the basic Quillota node, equivalent to 2.35 cUS/Kwh, and the basic peak power at the Polpaico node at 220 KV is $3637.24/KW/month, equivalent to US$5.39/KW/month. Monomial rate is equivalent to 3.34 cUS/Kwh. This rate includes average cost of generation and transmission for delivery at 220 KV. The difference with the average free price already pointed out of 3.71 US/Kwh, corresponds to subtransmission costs and other nonspecified costs. This amount turns out to be 0.37 US/kwh for SIC clients. Rate components for Free SING customers Likewise, following the same methodology, it was found that for SING the average generation and transmission cost is 3.05 US/kwh and the subtransmission cost and others is 1.36 US/kwh, for a total of 4.41 US/Kwh. To summarize it the aforementioned, use the following table: Table 27. RATE COMPONENTS FOR ELECTRIC ENERGY IN SEPTEMBER 2003 System Cost Generation and T Transmission Subtransmisión and Others Total SIC SING
82 COLOMBIA 5.5.1 MAIN INDICATORS Official name: Republic of Colombia Area: 1,141,748 km2 Population: 44,628,000 Inhabitants Capital: Bogotá D.C. Currency: Colombian peso
83 TABLE 5.28 ECONOMIC INDICATORS FOR COLOMBIA Economic indicators 1999 2000 2001 2002 2003 Population (Thousands of Habitantes) a GDP (Millions of constant dollars of 1995) a Variation (%) GDP per Cápita (US$/hab) Inflation (%) b It appraises from Change to End Year ($/US$) b Devaluation (%) Installed capacity (MW) c Generation of Electric power (GWh) d Demand of Electric power (GWh) d Losses (%) Energy consumption per capita (KWh/hab) Sources: a Asociación Latinoamericana de Integración (Latin American Integration Association)‐ ALADI‐ , Año 1999‐2002 . CEPAL, año 2003. b ANDI, Economic Studies Center based on information of the IMF, The Economist, Warburg Dillon Read and journalistic information. c Comisión de Integración Energética Regional (Regional Energy Integration Commission) ‐ CIER d UPME, Energy Balance. 5.5.2 DESCRIPTION OF THE ELECTRICAL SYSTEM OF COLOMBIA A
fter several decades of state monopoly, the utility sector underwent a transformation after the Constitution of 1991, which establishes the State as being in charge of insuring and regulating the efficient provision of public services to all the inhabitants of the national territory. For the establishment of the new framework, which is ordered by the Constitution, Law 142 of 1994 of Domiciliary Public Services and law 143 of 1994 were passed. They establish the limits to the vertical integration of utility companies that provide the service of electric power. The activities are defined as: Generation, Transmission, Distribution and Marketing. In addition, the Electricity Wholesale Market was created and the institutional scheme of the sector was reorganized. 84 5.5.2.1 Generation System 66 Up to February of 2004, the Colombian generation system has the installed capacity of 13.253 MW, of which 8.619 MW are generated with hydraulic power, 4.373 MW with thermal power and 398 MW are generated by minor plants, co‐generators and self producers (self generators?). The distribution is the following: The availability of hydraulic generation is conditioned by the occurrence of El Niño phenomena.60% of the available capacity is private property and the remaining 40% belongs to the national state and municipalities. The revenue from generation comes from three sources: from income from bilateral energy contracts, which represents 60% of the energy sold in 2003 (in previous years it reached 85%), for sales in the energy market and for the charge per capacity. 5.5.2.2 Transmission System The system comprises free access 550kV and 220kV networks. It has 11 transporting companies, of which Interconexión Eléctrica S.A. ‐ISA‐ is the greatest electric power transporter in the country, and the owner of 80% of the network. The planning of the network takes place in a centralized way and expansions result from competitive processes which are assigned to the company that requires the smallest sum for the construction66 TABLE 5.29 TRANSMISSION LINE LENGTH COMPANY SUBSTATIONS KM CIRCUITS ISA TRANSELCA
85 EEPPM EEB EPSA ESSA DISTASA CORELCA CHB EBSA CENS TOTAL 5.5.2.3 88 12,197 International Connections After the rationing of 1992, the Colombian Electrical System has analyzed the possibility of interconnecting with neighboring countries in order to exchange energy to cover juncture deficiencies in the supply. However, the episodes of scarcity that Venezuela and Ecuador have gone through in recent years have made it evident that it's also possible to export electric power, especially when there is a surplus in the installed capacity. The current interconnection infrastructure has a capacity of 250 MW with Venezuela, and 260 MW with Ecuador. The following chart shows these interconnections Figure 56 INTERNATIONAL CONNECTIONS BETWEEN VENEZUELA – COLOMBIA – ECUADOR The exchange potential, which was identified by the CIER, is 1000 MW with Venezuela and 400MW with Ecuador. Regarding Central America, there is a potential market. Its feasibility increases with the interconnection which was proposed at the SIEPAC67 between Guatemala and Panamá. On the other hand, advances were made last year with Ecuador, Venezuela and Peru as to regulatory matters to make possible the development of an Andean electric power market.
86 With Venezuela, the energy exchange is carried out based on bilateral contracts, under a resource optimization scheme on a national level and with independent planning at the links. With Ecuador, the energy exchange is carried out based on a coordinate dispatch through wholesale energy markets, aiming to optimize resources on a regional level and with coordinate planning of links. The energy transactions of Colombia with Venezuela and Ecuador are summarized in the following chart, where a significant increase in international transactions is shown. This is due to the interconnection with Ecuador in the year 2002. Figure 5.7 ENERGY EXCHANGES VENEZUELA­COLOMBIA­ECUADOR Colombia's interconnection system with Ecuador and Venezuela, allows the development of an energy corridor as far as Peru, thanks to an interconnection project between Ecuador and Peru. Another Colombian interconnection project is with Panama. This will allow Colombia to become integrated with the Central American market, relying on the development of the SIEPAC project. This will allow the creation of an energy corridor from Mexico to Peru. 5.5.2.1 Local Distribution System (LDS). The electric energy distribution system is composed by networks, substations with their associated equipment, which operate at voltages of less than 220 kV which do not belong to a regional transmission system, nor to any municipal or district system. All distributor companies are marketers. However, not all marketing companies, are distributors. 5.5.3 REGULATORY FRAMEWORK I
n 1994, laws 142 and 143 were passed, and their main provisions were: Promotion of free competition and specialization in the provision of the service, by means of the division of the generation, transmission, distribution and marketing activities, of which the generators and distributors may act simultaneously as marketers, separating the bookkeeping part of each activity and without carrying out resource transfers between them. 87 Promotion of the coverage of the different regions of the country and of low income users.
Definition of regulated and non regulated users.
Definition of Self‐generators.
Definition of the Expansion Plans of the National Interconnected System, preservation of the environment, concession contracts, saving, conservation and efficient use of energy.
Establishment of the institutions in charge of regulation and control:
Regulation: Comisión de Regulación de Energía y Gas ‐CREG‐ (Energy and Gas Regulation Commission).
Control and Surveillance: Superintendencia de Servicios Públicos Domiciliarios ‐ SSPD‐ (Superintendence of Domiciliary Public Services).
Landing: Unidad de Planeación Minero Energética – UPME – (Mining Energy Planning Unit)
System Operator: Centro Nacional de Despacho –CND‐ ISA (National Dispatch Center).
Market Administrator: Mercado de Energía Mayorista – MEM –ISA (Wholesale Energy Market). The regulation has established some limits to prevent the concentration of property or corporations, which may affect the prices of electricity. This way, no distributor may provide this service to more than 25% of the total market. No generator may have more than 25% of the nominal generation capacity and their net effective capacity must be lower than the potential system bracket, which is the difference between the maximum demand of the previous year, and the average availability during the same period. No company, which is dedicated to generation or distribution, may have a share of more than 25% of the stock in a company which is dedicated to an activity which is different from its own, and generators, distributors are marketers may not have more than 15% of the stock of a transmission company. 5.5.3.1 Energy and Gas Regulation Commission – CREG­ The Energy Regulation Commission, which was created by means of article 10 of Decree 2119 of 1992, was denominated as the Energy and Gas Regulation Commission by law 143 of 1994. By means of resolutions, its purpose is to develop the principles established in laws 142 and 143 of 1994, regulating monopolies when competition is, in fact, not possible; and, in other cases, promoting competition among the different agents, so that the operations of monopolizers, and competitors will be economically efficient, do not imply an abuse of their dominant position and produce quality service. The CREG comprises: the Minister of Mines and Energy, quien la preside; the Minister of Finance and Public Credit; the Director of the National Planning Department; Five (5) experts in energy matters of full‐time dedication, who are appointed by the President of the Republic for periods of four (4) years and the Superintendent of Domiciliary Public Services, with the right to voice an opinion, but not to vote. 5.5.3.2 Superintendence of Domiciliary Public Services – SSPD­ It was created by Article 370 of the Political Constitution. It is a technical entity, which is in charge of control, inspection and surveillance of companies that provide domiciliary public services, among which is the service of electric power, in the terms set forth in the law.
88
The Superintendent, and his delegates are freely appointed and removed by the President of the Republic. 5.5.3.3 Mining­Energy Planning Unit ­UPME­ The Mining Energy Planning Unit ‐UPME‐ an adjunct entity of the Ministry of Mines and Energy, is in charge of the following assignment which was imposed upon this ministry by Law, 142 of 1994: “To develop an electric power and fuel gas public service coverage expansion plan maximum every five years. Public investments that must be made are determined in it and private investments must be encouraged.” Additionally, every year the UPME must develop a minimum cost plan for the expansion of the generation, transmission and distribution infrastructure which will serve as a guide for those who may be interested in investing. The UPME plans are thus indicative of necessary projects. In the case of the recommended reinforcements for the National Transmission System ‐ STN, the projects are the base for public bids that the UPME opens in order to select the national and international transmitters that will take care of them. Moreover, the UPME promotes, designs and establishes saving and efficient use of energy. The UPME also develops and updates the National Energy Plan, the Expansion Plan of the electric sector and the other sub‐sectorial plans, in concordance with the Project of the National Development Plan and the macroeconomic policy of the National Government. 5.5.3.4 Operation Management and Market Administration Composed of the Wholesale Energy Market –MEM‐ and the National Dispatch Center–CND‐, it is in charge of coordinating the Operation of the National Interconnected System, carrying out the administration of the Commercial Exchange System and the liquidation and administration (invoicing, collecting and distribution of funds) of accounts of charges for the use of the National Interconnected System network. The Commercial Exchange System consists of the registry of agents and the commercial borders of the market, the long term energy contracts; the liquidation, invoicing, collection and payment of the value of energy contracts in the exchange by generators and marketers, as well as the fulfillment of all the necessary tasks for its adequate functioning. 5.5.4 RATE STRUCTURE OF FOUR END USERS T
he CREG issues general formulas which are valid for five years. These formulas allow electricity marketers to establish the costs of the provision of the service to users who are regulated in the National Interconnected System (SIN). The rate formula which is in effect for regulated users of the public service of the electric power establishes maximum values to be charged, by means of the calculation and updating of the unit cost in time, with price indexes, including efficiency and productivity indicators. 89 The unit cost is specific for each company according to its costs, and for each user in relation to the level of voltage that he/she is connected to. This formula is a direct referent for the negotiation of contracts between non‐regulated users and their energy suppliers. The voltage levels which are defined in the regulation are the following:
Level IV: Voltages between 57.5 kV and lower than 220 kV.
Level III: Voltages between 30 kV and lower than 57.5 kV
Level II: Voltages between 1 kV and 30 kV
Level I: Voltages lower than 1 kV The unit cost monomial which is determined by CREG Resolution 031 of 1997, and which constitutes the rate formula in effect up to 2003, includes the following components: generation, transmission, distribution, marketing and others. Unit Cost = (G +T)+ D + C +O (1 ‐ P) Cost of Generation The maximum energy purchase costs on the wholesale market that the marketer may transfer to his clients who are not regulated in the rates are calculated based on a weighing between the purchases carried out by the company during a year to supply their regulated market and the average sales carried out by all the companies with the same purpose, giving a greater weight to the purchases carried out by the company in the last month. This is done in order to quicken the transfer of price signals to the user market. Transmission Costs For existing assets, their new replacement value is calculated based on the unit costs per constructive unit, according to the classifications and the amounts approved by the CREG for each one of the first 25 years of operation of their project. The offers are made in constant dollars from December of the previous year to the bid call. The IAE is updated with the Producer Price Index of the United States. The IAE covers all the costs incurred on by the chosen bidder and no additional payments will be made. The previously described methodology is applied to existing assets as of the 26th year. 5.5.4.3 Distribution Costs Distribution costs will be used by CREG as the base for the definition of rates for regulated users of electricity service. They will take into account efficient companies used as reference according to comparable distribution areas, and according to the region's own characteristics, distribution network investment costs, including the opportunity cost of capital and administration, operation and maintenance costs (AOM) per unit of maximum power supplied. Besides, energy and power loss levels which are characteristic of comparable efficient companies will be taken into account.
90 The calculation of the charges for distribution is based on a maximum efficiency price methodology per unit of transported energy in the system (price cap). This methodology recognizes the charges for administration, operation, maintenance and expansion of the lines and substations which are used for the distribution. 5.5.4.5 Recognized fraction to cover losses It is a value that represents the percentage, expressed as a fraction that is associated with the effect of both technical and non technical energy losses, which are accumulated up to the voltage level to which the user is connected. 5.5.4.6 Other Costs Additional Costs of the Wholesale Market, correspond to the contributions that agents must make to the CREG and the SSPD, the costs assigned to marketers for restrictions and complementary services, and the remuneration of the National Dispatch Center, the Regional Dispatch Centers and the SIC administrator. In addition to the above, there is also a Charge per Consumption Unit. One of the main components of Other Costs, are the restrictions, which are liquidated for the following items: Electrical Restrictions and/or voltage support of the STN. Compliance with the reliability criteria (VERPC). Abnormal Public Order Conditions (CAOP). Stability considerations of the STN. Security associated with restrictions related to electricity importations / exportations (TIES). 5.5.4.7 Connection Costs Although this cost is not in the rate formula, companies may charge users once for a connection charge at the time when the connection to the service is made. Discharge includes the service connection and a meter and may include, given that it is authorized by the Commission, a fraction of the costs that recover part of the new investment in distribution networks, pursuant to article 90 of Law 142 of 1994. There are industries that are directly connected to the National Transmission System. This type of users is billed for the monthly connection, which represents the efficient cost of operation, administration and maintenance of the assets. It is important to note that these users are not charged for the use of the regional transmission and local distribution systems. 5.5.5 SUBSIDIES AND CONTRIBUTIONS 5.5.5.1 Solidarity Scheme
91 The population in Colombia is classified into strata according to their income level. The users with the highest income (classified in strata 5 and 6) and the users belonging to the industrial and commercial sector pay a 20% contribution on the Service Provision Cost, which is destined to cover the subsidies granted to the users with lower incomes (classified in strata 1, 2 and 3). The percentage of the subsidies which are granted is maximum 50% for stratum one, 40% for stratum two and 15% for stratum three, and covers up to the basic subsistence consumption, which is currently defined at 200 kWh‐Month for the whole country. For more information about this type of charges, refer to resolution 004‐1994 on web page www.creg.gov.co or CREG‐1996‐C961867 concepts which contain an explanation about connection charges to non‐regulated users. The Mining and Energy Planning Unit –UPME. (Law 632 of 2001) defines the subsistence consumption value. 5.5.5.2 Solidarity Fund for Subsidies and Income Redistribution – FSSRI‐ The National Government by means of Laws 142/94, 143/94 and 286/96 created the FSSRI as a fund account to implement the solidarity scheme. The FSSRI is in charge of administering and crossing the contributions and subsidies that the electric power companies and fuel gas that is distributed through the physical network bill and grant the final users according to the limits established by CREG. Since its creation, the FSSRI has had a deficit in spite of the disbursements from the National Budget. 5.5.5.3 Financial Support Fund for the Energization of Interconnected Rural Zones. As of July of 2003, according to Article 105 of Law 788 of 2002 and CREG Resolution 082 of 2003, 1$/kWh is paid in the charge for the use of the National Transmission System which is destined for this fund, which is constituted to expand the coverage of the electrical power service in rural zones. 5.5.6 SURVEYS F
or this update, the Chamber of Great Consumers of Energy and Gas of the ANDI carried out surveys in the food, beverage, cement, paper, textile, iron and steel, mining, lumber, manufacture, transportation, water, chemical, construction and wire and cable manufacture sectors to know about the prices of electric power. In the following table, you will find the basic information on the companies that provided information and the voltage level at which they are connected: The energy rates depend on the voltage level of the supply and the consumption of the industry. 92 In March of 2003, the average rate that was found for industries which were connected on Level IV was US$4.31, for voltage level III US$4.94 and US$5.69 for voltage level II. These facts were verified with the publication carried out by Interconexión Eléctrica S.A. ‐ISA‐. Table 5.30 COMPANY THAT PROVIDED INFORMATION No. Company City Sector Voltage kV 1 2 3 4 5 6 7 8 9 10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
5.5.7 LARGE CONSUMER MARKET I
n general, large consumers comprise non‐regulated users, which corresponds to those whose load is greater than 0.1 MW or whose consumption is greater than 55 MWh/month. Great consumers belong to the industrial and commercial sector. In theory, any user may choose his power supplier. However, this advantage is only carried out in practice by those who are non‐regulated, including the Great Industrial Users, who may enter into purchase and sales contracts with one or several marketers under mutually agreed conditions and 93 prices. The contracts are registered at the SIC and there are stock market transactions, which is why non‐regulated users act as market agents by means of the marketing company that represents them. Table 5 .31 represents the electric power prices for users in the wholesale market at 4, 3 and 2 voltage levels for the month of March of 2003. Level 4 Level 3 Level 2 Generation Transmission Distribution Others Taxes Total Energy prices users in the wholesale market voltage level (US$/KWh) Source: Calculations carried out by ANDI with information from ISA and CREG Dollarized prices to March of 2003
94 Chart 5.8 COMPOSITION OF THE RATE FOR NON­REGULATED USERS Source: Calculations carried out by ANDI with information from ISA and CREG Dollarized prices to March of 2003 5­5.8 THE PERMANENT INFORMATION SYSTEM I
n order to determine the total average price per kWh of the great consumers of the country, you take the information supplied by the Energy Wholesale Market which corresponds to the average value of all the contracts entered into by Non Regulated Users (UNR) which are connected on a IV voltage level, which is published the month following the analysis in the “Special ISA.COM CREG 135/ 97 Resolution” bulletin. The price of the generation component is obtained from the average price for the cost of energy destined for the Non Regulated market which is obtained from the above‐mentioned bulletin. The price of transmission is a regulated charge, and it is taken from the liquidation of the LAC for the STN which the MEM presents for the corresponding month. The distribution price for level for of the month of December is stamped and is obtained from the liquidation of the LAC for the STR Regional Transmission System, weighing the value with the demand of each one of the two regions into which the country is divided (North zone and Center South zone). This information is found in the MEM web page.71 The Others component is calculated by means of the difference of the total price minus the contribution and the charges for generation, transmission and distribution. For the months of March and December of 2003, with dollar exchange rates of $2959 and $2778.2 respectively, the following results are obtained a list of a: Electric energy prices (US$/kWh) March 2003 $ US$ Dec 2003 $ US$ Generation Transmission Distribution Level 4 95 Others Taxes Total 122.97 4.15 129.45 4.66
96 ECUADOR 5.6.1 MAIN INDICATORS Official name: Area: Population: Capital: Currency: Republic of Ecuador 256,370 km2 13,357,000 inhabitants Quito American dollar
97 A TABLE 5.32 ECONOMIC INDICATORS ECUADOR Economic indicators 1999 2000 2001 2002 2003 Population (Thousands of Habitantes) a GDP (Millions of constant dollars of 1995) a Variation (%) GDP per Cápita (US$) Inflation (%) b It appraises from Change to End Year ($/US$) Installed capacity (MW) c Generation of Electric power (GWh) c Demand of Electric power (GWh) c Losses (%) c Energy consumption per capita (KWh) Sources: a) b) c) Asociación Latinoamericana de Integración (Latin American Integration Association) ‐ ALADI‐ , Year 1999‐2002. CEPAL, year 2003. ANDI, Centro de Estudios Económicos (Center of Economic Studies). Based on information from the IMF, The Economist, Warburg Dillon Read and journalistic information. CONELEC. Statistics of the Ecuadorian Electrical Sector. June of 2003. The Generation in Demand data of 2003 only correspond to the first semester. 5.6.2 DESCRIPTION OF THE ELECTRICAL SYSTEM T
he Ecuadorian electrical sector currently has a regulatory system, which promotes the vertical disintegration of the generation, transmission and distribution activities; it is governed by the Regimen Law of the Electric Sector of October 10, 1999, and its posterior reforms. They promote private investment in electric power generation, transmission and distribution companies, allowing up to a 51% share in the stock capital which belongs to the Solidarity Fund. In June of 2003. There were in Ecuador, 11 electrical generation companies, 1 transmitter, 7 self producers and 20 distributors. Moreover, 44 have qualified as Great Consumers, of which 27 registered their operations at the CENACE, 3 have had their qualification revoked and 5 are receiving energy through distributors. 5.6.2.1 Generation System The Ecuadorian generation system has an installed capacity of 3.451 MW (to December of 2002). 51% of the installed capacity comes from hydroelectric centrals, while thermal plants represent 49% of the installed capacity. The following table shows the evolution of the installed generation capacity, which are differentiated by the technology that is used. 98 TABLE 5.33 INSTALLED CAPACITY OF ECUADOR IN MW Years Hydraulic 1999 2000 2001 2002 Thermal V Vapor Thermal Gas Thermal Natural Gas Thermal MCI Total 3.351 3 351 3 208 3 451 5.6.2.2 Transmission system Currently, there is only one transmitter agent at the MEM, which operates its facilities in coordination with the CENACE complying with the provisions that are imposed on it. The transmission system comprises lines that go from 138 kV to 230 kV. Besides, there are subtransmission lines at 69 kV. The transmission losses of the National Interconnected System to June of 2003 were 4.0%73. 5.6.2.3 Distribution System Up to June of 2003, there were 20 distributors in Ecuador, of which 30 had generation, since they were not yet divided as the Regimen Law of the Electric Sector mandates, and 4 of the distributor companies operate non interconnected systems, therefore, they are not required to divide their generation. The distribution levels are those which are equivalent to low voltage, which are lower than 600 volts. To June of 2003, the distribution losses were of 23.4%. 5.6.3 REGULATORY FRAMEWORK O
n October 10, 1999, the Regimen Law of the Electric Sector was created, which is the law in effect, which promotes the vertical disintegration of generation, transmission and distribution activities. By means of this law, it is established that it is the State's duty to supply electric power; it is a public utility service of national interest; therefore, it is the state's duty to directly or indirectly, supply the electric power needs of the country, by means of the optimum use of natural resources, pursue want to the National Electrification Plan The national electrical sector will be structured in the following way: a) The National Electricity Council; b) The National Center of Energy Control; c) Electric generation concession companies; d) The Electric Transmission Concession Company; and, e) The electric distribution and marketing concession companies. 99 5.6.3.1Consejo Nacional de Electricidad (The National Electricity Council) –CONELEC‐ CONELEC does not pursue business activities in the electrical sector. It is in charge of developing plans for the development of electrical energy and carrying out, among others, the following functions: Regulate the electrical sector and see to the compliance of legal and regulatory provisions and other technical norms of the electrification of the country pursuant to the national energy policy; Develop the electrification plan, based on the optimal use of natural resources. For that purpose, it will keep an updated inventory of the energy resources of the country for electrical production purposes. This will be a referential type of plan; Prepare and propose the General Regulation and a special regulations that are required for the application of the Regimen Law of the Electric Sector. The regulations are approved and issued by a President of the Republic approved the rate this for regulated transmission services and final distribution consumers. Dictate regulations which the generators and transmitters must comply with us to safety, protection of the environment, technical consumption measurement and billing norms and procedures, meter control and use, interruption and reconnection of supplies, access to real property belonging to third parties, risk of failure and quality of the services provided; and other norms that are determined by the Law and the regulations. For this purpose, corporations and people subject to its control are required to provide CONELEC. The technical and financial information that is required of them74. 5.6.3.2 El Centro Nacional de Control de Energía (The National Center of Energy Control) ‐CENACE‐ CENACE is a non profit Civil Corporation, of an eminently technical type, whose members are all generation, transmission and distribution companies and the great consumers. It is in charge of the technical and economical handling of energy as a block, always guaranteeing an adequate operation which results in the benefit of the final user. CENACE is led by a Directorate composed by:
A Permanent Delegate of the President of the Republic who will chair it;
Two Delegates of the generation concession companies;
Two Delegates of the distribution concession companies;
One Delegate of the transmission concession company; and,
One delegate for the great consumers that have long term contracts. The appointment of the delegates before the Directorate of the Corporation, is carried out in conformity with the respective Regulation. Global Function The National Center of Energy Control is in charge of the administration of technical and financial
100 transactions of the Electrical Wholesale Market. It must protect the operation safety conditions of the National Interconnected System taking charge of the supply of energy to the market, at the lowest possible cost, preserving the global efficiency of the sector and creating market conditions for the marketing of electric power by generation companies, without any discrimination among them, and facilitating their access to the transmission system. 5.6.3.3 Mercado eléctrico mayorista –MEM‐ (Electrical wholesale market) The electrical wholesale market –MEM‐ is constituted by generators, distributors and great consumers, which are incorporated into the National Interconnected System. The transactions that may be carried out in this market are only sales in the occasional market or term contracts. The electrical wholesale market comprises all electrical supply transactions which are carried out between generators; between generators and distributors; and between generators and great consumers. Likewise, energy and power exportation and importation transactions are included. Term Contracts in the Electrical Wholesale Market In the electrical wholesale market, term contracts are those which are agreed on freely between generators and great consumers and those entered into by generators and distributors, for a term of minimum one year and to be performed through the National Energy Control Center. Within a 10‐day term after its execution, term contracts must be registered at the CENACE and their effect will start 20 days after their registry. The National Center of Energy Control will communicate the sale price for each hourly period to all those who participate in the market. The price will be based on the short term instant marginal economic cost and the power charge which will correspond to the fixed costs of the marginal generation central, which result from the real time operation of the national interconnected system. The price which will be established in this manner will be uniform for all sales carried out during the corresponding period. Occasional Market Generators may sell electric power in the occasional market. Generators, distributors and great consumers may in turn buy in the occasional market. Transactions in said market shall comply with the following rules: The sales that are carried out by generators shall be those that result from the generation of the units that the National Energy Control Center dispatches. The purchases that are carried out by distributors and great consumers in the occasional market will be valued at the price that the National Energy Control Center fixes periodically according to the previous item and the procedures which are set forth in the Regulation for that purpose. The rates for final users anf great consumers reflect the costs which correspond to the processes of each one of the links in the generation, transportation and distribution chain.
101 Prices Subject to Regulation Prices subjected to regulation are denominated from here on as rates and they will only correspond to the following: Power and energy transfers between generators, which result from the operation at the minimum cost of the National Interconnected System, when they are not provided for in term contracts. The rates which are applied to these transfers will be calculated by the CENACE; Power and energy transfers of generators to distributors which will be calculated by the CENACE and approved by the CONELEC. Transmission rates which compensate the use of transmission lines, transformation sub‐stations and other elements which comprise the transmission system which will be approved by the CONELEC; The toll for the use, by third parties, of the distribution system which will be the same as the Distribution Value added (VAD) which will be approved by the CONELEC minus the associated costs to the client. The rates for supplies to final consumers provided by distribution companies that do not have or have not practiced the option of freely agreeing on the their supplies, which will be approved as rate lists by the CONELEC. Free Prices Distributors and great consumers may hire the supply of electric power for their own consumption, with a generator or distrubutor, without necessarily subjecting to the rates fixed by the CONELEC. The respective regulation will determine who is considered a great consumer, according to the power and energy modules and other characteristic parameters. Rate Principles The rate lists which are approved by the CONELEC will comply with the following principles, depending on the corresponding case: Applicable rates to final consumers will cover the referential prices of generation, the measured costs of the transmission system and the distribution value added (VAT) of efficient companies. Consequently, the rates will reflect the real costs of the service based on international quality and efficiency guidelines and in no case shall exceed those on the international market. The rate lists shall be made based on the application of management indexes which are established by means of regulation by the CONELEC, for efficient companies with real costs. The regulating entity shall determine the periodicity of revision and approval of the rate lists, which in no case shall be less than a year; and, The rate structure for the final consumer who may not be able to enter into long term contracts for electric power supply or who may be able to but has not used this possibility, must reflect the
102 costs that clients originate according to their consumption modalities and their voltage level. Furthermore, in the preparation of rate lists, the right of consumers with the lowest incomes to have access to electric power service must be taken into account within the economic conditions according to their possibilities. Transmission Rates The rates that agents of the electrical wholesale market pay for the use of the transmission system must, as a whole, cover the economic costs which correspond to the yearly yield of the assets in operation and investment of the expansion plan; operation and maintenance and transmission losses, at the levels which are approved by the CONELEC. The CONELEC will also establish the parameters that the regulator will apply in order to fix the corresponding rate that each agent of the electrical wholesale market must be paid. The transmission rates shall be set by the CONELEC, determining their initial values and the readjustment formulas which will be applied every year. Once they are set, the rates shall be considered as incorporated into the concession contract of the transmitter. Distribution Value added The distribution value added corresponds to the inherent cost of the distribution activity of an efficient company, on the base of internationally accepted procedures which have operation characteristics which are similar to the corresponding distribution concession company. To calculate the distribution value added the following will be taken into account: a) Costs which are associated to the consumer, independent of its power and energy demand; b) Medium power and energy technical losses; c) Investment, operation and maintenance costs which are associated to the distribution at the reference company per unit of supplied power; and, d) Expansion, improvement, operation and maintenance of public lighting systems which use electric power. The distributors will calculate the components of the distribution value added for the corresponding reference company every year and they will submit the resulting study to CONELEC´s consideration, which will analyze it within the terms set forth in the respective regulation. 5.6.4 SUBSIDIES AND CONTRIBUTIONS L
ow consumption consumers will be subsidized by residential users with a higher consumption in each geochartic zone. Those who do not exceed the average monthly consumption of the residential consumption in their respective geochartical zone will be considered as low consumption consumers in this category in each geochartical zone of distribution concession, but who in no case exceed the average residential consumption on a national level. These consumption values shall be determined for each case at the beginning of each year by the CONELEC based on the statistics of the previous year. 103 In Ecuador there are three types of taxes, which are liquidated by applying a percentage on the electricity bill value: the national order tax which is destined for the Marginal Rural Urban Electrification Fund ‐FERUM‐, which equals 10%; tax for public lighting, which varies between 4% and 6% depending of the municipality and the tax for Garbage Recollection , which varies between 10% and 12% depending on the municipality. 5.6.5. THE LARGE CONSUMER MARKET. Users are classified by consumption sectors: in residential and general sectors; industrial and commercial sectors are included in the general sector. They are also differentiated by the voltage level, which may be high (V > 40 kV), medium (600 V ‐ 40 kV) and low voltage which are voltages lower than 600 V. Users may be regulated and non regulated. Non regulated users correspond to those who record values equal or greater than the monthly average demand (KW), during 6 months prior to the classification request and a minimum annual energy consumption (MWh) during twelve months prior to the request, to those values that are indicated in the following table: 76 A TABLE 5.34. MINIMUM REQUIREMENTS TO HAVE ACCESS TO THE FREE MARKET. PERIOD OF PRESENTATION OF THE APPLICATION IT DEMANDS AVERAGE MONTHLY (K KW) CONSUMPTION YEARLY (MWh) Until December 2002 January ­ June 2003 Julio ­ December 2003 January ­ June 2004 Julio ­ December 2004 January 2005 from now on 5.6.6 SURVEYS With the collaboration of EGRANCONEL, Asociación de Grandes Consumidores de Energía del Ecuador (Great Energy Consumers Association of Ecuador), 10 surveys of the industrial sector were done, 3 of which are of companies which are connected at voltage levels higher than 138 KV. The collected surveys cover the food, water, plastic, iron and steel, textile and metalmechanic sectors. The following table describes basic information about the companies that answered the surveys. TABLE 5.35 No. Company City SURVEYED COMPANIES Sector Voltage KW 1 2 3 4 5 6 7 8 9 10
104 The average that was found of the surveyed companies for March of 2003 was US$0.0793/Kwh, with a minimum of US$0.0610/Kwh and a maximum of US$0.1036/ Kwh. The average for the companies which are connected at voltage levels over 69 KV was US$0.0641/Kwh, including 10% of taxes. Without taxes, the average value that was found was US$0.0583/Kwh. The above values were contrasted with the statistics obtained from CONELEC77 for the first semester of 2003, which are shown in the following table. For the month of March of 2003, the average price for the great consumer in the electrical wholesale market was US$0.061/Kwh, which was slightly higher than the average of the surveys of companies over 69 KV. This figure allows us to conclude that the average value that was found in the surveys is reazonable, given that for high voltage levels, the average rates should be under the national average which is shown here. The bill for the great consumer in the occasional market corresponds to the handling of the market, which includes the costs of power, reserves, transmission and others. The total average price includes tolls charged to the great consumer and do not include taxes. The bill to the Great Consumer in the Occasional Market corresponds to the Handling of the Market. The Total Average price includes the tolls which are charged to the Great Consumer. There is no information on whether one of the Great Consumers buys electric power in the Occasional Market. The respective average price has been considered as a function of the energy that is received. The total average price of the rates for the 1st semester of 2003 was US$0.0614/ Kkwh, which is also slightly higher than the value obtained from the surveys. 5.6.7 PERMANENT INFORMATION SYSTEM. T
he information on the final rates paid by the Great Consumers of Ecuador may be updated permanently with the information that is available in the CONELEC78 web page and with the following methodology. 5.6.7.1 Methodology for Great Consumer Prices. The total average prices for the great consumers are obtained from the statistics of the Ecuadorian electrical sector79. They are total rates without taxes for all the great consumers which are connected at several voltage levels. For March of 2003, the average price was 6.1 cUS/Kwh and the most updated value is 6.l7 cUS/Kwh of June, 2003. Generation Prices: Generation prices correspond to the energy, power and PPA prices published by CONELEC. In order to obtain the generation price, the information published by CONELEC was taken: “Price structure of energy for the distributor and great user up to 2002”80, which is presented in table 5.37. 105 The generation price was updated by taking the total average price found in the previous numeral, by means of a rule of three. A generation price of 5.15 cUS/kWh is obtained for March of 2003 and 5.21 cUS/Kwh is obtained for June of 2003. Transmission Prices: The transmission price is obtained in a similar way from the same information from CONELEC “price structure of energy for the distributor and great consumer in the occasional market.” This value was on average 0.6466 cUS/Kwh for the year 2002 from March 2003 resulting in 0.57 US/Kwh, and for June 2003 in 0.575 cUS/Kwh. Distribution prices and other charges: Included in other charges there are restrictions and mandatory power generation. The distribution amount and charges may be obtained fromthe difference between toal price and generation prices and transmission.
106 Table 5.37 ENERGY PRICE STRUCTURE FOR LARGE CONSUMERS & DISTRIUBUTORS ENERGY PRICE STRUCTURES FOR DISTRIBUTORS AND LARGE CONSUMERS IN THE SPOT MARKET (US% c. / kWh) Dates Energy Restrictions Obliged generation It potentializes (1) PPAs (State and G.Privadas) Transmission Total Apr­99 May­99 Jun­99 Jul­99 Aug­99 Sep­99 Oct­99 Nov­99 Dec­99 Jan­00 Feb­00 Mar­00 Apr­00 May­00 Jun­00 Jul­00 Aug­00 Sep­00 Oct­00 Nov­00 Dec­00 Jan­01 Feb­01 Mar­01 Apr­01 May­01 Jun­01 Jul­01 Aug­01 Sep­01 Oct­01 Nov­01 Dec­01 Jan­02 Feb­02 Mar­02 Apr­02 May­02 Jun­02 Jul­02 Aug­02 Sep­02 Oct­02 Nov­02 Dec­02 Prom. 99 Prom. 00 Prom. 01 Prom. 02 1.7349 2.9949 5.5299 4.2382 0.0068 0.0043 0.0074 0.0326 0.0990 0.1026 0.1397 0.4156 0.7245 1.1457 1.2828 1.5943 0.4083 0.2453 0.0496 0.0292 0.5057 0.4640 06279 0.6466 3.4792 4.9568 7.6374 6.9419 Table 5.38 ELECTRIC ENERGY RATE COMPONENTS FOR ECUADOR Month Generation Transmission Distribution and others Taxes Total Mar­03 Jun­03 5,15 5,21 0,57 0,58 0,38 0,39 0,61 0,62 6,71 6,80
107 MEXICO 5.7.1 Principal benchmarks Official name: United States of Mexico Area: Population: Capital city: Currency: 1,964,375 km2 103,343,000 inhabitants Mexico, D.F. Mexican peso
108 Table 5.3.9 Economical benchamarks, Mexico Economic Indicators 1999 2000 2001 2002 2003 Population (Thousands of Habitantes) a GDP (Millions of constant dollars of 1995 (US$/hab) a Variation (%) GDP per Cápita (US$/hab) Inflation (%) b It appraises from Change to End Year ($/US$) b Devaluation (%) Installed capacity (MW) c Generation of Electric power (GWh) c Demand of Electric power (GWh) d Losses (%) d Energy consumption per capita (KWh/hab) e 5.7.2 Description of the Mexican electrical utility system T
he electrical market is characterized for being the government monopoly, which through its Secretariats of the Treasure and Public Credit, Energy, Mines and Para‐state Industry and Trade and Industrial Promotion will be in charge of both the regulation and control of the sector as of the setting of rates and the issuance of regulations and standards. Changes that have been witnessed in recent years have been restricted to opening the electrical sector to private investors in the fields of power generation, so as to provide the Comision Federal de Electricity –CFE‐ or The Federal Commission of Electricity with energy for self power generation and for exporting purposes. 5.7.2.1 Power Generation System The Comision Federal de Electricity –CFE‐ or The Federal Commission of Electricity is provided with 40.4 GW electrical power generation facilities, of which 9.4 GW are assigned to hydro electrical plant sites, while 26.6 GW of thermo electrical plants and 1.4 GW of nuclear plants. The following chart displays in detail the allocation per type of power generation. 109 Chart 5.9 Effective Installed Capacity of Power Generation 5.7.2.2 Transmission The Comision Federal de Electricity –CFE‐ or The Federal Commission of Electricity is equipped with a transmission/distribution system to convey power from the generation source to end users. This operation is carried out through high, medium and low voltage facilities whose length and development can be seen in the table below. Table 5.4.0 Length of transmission lines Level of voltage (kV) 400 230 161 150 Total 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 30,033 30,412 31,116 31,804 33,063 34,079 35,271 35,271 39,210 39,182 Loads per use of the power transmission system. The current methodology to be implemented by The Comision Federal de Electricity –CFE‐ or The Federal Commission of Electricity to calculate the charges corresponding to transmission services requests is given by Resolution No. 146/2001. The charges for the requested transmission services at voltages of over 69 KV, will be equal to the summation of the costs below:
Fixed costs for the use of network
Variable costs for using the network, and
Fixed costs for managing the agreement The procedure to figure out the components of the billing for the requested transmission services considers the network users independently and their impact of each transmission service on the network.
110 The billing for the requested transmission service at levels higher than 69 KV will be equal to the summation of the costs below:
Cost for the usage of network, and
Fixed cost for managing the agreement Note: The billing for using the national transport system is calculated for the different regions, sending voltages, and magnitudes of power transmission. In 65% of regions, the cost for transport is 0212c US$/kWh, and in the remaining of scattered regions, the billing is higher. 5.7.2.3 Distribution The distribution network as of March 31, 2003 was made by the subtransmission lines (42.950 kms) and distribution (566.705 kms). The relevant voltage levels are 138.115.85 and 69 kW for subtransmission, and 34.5.23 13.3.6.6 4.16 and 2.4kV and low voltage for distribution. 5.7.3 Regulatory Framework 5.7.3.1 Current Outlook Power generation, transmission, and distribution activities are all vertically integrated. Art. 27 of Mexico chart specifically declares as follows:
“It is the exclusive nation liability to generate, conduct, transform, distribute, and supply power intended to meet the public services needs.
In this regard, no concessions will be granted to individuals and the nation will make the best use of the assets and natural resources required for such purposes”.
Art. 28 of the Mexican chart defines the strategic areas among which electricity is included. In its relevant section it states as follows:
“No monopoly will be formed through the state performed exclusive activities, in the following strategic areas: mail, telechart and radio‐telecharty; oil and all other hydrocarbons; basic petrochemical, radioactive minerals and nuclear energy generation; electricity… “.
“The state will have the companies it requires to assure the efficient management of the strategic areas for which the state is responsible, and for the priority classified activities, where according to the laws, the state may participate either by itself or together with the social and private sectors”. Therefore, to introduce definite changes into the electrical sector, it would be required to amend the chart in an attempt to eliminate the exclusiveness of the state in such functions.
111 The law of public service of electricity. This law known as Law of Public Service of Electricity was enacted on 22 December 1975. This law was subject to the following amendments during the ensuing years up to 1993. Article 1 states that it is the nation’s responsibility to generate, conduct, transform, distribute and provide electrical energy intended to supply a public utility by reaffirming the contents of Art. 27 of the chart. Art. 3 duly approved in December 1992 permits the private sector participation for the following power generation activities: power generation for self supply, co‐generation or small scale production; the power generation carried out by independent producers for their selling activity to The Comision Federal de Electricity –CFE‐ or The Federal Commission of Electricity; the power generation for exports derived from the co‐generation, independent production and small scale production; the imports of electricity, by individuals or companies, exclusively aimed at the supply for its own usage; and the power generation aimed at usage in emergency situations derived from interruptions in the electrical utility services. Art. 7 states that CFE shall be liable for the rendering of electricity services. Art. 30 defines that the selling of electricity shall be governed by the Secretariat of Treasure and Public Credit approved rates. Art. 31 states that the Secretariat of Treasure and Public Credit with the participation of the following secretariats: Energy, Mines, and Para‐State Industry and Trade and Industrial Promotion, and upon CFE proposal will set the rates, their adjustment or restructuring in a manner that it tries to meet the financial needs and the public utility services needs, assuring the rational energy consumption. Likewise, the Secretariat of Treasure and Public Credit may set special rates in peak demand times, minimal demand or a combination of both. Art. 32 refers to the fact that the amendment, adjustment or restructuring of rates will entail the immediate supply contracts amendment, that could have been entered into. 5.7.3.2 Scheduled Changes In 1975 and 2001, the Energy Public Services Law and the Rules of Energy Public Services were issued, reflecting a very moderate electrical sector opening. Electrical Reform Relevant issues of the initiative of the electrical reform submitted by the Federal Executive on August 16, 2002. Amendment to Arts. 27 and 28 of the Chart The state is the only entity authorized to render public utility of energy Individuals are allowed to generate and sell electricity to the state or the users whose consumption rates exceed the legally set minimal amount. The state shall assure the access and non‐discriminatory usage of the transmission and distribution network. Amendments to the Law of Energy Public Services This instrument provides the legal framework to modernize the individuals participation schemes in the electrical industry and to prevent the state commitment to assure the rendering of energy
112 public services. Among the principal provisions thereof are the following: La Comision Federal de Electricidad y Luz y Fuerza del Centro (The Federal Commission of Electricity, Light and Power of the Center) continue to render the power public service to all requesting users, regardless of his consumption rate. User consuming over 2.500 MWh a year in industrial, commercial or service activities may decide to be supplied with power through the public service or else apply for and becoming registered before CRE to enter into contracts with private power generators, or purchase the power in the power generation dispatching facilities. Individuals are allowed to be procured with permits to render services to those users who have managed to be registered through bilateral contracts. The Power Secretariat duties are defined therein, to include: planning of the national electrical system, issue the measures to assure the supply of energy for rendering public services and promoting the usage of renewable sources for the power generation. The Federal Executive body shall continue to promote the electrification of rural communities and backup programs to users of the lower economical strata. The National Center for Energy Control (CENACE) shall be liable for controlling the national electrical system networks impartial usage, operating the power generation dispatching. The power dispatch comprises the choosing of available plants operating at the lowest costs to meet the demand for power. Amendments to the Power Regulating Commission Law CRE is provided with powers to release the terms, conditions and rates applicable to the supply of the following services: the supply intended to provide the power public service, the conduction of electricity through the networks and CENACE rendered services. Federal Power Commission Organic Law This law provides the juridical regime under which CFE operates. The principal provisions thereto include: CFE purpose is to supply the electricity public service, as it has been doing. CFE is authorized to enter into agreements with the users recorded. The entity legal purpose is expanded to enable it to carry out some additional activities to increase its revenues and develop value‐ added services for its corporate customers. Budget and assessment related provisions and guidelines issued by SHCP and SECODAM should consider CFE management autonomy. CFE is managed by Administration Council and by General Director. The Administration Council shall be composed by the Secretaries of Power, Treasure, Environment and Economy; four President‐ designated representatives and three labor union representatives. The workers’ acquired rights shall be respected, and arrangements made with third parties will be adhered to. The National Power Control Center Organic Law This Law creates the National Power Control Center –CENACE‐ as a decentralized entity of the Federal Public Administration and defines the legal framework to govern the performance of its duties. This law will be enacted as of June 1, 2006 or as son as 12.5% of the national power, generation is purchased by the recorded users, whatever occurs first. CFE shall in the meantime carry out the activities to which this Law refers. CENACE duties are specified in detail herein, in relation to the operational control of the National Power System and the power generation dispatching operations. CENACE shall be run by a Government Board made up by the Power Secretary and four representatives designated by the President, following the proposals from the public and private power generators, PROFECO and the recorded users. CENACE creation shall not affect at all, that entity ascribed workers’ rights.
113 5.7.4 Billing Structure O
n May 24, 2001, the Public Service Law Regulation for Power was issued. Chapter VI of billing provisions provides the criteria and procedures to figure out the rates, as stated in the articles below. Article 47. The Secretariat of Treasure and Public Credit following a vendor’s proposal, with the participation of the Secretariat of Trade and Industrial Promotion shall set up the rates for the sale of electrical power, its price adjustment, modification or re‐structuring as per the public concern and the public service requirements modalities. The price adjustment will be made if any of the elements of the rate or the method of intervention of those elements are varied. Restructuring shall correspond to those cases in which it is necessary to add or delete one or several rates. Article 48. The rates setting up will be aimed at meeting the financial and public service expansion needs, encouraging the rational consumption of power which calls for the following: reflecting of the economical cost of the power generation, transmission and distribution items, including therein the power generated by the vendor itself or the power obtained by the vendor from external sources. It shall also consider the power infrastructure expansion requirements which shall be adjusted according to the evolution of economical costs along time, taking into account in a separate manner, the items of power generation, transmission and distribution, as well as the relevant differences or variations resulting from regional or seasonal factors; changes in productivity or efficiency and changes arising from the system operating conditions during the period of base, intermediate or peak demand. Additionally, the Secretariat of Treasure and Public Credit may consider the applicable international rates for offering a similar quality service. The items referred to in this article can be explicit or implied within the rates. Article 49. Rates are to specify the following items: type of supplies to which they are applicable, supply voltage: high, medium or low; application times of rates, other than 24 hours; charges for demand or consumption, as well as the monthly minimal charge; charges for the hired demand for the service; account of the guarantee fund; places where the rate will be applicable. If places where the rate is to be applicable are not specified, it shall be understood that rates shall be applicable nationwide; effective date of the rate, and some other provisions related to the application of rates. The rates and their additional provisions, if any, shall be published in the Federation Official Gazette and at least in two daily newspapers having a high circulation rate. These requisites are to be met for the application of rates. The supplier shall print brochures with the approved rates and shall give a copy thereof to any person requesting it, so that people can be informed about the rates corresponding to the relevant supplies of energy, as well as their characteristics and quantities. Likewise, the vendor shall provide information and assistance to the interested parties regarding the features of the requested power supplies and the relevant applicable rates. Article 51. The vendor proposal for the setting, adjustment or restructuring of rates shall be accompanied with at least the following information attached thereto: a justified study of the proposal indicating the scope and consequences of the proposal to the vendor financial status, in the application of rates or in any other issue; financial statements of complementary results to back up the proposal; studies of economical costs for electrical energy on which the proposal is to be based; a description of the items making part of the proposal; and an estimate of outcomes 114 considering the price adjustments, modifications or restructuring. The proposal is to be approved by the vendor’s Board of Government prior to its submission to the Secretariat of Treasure and Public Credit, which may ask the vendor to provide additional information related to the study of the proposal. If the additional information is not provided within the preset term, such Division shall resolve the case in conformity with the available data. Article 52. When the supplier, with the Secretariat approval, modifies the voltage as a consequence of the development of the systems thereof and if this fact results in the application of a different rate established by the contract, the new rate shall be applicable from the date on which the supply is provided under the new voltage conditions. Article 53. When a given supply meets the features of application of two or more rates, the user may hire the services of the general usage rates better suited to its concerns. If the user hires the supply of some specific usage rates, the user cannot use the power for other applications. In this latter case, the facilities are to be split to hire individually the relevant supplies. The user shall be under the obligation of carrying out the separation and shall agree with the vendor the necessary time frame for carrying it out. After the separation is performed, services will be hired for the application of the relevant rates for each case. If the user fails to enter into an agreement or fails to make the separation within the preset term, the vendor shall stop said service rendering, adhering to Article 35 provisions. Hired Demand Option for Services under Hourly Rates The vendor is authorized to make special arrangements with users as stated herein below: Users having rates H‐S, H‐SL H‐T and H‐TL can be billed according to the hired demand if they request so, according to the modalities below: Setting up of Hired Power Demands The user shall set its hired power demands within the following periods: peak (DCP), intermediate (DCI), and base (DCB). Users in Lower California will also set their semi‐peak contracted demand (DCS). Hired demands cannot be modified before one year and they shall comply with the ratio below: DCP< DCI < DCB DCP< DCS < DCI for Lower California Demand invoiced in excess (DFE). The demand invoiced in excess for all regions, except Lower California, Lower California South and Northeast was defined as: In Lower California for rates H‐S, H‐SL H‐T and H‐TL during the months of the season with peak and semi‐peak periods the equation below is applicable: During the months having no peak or semi‐peak periods the equation below is applicable. In Lower California South and Northeast, for rates H‐S, H‐SL H‐T and H‐TL within the months of the season having peak periods the following equation is applicable:
115 DFE = (1 –FRI) X max (DP‐DCP,0) + FRI x max (DI – DCl,0) In addition, during the months having no peak periods, the following equation is applicable: DFE = FRI x max (DI –DCl,0) + FRB max (DB‐DCB,0) Charge for Demand Invoiced in Excess When DFE exceeds one twentieth of DCF, an additional charge equivalent to 4.545 times the charge for kW of billable demand will be applicable, as per the applicable rate and using the DFE method. CFE includes in the invoice of electricity to industrial users, all charges in addition to the energy consumed and demanded power. These charges are as follows:
Charge for power factor as stated above.
Charge for lighting
Value added tax (IVA) The user shall try to keep a power factor (FP) of approximately 1.0 as much as possible. However, if the power factor during any period of billing (monthly) has an average value of less than 0.9 behind, the vendor shall be entitled to charge an additional sum of no more than 120% pursuant to the proposition below: Surcharge percentage = 3/5 (90 – 1) x 100 FP Where FP is stated in terms of a percentage. If the FP is higher than 90% then the vendor will award a bonus of no more than 2.5% pursuant to the expression below: Bonus percentage = ¼ (1 – 90) x 100 FP 5.7.4 Rates applicable to large users Rates are defined according to four levels of supply voltages: Low voltage, which is the service to be supplied to voltages of less than 1 kV Middle voltage, which is the service supplied in voltage levels of more than 1.0 kV, but lesser or equal to 35 kV. High voltage at the subtransmission level which is the service supplied in voltage levels between 35 kV and less than 220 kV. Two types of rates are applicable for subtransmission and transmission purposes: H‐S‐ and H‐T Rates for general services, applicable to services using energy for any application, which due to the features of usage of its demand, file a request for being recorded under this kind of service, which shall be valid for one year.
116 H‐S‐ and H‐TL Rates for long‐term general services. Additionally, rates are structured by regions, to include the effects of seasons within the year and the influence thereof to determine the schedules of peak, semi‐peak, intermediate and base demand. Those regions are as follows: Lower California Lower California South Northeast North Northeast Central South Peninsular The minimal monthly corresponds to the value resulting from applying the cost of kW of demand invoiced at 10% of the contracted demand. The hired demand shall be initially set up by the user; and the value thereof shall not be less than 60% of the total connected load or lesser than the capacity of the bigger motor or apparatus installed. If 60% of the total connected load exceeds the user’s substation capacity, the hired demand will only be the capacity of such substation operating at a 90% factor. Rates are adjusted on a monthly basis by IPP and according to the fuel costs, according to the formulas established by the voltage level. 5.7.5 Permanent Information System Information on final rates that are payable by the Big Users can be permanently updated, together with the monthly reports released by the Federal Electricity Commission which appear in their website: (www.cfe.gob.mx). Positions Jan. Feb. Mar. Apr. May. Jun. Jul. Baja California Dem. F. ($/kW) Ener. P.($/kW) Ener. S:P.($/kW) Ener. I.($/kW) Ener. B.($/kW) South Baja California Dem. F. ($/kW) Ener. P.($/kW) Ener. I.($/kW) Ener. B.($/kW) Central Dem. F. ($/kW) Ener. P.($/kW) Ener. I.($/kW) Ener. B.($/kW) Dem. F. ($/kW) Ener. P.($/kW) Ener. I.($/kW)
117 Ener. B.($/kW) Northwest Dem. F. ($/kW) Ener. P.($/kW) Ener. I.($/kW) Ener. B.($/kW) North Dem. F. ($/kW) Ener. P.($/kW) Ener. I.($/kW) Ener. B.($/kW) Peninsular Dem. F. ($/kW) Ener. P.($/kW) Ener. I.($/kW) Ener. B.($/kW) South Dem. F. ($/kW) Ener. P.($/kW) Ener. I.($/kW) Ener. B.($/kW) 5.7.5.1 Procedure for setting the Large User rates To obtain the Mexico prices, the monthly charges information published by the Federal Electricity Commission –CFE‐ are taken. That information is turned into a monomial rate using the typical load curve fit of a usual industry connected to the transmission system. This calculated mean price does not include the charges for power factor, charges for the rights of lighting or VAT. The typical load curve consumption model is as follows: Invoiced demand: 9,696 kw Energy P= 69.696 kwh Energy I = 3.361.920 kwh Energy B = 2.459.040 kwh Example of calculation of loads For the H‐T voltage level, the center region and the month of March 2003 yield (according to the chart above) the charges below: Leading‐edge energy charge = 0.1607 USD$ kwh Base energy charge = 0.0378 USD$ kwh Intermediate energy charge = 0.0409 USD$ kwh Billable energy charge = 4.3758 USD$ kw Energy charge = 244016.69 $USD (Leading edge energy* charge of leading energy) + (intermediate energy* charge for intermediate energy) + (base energy*charge for base energy) Charge for demand = 9696 kw * 4.41 USD$/kw = 42759.36$USD Consumption of energy = 5890656 kwh Mean price = 4.87 cUSD$/kwh Mean price payable for the energy supply, which is the result of dividing the summation of charges
118 over the total power consumption. The above methodology affords to obtain the mean prices for each region. Table 5.4.1 Average price per region Charge per kilowatt—energy hr. US$ Charge per kilowatt invoice demand US$ *Baja California Baja California Sur Central Notheast Northwest North Peninsular Soth Average Peak Inter. Base Billing US$ Average Price Kilowatt US$ This methodology is replicated for each month. The following values are obtained for year 2003. Figure 5.10 Average monthly price per kilowatt. In order to estimate the generation + transmission and distribution + other costs the result of the preceding survey are taken into consideration, where generation + transmission represent 81.49% and distribution + others represent 18.2996. The mean price for December 2003 was 5.17 US$/kwh and the breaking down thereof was as follows: Generation + transmission = 4.22 cUSD$/kwh Transmission = 0.21 cUSD$/kwh ; then Generation = 4.01 US$/kwh Distribution and others = 0.95 c US$/kwh
119 Jannuary Febrary March April May July Aug Septemb er October November June Exchange rate Average price Kilowatt US$ Decembe r Exchange Rate Average Price Kilowatt US$ Table 5.42 Components of the power rate for Mexico. Dic/03 Generation Transmission Distribution and others Taxes Total 4.01 0.21 0 5,17
0.95 120 PARAGUAY 5.8.1 Principal indicators Official name: Area: Population: Capital city: Currency: Republic of Paraguay 406,752 km2 5,924,000 inhabitants Asuncion Guarani
121 Table 5.4.3 Paraguay Economic Indicators Economic Indicators 1999 2000 2001 2002 2003 Population (Thousands of Habitantes) a GDP (Millions of constant dollars of 1995) a Variation (%) GDP per Cápita (US$) Inflation (%) b It appraises from Change to End Year ($/US$) Installed capacity (MW) c Generation of Electric power (GWh) c Demand of Electric power (GWh) c Losses (%) c Energy consumption per capita (KWh) Population (Thousands of Habitantes) a 5.8.2 Description of its power system P
araguay power system is characterized for having just one utility, which is vertically integrated. Its name is Administracion Nacional de Electricidad – ANDE‐ (The National Power Administration), a self‐controlled entity belonging to the state of Paraguay. The mission of this company has been since 1964 to render the public service of power throughout its national territory. 5.8.2.1 Power Generation System The power generation offers in the country is assured by the hydro electrical power derived from the bi‐national projects performed with Brazil (Itaipu: 12.600 MW) and with Argentina (Yacyreta: 3.200 MW). In each 50% of its capacity corresponds to Paraguay, as provided by the relevant international treaties. The hydroelectric station at Itaipu is responsible for generating 93% of the power consumed in Paraguay. The current maximal national demand is about 1200 MW while the annual power consumption is reaching 4500 GWh, which is too much below the bi‐national hydroelectric capacity available in the country. 5.8.2.2 Transmission System The Paraguay National Interconnected System (SIN) is made by 220 kV lines and it is divided into 122 subsystems bonded to each other. 5.8.3 Regulating framework C urrent outlook. There is no wholesaler power market. The planning of the National Interconnected System to guarantee the power supply is carried out by the National Administration of Electricity – ANDE ‐, in the short, Middle and long term. Based upon the market research, in a 10 year horizon, new transmission projects are justified whose purpose is the regional energetic integration or possibly specific reinforcements. International Trade The effective legislation authorizes ANDE to buy and sell, inside of and outside of the national territory, electric power, to other companies or electric systems of public/private service or and exchange energy with them. To offset the lack of a regulatory framework, all exchanges carried out to this date, have been regulated by bilateral contract. For international exchanges, the reference is the importer wholesaler market. Regulation on congested operations rights is not available. 5.8.4 STRUCTURE OF RATE A NDE elaborates a sheet of rates that is sent to the Executive Power for its approval by ordinance, which is published and becomes valid in all the National territory. Ordinance 2.109 of 1994 establishes special conditions for the installation of big Consumers connected in the levels of 66KV and 220 KW. All clients are regulated, classified into categories according to the consumption group to which they belong, that is to say, if it is domestic, commercial, industrial, general, high and very. High voltage, government distributions and public lighting. For the transfer to rates of costs in purchase contracts carried out by Distributors, the effective legislation establishes that rates will be fixed with base to the budget, so that rates produce an Annual Net Income of not less than eight per cent (8%) or higher than ten % (10%) of the effective immobilized investment during the exercise term. At this time, prices of energy are lower than the regulated price, pursuant to the standards mentioned above. The current rates sheet was issued on March 7 2002 by Ordinance 16600 of the Executive Power of the Nation. 5.8.5 PERMANENT SYSTEM OF INFORMATION. I
t is possible to upgrade permanently the information of the final rates paid by big consumers starting from the rates published in theRates Sheet of the National Administration of Electricity, which are found in its website. 123 5.8.5.1 Procedure of setting of rates for Big Users To obtain prices binomial rates are taken of High and Very High voltage, Codes 610 and 620 respectively. Using a factor of load of 83% and a rate of change of 6177 Gs/US $we can obtain the following results. High voltage (Code 610) Very High voltage (Code 620) Price of power (US$/KW) Price of energy (US$/KWh) Load Factor Average Amt. US$ / kwh Where the value of Very High Voltage corresponds to the price of power generation plus the price of transmission. Generation + Transmission = 1.6 US$/Kwh. Therefore, the price of distribution plus others corresponds to: Distribution + Others =2.1057 ‐ 1.6948 = 0.501 cUS $/ KWh. Users of high voltage have the possibility of selecting differentiated rates in the peak hours regarding the off‐peak schedule (Differentiated High Voltage Rates Code 630). For the structure of consumption model for industry very similar results are obtained Concept Units Used US$ US$/Unidad Power Demand (KW) Energía Punta (KWh) Intermediiate energy (KWh) Low energy (KWh) Charge for energy Total invoiced Energy & power US$ Fixed cost US$ Total energy units consumed Amt in US$ per KWh Table 5.44 Components of electric power rate for Paraguay Generation Transmission Distribution and others Taxes Total Dic/03
124 PERU 16.1 MAIN INDICATORS Official name: Republic of Peru Area: 1,285,216 km2 Population: 27,203,000 inhabitants Capital: Lima Currency: Nuevo Sol
125 CHART 5.45 ECONOMIC INDICATORS­ PERU. Economic Indicators 1999 2000 2001 2002 2003 Population (Thousands of Habitantes) a GDP (Millions of constant dollars of 1995) a Variation (%) GDP per Cápita (US$) Inflation (%) b It appraises from Change to End Year ($/US$) Installed capacity (MW) c Generation of Electric power (GWh) c Demand of Electric power (GWh) c Losses (%) c Energy consumption per capita (KWh) Population (Thousands of Habitantes) a 5.9.2 DESCRIPTION OF THE PERUVIAN ELECTRIC SYSTEM 5.9.2.1 Generation System The Peruvian electric market is served by 6.1 GW of installed capacity, with 55% of supply that is derived from the hydroelectric energy and 45% from thermal energy. There exist around 20 generation utilities. The government has a managerial participation of +/‐ 50% in the power generation activity. A large extent of the hydroelectric power stations have reservoirs (natural and artificial) with regulation systems to store energy in humid months and to keep it, as a prevention means, during dry months. This regulation capacity allows storing volumes of water for annual periods. The Peruvian electric system maintains a generation reserve system higher than 50% and the supply is guaranteed in case of any natural phenomenon or fails of the system. The following chart shows the co charge of the installed capacity of Peru in 2003.
126 Chart 5.11 INSTALLED CAPACITY OF GENERATION BY 2003 5.9.2.2 Transmission system The electric system of Peru is made by the National Interconnected system (SINAC) starting from October of 2000 that includes the regions of Tumbes , Piura, Chiclayo, Trujillo, Lima, Ica, Arequipa, Cuzco, Puno, Mosquera and Tacna. The main system of transmission trunk between Tumbes and Tacna is 220 KW while derivation systems are connected to 138 KW and 60 KW. Rural systems are connected mainly in 33 KW and 22.9 KW. The main utilities of transmission has been recently gave under concession agreements to the private sector. The length of installed lines of SINAC is as shown below Table 5.46 LENGTH FOR LINES AT 220, 138, 66 AND 50 KW. Voltage kV Length km 220 138 66
50
Total 2272,17 5.9.2.3 Distribution System. By the end of year 2000, there used to operate 21 distribution companies. The main private utilities are the following: Edelnor, Luz del Sur, and Electro Sur Medio. Those in the public sector are Hidrandina, Electric Society of South West, Electrocentro, Electronorte and Electronoreste. The law of Electric Concessions (LCE) provides that distribution concessions are agreed for an undetermined term Losses in Distribution In 2002, energy losses in the distribution systems in the country (interconnected and isolated)
127 were about 9,1%, a figure higher by 0,4% than the percentage of losses reached within the first quarter of 2003; where 2.1% corresponds to recognized losses and 7.1% corresponds to standard losses, while real losses were 8.7% for the same quarter in 2003. CHART 5.12 EVOLUTION OF LOSSES IN DISTRIBUTION IN PERU 5.9.3 REGULATORY FRAMEWORK he energy SECTOR IN Peru has a regulatory system that promotes the vertical disintegration of generation, transmission and distribution activities. Rates are preset by OSINERG (The Organ Supervising the Investment in Energy) following the orders of the Law on Electric Concessions and its Regulations in a strict manner. T
The regulation process is carried out within a transparency framework which includes public hearings where all the interested parties (i.e. consumers, companies, users' associations, Ombudsman, among others) have the opportunity to participate. 5.9.3.1 The Regulator Body OSINERG The state owned entity regulating the electric sector is the Organism Supervising the Investment in Energy (OSINERG). This entity was incorporated by Law 26734 as a public entity with functional, technical, administrative, economical and financial autonomy. This body has the responsibility of fulfilling with the regulation of rates and its inspection. Its regulating function requires that OSINERG sets prices in the so called bar system for the generation system, as well as tolls for the main and secondary systems of transmission, the values added of distribution of middle and low voltage, the costs of connections and charges for replacement and maintenance of connections. Law 27332 provided the integration of the Commission of Energy Rates (CTE) with OSINERG, incorporating the Join Management of Rates Regulation (GART), an executive organ of OSINERG liable for proposing to the Directive Council the rates in the energy sector. The performance of OSINERG, is evidenced for example in regulations of rates For electric generation. This means that during the past six years, the differences with proposals of generators has meant a reduction of more than 6.000 million of soles for the consumers' benefit. 128 Thus, for the latest regulation, generators requested an increase of 17% and OSINERG determined a reduction of 4%, this shows the independence of this regulating body. 5.9.3.2 The Committee of Economic Operation of the System – COES – made by the proprietors of the power generation stations and by the transmission systems. This entity is responsible for planning the operation of the Interconnected System, control of the operation, coordination of maintenance, calculate the demand and energy of each generating unit and to guarantee the energy purchase or sale, as well as the sale of power hired at a regulated price. 5.9.3.3 Regulation for Expansion of the Peruvian Electric System. The expansion of generation in Peru is derived from the sale in the market of contracts. The spot price of energy is subject to randomized variations as well as to seasonal variations, as the result of variability of the available hydroelectric generation. There is remuneration for the generation capacity by means of the operation of the market of firm power transfers among generators. The expansion of transmission is the result of a centrally planned procedure, with bids for the award of works. The central mechanism to assure the supply in the Peruvian electric market is based upon the obligation that distribution concessionaires have of keeping effective contracts with generating companies that guarantee it their total requirement of power and energy for the next 24 months as minimal. 5.9.4 RATE STRUCTURE FOR END USERS 5.9.4.1 Setting of Rates in Bar for Regulated Users In July of every year at the latest, the process of setting the rates in bar is started, for the ensuing period from November to April, with the presentation of the technical and economical study of the proposal of rates by the Committee of Economic Operation of the National Interconnected Electrical System (COES‐SINAC). Similarly in January the process for setting the rates in bar is started for the May – October period. In bar rates are the rates applied to the point of the electric system prepared to deliver and/or withdraw electric power. The main components of electric rates have different periods of regulation. Rates in bar or generation rates are regulated every six months and the new values are into effect the first day of May every year and the first day of November. The regulation of rates is also made in a joint manner for the Main System of Transmission (SPT) of the National Interconnected Electric System (SEIN). The third important component of the applicable electric rate for the end user is the added value of distribution (VAD) also known as rate of electric distribution, whose regulation is made every four years. The next setting of VAD will be carried out by year 2005. The reference Bar for the application of the basic price of energy is the city of Lima (Barras de San
129 Juan, Santa Rosa and Cavarría at 220 kw). Lima represents around 50% of the demand of SEIN and it is a place where secondary systems meet of the main power generation centers. For setting the basic price of power, the city of Lima is considered as a reference place, by 220 KW, as this is the most convenient location to install additional capacity of leading power in SEIN, pursuant to the last analysis carried out by OSINERG and by COES‐SINAC. The theoretical rates of power and energy for each Substation Base in the system are obtained by expanding the basic prices using the respective factors of losses. Theoretical prices are then compared with the weighted average price of the free market (values for the last half year submitted by the companies). If they are not different by more than 10% of effective free prices, then theoretical prices of energy are accepted as definite Bar Rates for the following period. 5.9.4.2 Distribution prices The remuneration received by the distributor is the Value Added of Distribution (VAD), applicable to the end user. Users paying the VAD are those connected to medium and low voltage. VAD includes the components of trading costs, standard costs of investment, maintenance and operation, representing the total cost incurred to make power and energy available to the customer, from the equivalent bar of half voltage up to the point of connection. Users in half voltage, those connected to a voltage higher than 1 KW, and smaller than 30 KW, those users connected to a voltage lower than or equal to 1 KW are considered as users in Low Voltage. Users of half voltage will be enabled to freely choose any of the existing rating options, keeping in mind the measurement system required by the respective rating option. The rating option chosen by the user should be accepted by all means by the utility of electric distribution. The detailed information about VAL, Fixed Charges, parameters of Rates Calculation and the updating formulas can be obtained in the web page of OSINERG (www.osinerg.org.pe, or www.cte.org.pe), or from resolution OSINERG N0 2120‐2001 ‐ OS/CD. 5.9.4.3 Other Costs Charged to Camisea Project This is the energy project considered by many players as the most important project in the energy history of Peru. This consideration is based upon the dimensioning of its reserves that could change the current conditions of the energy importing country and the direct economic efficiency of Natural Gas that could raise the competitiveness of the industry of Peru.
130 The Camisea deposit, according to official reports possesses non‐developed proven reserves of natural gas of 8.1 trillion of cubic feet. This quantity is equivalent to 1500 million barrels of oil (BOE). In 1999, Law 27133 was enacted, for the promotion of Natural Gas and Its regulations were approved with D.S. N0 040‐99‐EM, in order to establish the regulatory framework permitting the development of the industry of Natural Gas. For raising the funds necessary for the project of MAIN NETWORK OF CAMISEA, users of electricity will be charged:
US $1.00 / KW‐month for the period between November 2002 and April 2003.
US $1.50 / KW‐month for the period May 2003 to October 2003.
US $2.00 / KW‐month for the period November 2003 to April 2004.
US $2.50 / KW‐month for the period May 2004 to November 2004. Charge for reactive power. The charge for Reactive Energy CER is the charge paid monthly for the Reactive energy. The fixed value of this charge by Resolution OSINERG 2120‐2001 ‐ OS/CD is 0.0428 Soles/KVARh 91 5.9.4 TAXES AND CONTRIBUTIONS I nvoices of consumers' for energy include a 19% IVA tax from July 2003. Until that date, the applied IVA was 18%. This IVA is recoverable for the productive sector with its own sales, therefore, it is not included as any specific cost for energy input. 5.9.5 MARKET OF BIG CONSUMERS. T
he Peruvian electric market included regulated and non‐ regulated. Users. The non‐regulated users or free clients are those that have a demand bigger than or similar to 1,000 KW or if they exceed 20% of the maximum demand of the area of distribution concession, and they are free to negotiating generation rates and conditions for the energy purchase and power at level of bars. The price of generation (capacity and energy), the maximum demand and the sale conditions are freely agreed without any interference of the state. There exist many contracts whose terms vary between one and fifteen years. They do not negotiate tolls for the use of systems of transmission and of distribution that are regulated by OSINERG. As of December 2003, there existed 251 free clients, of which 45 are connected to the network of Very High Voltage (MAT), 40 to the networks of High Voltage (AT) and 166 to the network of Half Voltage (MT). The activity concentrating the biggest number of free clients is mining with 47, followed by textile, fishing and foods. The Non Regulated Market or Free Market is 47% of the total of sales to end users. 131 5.9.5.1 Procedure of Rates setting for Non Regulated Users In accordance with the Law of Electric Concessions the transmission rates and distribution rates will be regulated by the Commission of Rates of Energy, independently if these correspond to electricity sales for public service or for those supplies that are made under competition conditions, as set out by the Regulations of Law. For supplies made under competition conditions, prices of generation will be reached by mutual agreement between the parties. In the final rate of free or non‐ regulated users, the only charge that is free of regulation is the generation charge, while all other charges such as transmission, distribution, charge for Camisea project and charge for reactive energy are all charges established by resolution by complying thus with the legal provisions in the Law of Electric Concessions and Regulations. 5.9.6 SURVEYS W
ith the cooperation of ACIDE, (Association of Intensive Consumers of Energy in Peru), 10 surveys were made in the industrial sector, of which one is of one company connected at voltage levels of more than 138 KW. The applied surveys cover principally the mining, drinks and ceramic sectors. The following chart describes basic information of the companies that responded to such surveys. CHART 5.48 INTERVIEWED COMPANIES IN PERU No. Company Sector 1 Minsur 2 Atacocha 3 Yaulicayu S.A . 4 Sociedad Minera El Brocal 5 BHP Tintaya S.A . 6 CastroVirreyna Cía Minera 7 Ceramics Lima 8 Ceramics San Lorenzo 9 Unión de Cervecerías 10 Cervecerías San Juán Voltage
KV The average found for March 2003 of interviewed companies, was 4.26 US$/Kwh, for connected companies to voltage levels equal to or higher than 50 KW. The average of the connected companies at levels of voltage below 50 KW was 5.99 US$/Kwh. These values include generation, transmission, distribution, charges for Camisea project, and reactive energy cost. IVA tax is not included, as such costs are recoverable. The same surveys revealed that the average cost of generation and transmission of energy in bars of high voltage was 3.23 US$/kwh. The previous values were contrasted with mean prices of the free market taken from the Report OSINERG‐GART/DGT No. 045‐2003 that include the "Process of Regulation ‐ Rates in Bar May 2003 to October 2003". Such mean prices of the free market correspond to the average of prices reported by companies with free clients, for the 6 previous months that is from November 2002 to April 2003. 132 The mean free price for big consumers in the wholesale electric market was 11.77 cent soles/kwh, equal to 3.39 US$/kwh. These prices include the components of generation and transmission and they are comparable to the results of surveys. 5.9.7 Permanent Information System The information of average rates of free clients, defined as big energy consumers having a demand for power higher than 1000 KW or exceeding 20% of the maximum demand of the concession area of distribution, can be obtained every six months from the reports prepared by OSINERG for the process of approval of rates in bar. This is possible due to the legal need of checking that the mean price of rates in bar applied to define the rates of regulated clients, cannot vary more than 10% from effective mean prices of free clients. The behavior of prices in the free market has a specific weight due to the fact that as this market is competitive and acts under competition conditions, it will be possible, to reach an appropriate reference price for the segment of regulated clients. Therefore, starting from August 2003, OSINERG publishes a monthly report on the free market of electricity, which includes information on consumption and mean price of each effective contract in the free market. This information already allows upgrading the mean price of free customers on a month‐to‐month basis. The most up‐to‐date information currently is the information corresponding to December 2003. 5.9.7.1 Prices for Dember 2003 As stated above, rates for March 2003 for free clients are obtained from mean prices reported by the companies with free clients for the November 2002 to April 2003 term, used to compare the rates in bar proposed for the May to October, term in 2003. The mean free price for big consumers in the wholesale electric market was 11.77 cent Soles/Kwh, equivalent to 3.39 cUS $/ Kwh. These prices include the principal generation and transmission components. The mean price of main transmission is obtained from the chart of theoretical prices, PCSPT variable (charge of unit toll for connection to the main system of transmission) as shown in the following page. The value for November 2002 to April 2003 term, was 1,97 US$/KW‐month, equivalent to 0,35 US$/Kwh (97)xx, while the mean price of generation is (3.39‐0.35) US$/Kwh = 3.04 US$/Kwh. The remaining components of the rate such as tolls in secondary systems of transmission, the charges of Camisea and charges for reactivate energy are figured‐out as a difference using the final rate data as reported by the Statistical Report of 2002 by OSINERG. This report discloses that the total mean price for connected users at Very High Voltage‐ MAT ‐ (above 100 KW) is on average 4.26 US$/Kwh (value, which happens to be equal to 4.26 cUS/Kwh from surveys for users above 50 KW). Due to the above, the remaining components of the rate such as prices of secondary transmission, charges for Camisea and reactive energy are assumed to be equal to the difference between the total value and the mean value of free prices, that is 0.87 US$/Kwh for users connected to MAT.
133 5.9.7.1 Prices for December 2003 The free prices negotiated for big consumers as of December 2003 (principal generation and transmission), are obtained from the report of free market of electricity as of December 2003, broken down by levels of voltage at Very High voltage(MAT), High Voltage(AT) and Mean Voltage(MT) (98) xx. For users connected to MAT (>100 KW), an average of 11.46 cent Sol/kwh is obtained, equivalent to 3.31 US$/Kwh, using the exchange rate for December 2003 of 3.463 Soles/US dollar. The mean price of main transmission is figured out from the chart of theoretical prices, variable PCSPT (charge of unit toll for connection to the main system of transmission); for the period from November 2003 to April 2004, was 3.81 US$/KW month, equivalent to 0.67 US$/Kwh (99) xx, while the mean price of the resulting generation is (3.31‐0.67) US$/Kwh = 2.64 US$/Kwh. Charges for Camisea for December 2003 are US$2/KW‐month, twice as much as they cost by March 2003, which means that they were increased by 0.18 US$/Kwh and the total of other charges for December are increased in proportion regarding the values of March 2003, and therefore they are considered to be (0.87+0.18) US$/Kwh. The following chart summarizes the values of components of energy rate for the big consumers in Peru connected at the level of Very High Voltage, for March and December 2003. Table 5.49 Rates in bar ­ period Nov 2002 ­ April 2003 Bar ppM $/kW­mes PEMP C$/kWh PEMF C$/kWh PCSPT $/kW­mes PPB $/kW­mes CPSEE C$/kWh Talara Piura Oeste Chiclayo Oeste Guadalupe 220 Guadalupe 60 Trujillo Norte Chimbote 1 Paramonga Huacho Zapallal Ventanilla Chavarria Santa Rosa San Juan Independencia Ica
Marcona Mantaro Huayucachi Pachachaca Huancavelia Callahuanca ELP Cajamarquilla Huallanca 138 Viscarra Tingo María 220 Aguaytia 220 Pucallpa 60 Tingo María 138 Huánuco 138 Paragsha II 138 Oroya Nueva 220 Oroya Nueva 50 Carhuamayo 138 Caripa 138 Machupicchu
134 Cachimayo Dolorespata Quencoro Combapata Tintaya Ayaviri Azángaro Juliaca Puno 138 Puno 220 Callali Santuario Socabaya 138 Socabaya 220 Cerro Verde Repartición Mollendo Montalvo 220 Montalvo 138 Llo 138 Botiflaca 138 Toquepala Aricota 138 Aricota 66 Tacna 220 Tacna 66 Table 5.50 Components of the rate of electric power in march and december 2003 Voltage Level Generation Transmission Subtransmission, Taxes & Period Camisea & Reactiva Total MAT (March 2003) MAT (December 2003)
135 URUGUAY 5.10.1 MAIN INDICATORS Name official: Area: Population: Capital: Currency: Republic of Uruguay 176,215 Km2 3,411,000 inhabitants Montevideo Uruguayan peso
136 TABLE 5.5.51 ECONOMIC INDICATORS Economic Indicators 1999 2000 2001 2002 2003 Population (Thousands of Habitantes) a GDP (Millions of constant dollars of 1995) a Variation (%) GDP per Cápita (US$) Inflation (%) b It appraises from Change to End Year ($/US$) Installed capacity (MW) c Generation of Electric power (GWh) c Demand of Electric power (GWh) c Losses (%) c Energy consumption per capita (KWh) Population (Thousands of Habitantes) a 5.10.2 DESCRIPTION OF ELECTRICAL SYSTEM The National Law of Electricity (Law 14.694 of September 1º 1977) and the So‐called Law of Regulatory Framework of the Electric Sector (Law 16.832 of the 17 June 1997), are the main laws governing the electric sector of Uruguay. In the Regulatory Framework Law the different stages of electric business were divided form each other, the character of public service of generation was eliminated and it was declared as free activity, keeping the character of public service of transmission and distribution. Likewise, it is provided that the Executive Power is responsible for fixing the standards, policies and conditions for the operation of the system, and the regulation thereof is under the responsibility of the Regulating Unit of Electric Power ‐ UREE ‐, further on it was suppressed and substituted by the Regulating Unit of the Services of Energy and Water ‐ URSEA. By means of the law the Wholesale Market of Electric Power is created, which is administered by the Administration of the Electric Market ‐ ADME ‐ and the access to the transmission and distribution networks will be free. This law was regulated by ordinances 276/002, 277/002, 278/002 and 360/002. The state owned company National Administration of Factories and Electric Transmissions – UTE ‐ vertically integrated, was created by the law of October 1912. This entity had the condition of being a monopoly for the generation until the appearance of Salto Grande. At this time, it keeps the monopoly of transmission, while for distribution other “sub‐distributors” have already appeared in the market.
137 The bi‐national entity (Uruguayan‐Argentinean) Mixed Technical Commission of Salto Grande CTM ‐, depending upon the chancelleries of both countries, administers the power hydroelectric station bearing the same name. All assets corresponding to this work, as well as the energy they produce, belong in equal parts to Uruguay and Argentina. 5.10.2.1 System of Generation Out of the 2,052 MW of installed power, 74% is generated in hydroelectric plants and 46% by thermal plants. 5.10.2.2 Transmission The transmission network in the country included as of the end of December 2002: 770 km of air lines of 500 kw, 3.493 km of external power lines and underground cables of 150 kw and 96 km of external power lines of 60 kw. 5.10.2.3 Distribution The distribution network operated by UTE, which is also the proprietor of those facilities, it is an extensive network of external power lines, underground cables and substations covering most of the national territory. By the end of 2002 the plant consisted of 3.593 km of external power lines and underground cables in 30 and 60 kw, 276 transforming stations of MT/MT, 34.338 km of external power lines and underground cables operating in 6 and 15 kw, 33.351 transformation substations of MT/BT and 21.848 km of external power lines and underground cables in BT. 5.10.2.4 Interconnections Interconnections with Argentina The Uruguayan electric system is interconnected in alternating current with the Argentinean electrical system by means of two high power links (of about 1000 MW each) crossing the river Uruguay; these links make part of the so‐called "square of Salto Grande", a transmission system of 500 kw associated to the hydroelectric power station bearing the same name and operated by CTM itself. The interconnection located to the north is located in the power station of Salto Grande and it links the two substations of 500 kw of such power station, one of them in Uruguay and the other in Argentina. The interconnection located to the south links San Javier's substation in Uruguay with that of Colonia Elía in Argentina, both operating also with 500 kW. Interconnection with Brazil Since the electric systems of Uruguay and Brazil have different frequencies (Uruguay 50 Hz and Brazil 60 Hz) it is not possible to link both systems in Alternate current, but rather it becomes necessary to use frequency conversion equipment, operating at high investment costs. By year 2000 an interconnection of 70 MW of power started to operate in the area of Rivera/Livramento that links the Uruguayan transmission system (150 kw) with that of the Brazilian state of Rio
138 Grande do Sul (220 kw). 5.10.3 REGULATORY FRAMEWORK T he regulation is designed to assure that the expansion takes place due to the demand of contracts of distributors and the big consumers. Considering the importance of imports, procedures to assure a minimal level of local supply have been considered. 5.10.3.1 Current Situation This sector companies are all state‐owned. It is anticipated that upon the transition commencement to the new sector Regulatory Framework, there will be initial contracts between state generators UTE and Salto Grande and the current monopolistic distributor, i.e. the same UTE. A condition to be deemed a free customer shall be to own a connected power exceeding 250 kW. Power and Water Services Regulatory Unit URSEA is subject to direct governmental control, and shall, among others, discharge the following functions:
Enforcing the Regulatory Framework Law, and regulation thereof.
Establishing safety and quality rules.
Defining technical standards and procedures to measure, bill and control consumption. .Advising the Government on matters involving the granting of concessions, permits and authorizations, as well as monitoring of agreements and definition of rates.
Wholesale Power Market Description ‐ MMEE
Decree 360/002 provides the power generators, transmitters, distributors and big consumers shall be the Wholesale Electric Power Agents (MMEE).
Traders shall act in the market as participants.
Power Market Management ‐ ADME
The Power Market Management ‐ ADME, which started operations this year, was established under the Regulatory Framework Law, for the purpose of managing the Wholesale Power Market. 5.10.4 Rate Structure T
he new Regulatory Framework being now implemented in the country, provides the final rate for regulated consumers shall consist of the sum of wholesale market distributor purchase costs (distributor contract prices resulting either from bids or from the stabilized spot price plus the costs of national reserve, annual reserve and other services furnished by generators), plus proportional transport costs paid by the distributors, plus the compensation regulated by the distribution function. 139 New rate revisions on a four‐year basis are provided, for which purpose the same indexation methods shall apply. No public hearings are contemplated for above revisions. Wholesale market prices to be paid by non regulated free consumers will be those resulting both from contracts freely agreed upon with generators and from spot market purchases. Notwithstanding the Regulatory Framework regulations were completed as of December 2003, all compensations have been neither published nor implemented in an effective way. 5.10.4.1 Generation Distributors (the sole distributor is currently UTE, a state‐owned company) must purchase from generators, through supply contracts whereby a pre‐determined load curve, 80% of firm power assigned to regulated customers is sold at least at pre‐defined prices for the next five‐year horizon, and 50% at least of firm power assigned to potential free customers deciding to purchase for a one‐year horizon. To be transferable to rates, contracts signed by distributors shall be the result of a regulator‐ approved competitive price procedure. Term of contracts shall be 10 years at least, and be based on bids conducted tree (3) years prior to the supply commencement date. Power purchased by distributors outside markets, is acquired at a stabilized spot price, which is transferable to final consumers. Other wholesale market costs of distributors transferable to rates are those paid for national reserve and annual reserve, compensations for firm power supplied to the system by generators, as well as payment of other services, such as short term reserves, frequency regulation, etc. 5.10.4.2 Transmission The compensation the carrier will receive for ready‐existing investments currently owned by UTE shall consist of: The annual sum of investments appraised at a new replacement value (VNR), considering a 30‐ year useful life, and taking as a basis a return rate resulting from applying the WACC method. The adapted maintenance and operation code (CAOyM), based on an international benchmarking analysis, given as a percentage of VNR includes of a factor provided to reduce CAOYM, taking as a basis the efficiency increase. Carrier compensation and its adjustment formulas are defined by the government on a four‐year basis, under URSEA advice, and the company opinion. UTE undertakes to make expansions on the 150 kV network, and lower kV, (zonal transmission), and to receive as compensation the annual sum of investment made at a regulated rate, plus a CAOyM. Interconnection and extra high voltage networks (500 kV) which shall be constructed in the future, must be the result of competitive procedures, and the contract‐awarded company shall receive as
140 a compensation, the one specified in its proposal. Contractor shall receive as compensation:
Connection charges paid by the carrier for facilities directly used to connect generation or load to the interconnected system.
Variable income involved in the node spot price, which is low in the Uruguayan market. Location‐dependent toll, which applies to generation, import, power flow between bordering countries, and demand located at the transmission power station (500 kV network), including export. Stamped Voltage toll, applied to the remaining demand from distributors and big consumers, computed in such a manner that above three compensations are included in the amount asked by the carrier. As a result, the main payments of distributors (whose loads are connected to 150 kV regional networks for use of transport, shall be the connection charges and voltage stamped toll. All regulated charges paid by the distributor for network use shall be transferable to the rate. 5.10.4.3 Distribution and Marketing Maximum prices for distribution service furnished by distributors (Aggregate value of standard distribution ‐ VADE) are computed by URSEA, and determined through a governmental decree. VADE is completely revised on a four‐year basis. To calculate VADE, a specific number of typical distribution areas is established, for which their value is calculated. VADE includes assets compensation computed as an investment annual sum of the optimum network appraised at a new replacement value (VNR) and remuneration for management, operation, maintenance and marketing costs which are estimated for an efficient model‐company, for each of the defined typical zones. Application is provided of gradual compensation reduction which is paid to the distributor along the period between VADE revisions, on account of scale economy. Existence of additional income for non regulated activities using distribution assets reduces regulated compensations. 5.10.4.4 Rates for Big Users A condition to be a customer shall be to own a connected power exceeding 250 kW. Free customers are given the option to continue as distributor's regulated customers.
141 To become a free customer, a regulated customer shall either have had that condition for one year at least, or pay voltage rate charges for said term. To purchase power again from the distributor as regulated customer, the free customer shall give six‐month prior notice, and have been free customer for one year at least. Free customers shall purchase at least, through supply contracts, 50 % of the firm power they demand, and under any contract type, 70 % of power at least. Power not purchased by them through supply contracts may be acquired by them at the spot market. Transport use charges paid by free customers are computed under a method similar to that used to bill the charges of distribution services. 5.10.5 Taxes and Rate Subsidies T
axes final consumers shall pay for power sales are: a 23 % IVA rate, AND 39% COFIS rate. Notwithstanding the compatibility of implicit subsidies with laws in force, application is not provided of an explicit consumer subsidy system within the Regulatory Framework, and the authorities have not contributed budgetary funds for that purpose until now. There is, however, in the rate system in force, which has not been revised by the Regulator, there is a 100 kWh residential first grade rate at a lower price which could be deemed as a sort of subsidy for consumers using lower power quantities, which, is therefore, associated to lower income in most of the cases. On the other hand, the rural electrification works are performed by UTE at costs generally exceeding income received from said works. 5.10.6 Sustained System of Information 5.10.6.1 Procedure to Define Big Customer Rates Pricing in Uruguay is based both on UTE‐published Rate Listings and a consumption model reflecting data from a typical industrialist connected to the transmission system. Rates G.C.5 (Big Consumers), selected from the Rate Listing, are applied to services showing both an average consumption equal to, or greater than 90.000 kW/mo, and contracted power equal to, or greater than 110 kW, depending on rules, and their "optional" nature. Price of Energy ($ por kWh) Valle Llano Punta Max Power Measure($ per kW) 0,342 The model‐consumption used is: Power to be billed = 9.696 kw Lead power = 69.696 kwh Plain power = 3.361 kwh Valley power = 2.459.040 kwh 142 Applying a 29.3 exchange rate, we obtain a US$ 1.93 average price. Table below, shows the computation detail. Concept Units Used USD $ US$/Unit Power Demand (KW) Peak Energy (KWh) Intermediate Energy (KWh) Low Energy (KWh) Charge for Energy Total Billed for Power and Voltage Fixed Cost Total consumed power units G.C.5 rate in US$/KWh 3 % CONFIS Taxes US$ Total Price for G.C.5 Customer US$ 13.197.39 US$ 179.52 5.890.656 1.92 0.06 1.98 Minimum Rate, 85 % Ultra High Voltage (G.C.5 Rate) 1.63 The price of generation and transmission component is obtained from the Extra High Voltage Rates. The distribution prices, and others, are obtained from the difference between G.C.5 and Extra High Voltage rates. 3% CONFIS tax is included. Analysis of Countries Included Prices for electric energy (Dic/03) Generation plus Transmission Distribution Plus Others Taxes Total $ URUGUAYOS US $
143 VENEZUELA 5.11.1 Principal benchmarks Official name: Area : Population: Capital city: Currency: Bolivarian Republic of Venezuela 916,445 m2 25,562,000 inhabitants Caracas Bolivar
144 TABLE 5.52 ECONOMIC INDICATORS Economic Indicators 1999 2000 2001 2002 2003 Population (Thousands of Habitantes) a GDP (Millions of constant dollars of 1995) a Variation (%) GDP per Cápita (US$) Inflation (%) b It appraises from Change to End Year ($/US$) Installed capacity (MW) c Generation of Electric power (GWh) c Demand of Electric power (GWh) c Losses (%) c Energy consumption per capita (KWh) Population (Thousands of Habitantes) a 5.11.2 Power System Description The Venezuelan power sector is governed under the 2001 Ley Orgánica de Servicio Eléctrico (LOSE) which amends the 1999 Ley de Servicio Eléctrico (Power Service Law). Eighty five per cent of the Venezuelan power system is interconnected by high and very high voltage transmission lines (230Kv, 400Kv, and 765 Kv), which stretches to the central, eastern and western area of the country, to supply 90 % of the population. The other 10 % is supplied by isolated power systems and plants. From the 13 power companies currently existing in Venezuela, 8 are of private capital, and 5 of public capital. CADAFE is the most important power company in Venezuela. 5.11.2.1 Generation System The Venezuelan generation system had a 19.282. MW installed capacity in 2003. About 63 % of power generated in Venezuela comes from power plants generally located in river Caroní basin in Guayana, and the remaining 37 % is generated by thermal power plants, most of them located near the oil fields. The thermal power plants use gas as the most important fuel, and diesel as a backup fuel. Power plants located in areas far from oil exploitation centers and the gas transmission network are fed with diesel.
145 5.11.2.2 Transmission System The transmission activity is subject to concessions, and must be conducted under the laws and the other regulations in force. The most important electric or thermal power plants are interconnected through a system of transmission lines and substations operating at 765 kV, 400 kV, and 230 kV. Table below, shows the each voltage level length. TABLE 5.53 LINE LENGTH FOR THE VENEZUELAN INTERCONNECTION SYSTEM Transportation systems 765 kV 400 kV 230 kV TOTAL km High voltage 2,083 3.838 5,164 11,085 There currently exist three 230 kV and 115 kV interconnections with Colombia, and a 230 kV interconnection with Brazil. Lines of 138 kV, 115.69 kV and 34.5 kV leave from the substations which belong to a sub‐ transmission level and feed more than 3.500 centers inhabited by more than 95 % of the country population. 5.11.2.3 Distribution System The distribution system activity is subject to concession within an exclusive area, and must be conducted under the laws and the other regulations in force. The distribution levels are voltages below 13.8 kV. 5.11.3 Regulatory Framework The Venezuelan electric sector is regulated by the Ministry of Mines and Energy which is supported for this purpose by Fundación para el Desarrollo del Servicio Eléctrico ‐ FUNDELEC. Rate definition is defined through joint resolutions both from the Ministry of Mines and Energy and the Ministry of Production and Commerce. The coordination for the national interconnected
146 system is conducted by the Office for Operation of Interconnected Systems ‐ OPSIS. The Electric Service Law enacted in 1999, provides that companies must separately carry out their generation, transmission and distribution activities through legally different units. Generation and marketing activities require governmental authorizations. The distribution and transmission activities require a concession. The Comisión Nacional de Energía Eléctrica ‐ CNEE is the regulation organization in charge of developing regulations for the sector, based on the Electric Service Law guidelines, controlling the activities of market agents, imposing penalties, and coordinating public hearings in accordance with the appropriate rules in force. The Centro Nacional de Gestión shall be in charge of the Planning systems and their operation, as well as of managerial activities involved in the Wholesale Power Market. The chart below shows the potential condition of the future electric power market in Venezuela. 5.11.3 Rate Structure for End Users A
s long as new methods are not established by CNEE to prepare rates, and new electric service rates are not established under said new methods, the rates determined in the joint Resolutions No.089 from the Ministry of Production Commerce and No. 055 from the Ministry and Power and Mines of April 1, 2002 (published in the Official Journal of República Bolivariana de Venezuela, issue No. 37.415 of April 3, 2002, whereby the maximum rates are defined which shall be applied by the Electric Power Companies to electric power consumption, excluding sales to big users by Electrificadora del Caracolí ‐EDELCA ‐ or some rebates given to important users by distribution companies) shall be applied. Rates defined in above Resolution were determined on the basis of costs incurred by companies to render their service, a regulated profitability, and application of efficiency parameters. Above Resolution establishes rates for each the companies currrently furnishing the power supply service, which includes, among others, companies which integrate the generation, transmission 147 and distribution activities, this being the reason why rates include the costs of integrated development of said activities and the costs of electrical power purchase to fulfil the demand from their respective markets. An average rate has been established for each company, depending on their efficient costs and sales projection, taking as a basis the profitability of each of the production, transmission, distribution and marketing activities. Rate design is performed under load classification studies of each company and assignment of costs for each type of service. The Rate Resolution additionally provides semiannual adjustment formulas of rate values for differences between foreseen inflation and exchange rates (bolivares to the dollar) used to determine the rates and real values of those parameters, as well as monthly charges resulting from variations of prices and volumes of fuels used for generation, and prices of purchased electric power. Official rates include a charge for demand, and another for consumption, with the exception of small users who are only billed on the basis of power consumption. In special cases, users desiring a specific voltage level not justified by the consumption, enter into special agreements with distributors to cover the connection costs. In general, subscribers with a demand exceeding 1000 kVA are supplied with high voltage between 13.8 kV and 115kV, depending on their consumption. The demand charge is established in kVA, a condition which leads user to enhance its voltage factor. 5.11.5 Taxes E
lectric power billing includes both city rates and IVA (16 %). In the first case as rate component, and in the second case as an item other than that of service payment. 5.11.6 Large Consumer Market 5.11.6.1 Guayana Area Electrificadora del Caroní ‐EDELCA, has, from the very beginning of operation in the 60s, entered into electric power supply contracts with industrial customers located in said area, where electric power prices depend on their specific characteristics. For example, contracts were made where the electric power prices were dependent on international price of the product, as in the case of customers which produce aluminum. Prices established for EDELCA electric power supply contracts may be lower than the rates of the other distribution companies, because of several factors: the generation is hydraulic, the supply is performed at a high voltage level, and the market consists of industrialists concentrated in that area. 5.11.4 Information System There are two types of rates because those applied in Guayana (where big consumers are concentrated) are different from the ones applied in the remaining areas of the country. 148 Rate Unit Application Details 4.582,65 35,15 5.11.7.1 Venezuela (excluding Guayana) The final price billed to big consumers of electric power is computed by applying guidelines of Resolution 089 from the Ministry of Energy and Mines, which approves rates applicable to big users. The companies CADAFE and ENELVEN (ENELCO) were taken because they furnish big consumers with the greatest quantity of electric power. In the cases of ENCAFE and ENELCO, the general service rates 5 and 4 were taken, respectively. Users connected to voltages exceeding 115 kV. The following values are used for CADAFE: Thus, the monomial rice applicable to big consumers by CADAFE is 2.66 US$/kWh for December, 2003, at an exchange rate of 1600 Bs to US$. On the other hand, the monomial price applicable to big consumers by the company ENELVEN‐ ENELCO is 2.04 US$/kWh for March, 2003. Therefor, the final billed price is taken as the weighed average, with the demand fulfilled by each company calculated as follows: Transmission and Distribution The transmission price is taken from Resolution being in force as of March, 2003, which approves rates for transport network use authorized to ENELBAR, which is 0.17 US$/kWh, and to ENELCO, which is 0.24 US$/kWh. The final transport charge is taken as the weighed average in connection with the demand fulfilled by above companies, as follows: Thus, the generation price is taken as the difference between the total and the amount of transmission and distribution, 5.11.7.2 Venezuela (Guayana) The final price billed to big consumers of electric power is computed by taking a basis the data furnished by the Venezuelan Chamber of Electric Industry (CAVEINEL) to EDELCA, a company which supplies most of the industry located in this area. The prices are those defined for big consumers connected to the High Voltage System. As a result, they include the generation and transmission costs. To calculate the price, both the billing value and industry consumptions are taken to obtain an
149 average value of 19.82 Bs/KWh (= 426.781 Bs/21.540 KWh), equivalent to an exchange rate of 1600 Bs/US$ at US$1.23/KWh. The Table below shows the electric power prices for the Venezuelan industry as of December, 2003. Region Generation Transmission Distribution Txes Others Total Venezuela (w/o Guayana) 2.25 0.22 0 0 2.74 Venezuela (Guayana) 1.23 1.23
150 ANNEXES
151 VI. ANNEXES SOUTH AFRICA 6.1 MAIN INDICATORS Name official: Republic of South Africa Area : 1,227,200 km2 Population: Capital: The country has 3 capital cities. The Administrative capital is Pretoria, Province of Gauteng Currency: Rand, Symbol ZAR. TABLE 6.1 ECONOMIC INDICATORS Economic Indicators 1999 2000 2001 2002 Population (Thousands of Habitantes) a GDP (Millions of constant dollars of 1995) a Variation (%) GDP per Cápita (US$) Inflation (%) b It appraises from Change to End Year ($/US$) Installed capacity (MW) c Generation of Electric power (GWh) c Demand of Electric power (GWh) c FIGURE 6.1 SOUTH AFRICAN ELECTRIC SYSTEM
152 6.2 DESCRIPTION OF THE ELECTRIC SYSTEM South Africa is characterized for having its electric system covered by an agent, which produces 95.7% of energy, it is the only transmitter and it distributes 57.7% of energy. The trading activity is carried out by the distributor. 6.2.1 Generation System The installed capacity reaches 43 GW. The energy is produced mainly in thermal plants. The hydroelectric component is 1.8%, therefore, the climate conditions do not influence on the price of energy. The average cost of generation is 8 c / kWh, which is low considering the international standards and makes one of the entrance barriers for new competitors and other power generation forms. In spite of the above and due to the excess of capacity, South Africa imports energy under favorable conditions. CHART 6.2 EFFECTIVE INSTALLED CAPACITY OF GENERATION IN SOUTH AFRICA 6.2.2 Transmission P
ower transmission is carried out only by a company named Eskon. CHART 6.2 LENGTH OF TRANSMISSION LINES Lines 765 kV 533kV DC 400kV 275kV 220kV 132kV Total Km Totals 870 1,035 15,187 7,409 1,239 703 26,443 153 The percentage of losses in transmission is 4.12%. 6.3 REGULATORY FRAMEWORK 6.3.1 Current Situation The regulatory authority of the electrical sector industry (ESI) in South Africa is the National Electricity Regulator ‐ NER ‐, incorporated on April 1º 1995 as successor of the "Electricity Control Board", in accordance with the "Electricity Act" Nº 41 of 1987 (Electric Law). The funds of NER come from contributions imposed on generators of electricity, This is passed through all the agents of the market until reaching the final user. As a result, consumers pay for the protection they receive from NER. NER is then responsible for issuing the licenses to electricity generators, transmitters and distributors; as well as of approving the rates to which electricity is sold. Additionally, NER is liable for setting the minimum standards of quality of service and supply. Finally, it is liable for solving the disputes arising between clients and agents supplying energy. NER operates under the orders vested upon it by the Ministry of Minerals and Energy to act as "the guardian and forger of the regulatory framework for monitoring and making sure that concerns and needs of current and future users of electricity, are respectively safeguarded and complied with, having to care for the efficiency, effectiveness and sustainability in the long term of electric industry." 6.3.2 Planned changes Within the policies of reformation of the State owned companies in SOUTH AFRICA, the restructuring of the electric sector has been included therein, and more specifically the reforms in Eskom. As it was mentioned earlier, at the generation level, the conformation of power generation companies is expected that can be sold and that will be participating in a wholesale market for the energy exchange, wherein the participation is framed within the limits and guidelines of competition. NER defined and structured what is called as WEPS ("The Wholesale Electricity Pricing System"), in accordance with the transparency principle whereby it is stated that invoices for services should include all rates, collections, subsidies and crossed subsidies, which finally make the price of electricity. Accordingly, WEPS consists of the following rates: An energy rate dependent upon the time of use that includes the two periods of electric supply, and three daily schedules of supply (peak , standard and off‐peak). Rates should produce the appropriate signs for assuring an efficient handling of energy from the side of demand. A rate of the transmission network consisting of four components: a charge for network capacity, a charge for energy losses, a connection charge and a charge for supplementary services.
154 User Service Rate As stated in the Energy Policy document, electricity rates should reflect the costs incurred in for the supply including a reasonable profits margin. Additionally, is considered that rates can be within the reach of users, and this is a basic principle of operation. However, at present it is considered that rates reflecting costs entirely, can be unreachable by some users; therefore, at the level of distribution a compromise between these two aspects has been considered, in such a way that the purpose of the cost reflected in distribution rates is reached in a period of 5 to 10 years starting from the implementation of REDs. The following agents are the only ones authorized to purchase energy at WEPS: Regional electricity distributors (REDs) Traders Energy consumers whose annual consumption rate exceeds 100 GWh yearly in a simple point, which have also, kept this consumption rate for the last 3 years. Rate Regulation The government policies of South Africa as for the local government's rationalization and the creation of NER have had a bigger impact on the development of restructuring and regulation of electricity rates. The Constitution of South Africa forces the local government to have the same rates for all users of the same kind or category within the same jurisdiction. Additionally, NER has the legal duty of approving the electricity rates and special contracts for all suppliers of electricity in SOUTH AFRICA. According to the above considerations, NER established a teamwork for the Rates System under its leadership and with the participation of ESKOM and AMEU ("Association of Municipal Electricity Undertakings"), which produced the basis for the system of rates governing in SOUTH AFRICA. Just as NER points it out, the most important attributes in the rates system established by the teamwork are as follows: Rates should highlight the economic efficiency in allocating the resources of the country. Within the limits, users should be in the position of freely choose their rates from a range of applicable rates. Rates should be based and defined considering the cost of supply to the user and not considering the use that the user makes of that electricity. The above means that, for example, an industrial user and a commercial user should have access to the same rates if the supply cost is the same for both. All distributors will apply the methodology of supply cost as nationally defined to assure equality and impartiality among users served by different distributors. Having wide range rates differential is to be avoided between neighboring and different suppliers. Efforts should be made to establish and publish the average level of crossed subsidies among the different categories of users.
155 Rates should consider a set of factors, such as the need of reflecting the cost of different levels of quality, the need that it is easy and economic of administering, the need of facilitating the use of appropriate technologies and the need of assuring stability, simplicity and understanding of the rating system. 6.4 STRUCTURE OF RATES S
tructure of Costs Costs incurred in by the different types of users depend on the following issues:
The quantity of energy (kWh) used by energy
The maximum demand (kW) by the user
The schedule pattern of consumption
The factor of consumption load by the user
The matching grade of user’s load curves with other users
(diversity)
The user's location
The level of supply voltage
The factor of power
The quality required by the user in dealing with supply and service CHART 6.3 RATE STRUCTURES IN SOUTH AFRICA, AS DEFINED BY NER Rate charges Rate name Fixed [Rands/user/m] Energy [cents/kWh] Energy pattern [cents/kWh] Capacit y [Rands/ kVA] Rates one part: Rate energy used Rate two parts Rate two parts W hourly conumption rate Three part rate Three part rate w hourly consumption rate Structures of Costs and Rates relations Rates applicable to big industrial players correspond to three parts structures of rates. For each component of rates, there is an association available with structures of costs. This means that NER defined the relationship of costs as specified below, for the Rate of Three Parts: The charge of capacity recovers the cost of capital of elements. Some portion of this cost is to be relocated in the different parts of the rate. 156 The charge for energy recovers the entirety of variable costs and the portion of charges for capacity that should be relocated. The monthly fixed charge associated to the user‐generated charges. Within the Rate of Three Parts and considering the Schedule of Consumption pattern, it differs from the previous system in the distribution of the charge for capacity according to the schedule of consumption. The relocation of charges for capacity depends on the load factor. According to NER, capital costs would represent at least 70% of the supply costs to different users. If all these costs were associated to the charge for capacity, the charge would be excessively high and it could lead to sub‐optimal investment decisions by the user. Therefore, some portion of the charge is to be displaced ( relocated) to the charge for energy and the quantity of that displacement will depend on the user’s load factor. This means that, for low factors of big load it will be the displaced charge portion to the charge for energy. 6.4.1 Rates for Large Users E
skom is the main electricity distributor serving the big industrial users. Therefore, Eskom rates applicable to industry level users shall be presented. Eskom Effective Rates (2003) Eskom rates structure follows the guidelines given by NER3, including rates of one part, two parts and three parts and considering the effect of the schedule of consumption pattern for the last two. The different rates with which Eskom is provided are the following: "NightSave" for users with minimum demands of 25 kW/kVA that can move all or some portion of their load towards the off‐peak schedule within 22:00 and 06:00 during weekdays or change them to Saturdays, Sundays or Holidays.
"MegaFlex" for users with demands higher than 1 MVA who can displace their loads to defined periods without being supplied by rural networks.
"MiniFlex" for users with demands between 100 kVA and 5 MVA who can displace their loads to defined periods, which are not supplied by rural networks.
"RuraFlex" for users with power supply through rural networks at levels of voltage between 400 V and 22 kw.
"HomeLight" for urban areas or areas having high density with single‐phase power supply.
"HomePower" applicable to residential users in urban areas or with high density of population with average or high use of electricity.
"BussinessRate" applicable to users owning small business located in city areas or areas of 157 high density.
"LandRate" applicable to users in rural areas of low population density. For the purposes of the study, rates applicable to big industrial users correspond to "MegaFlex" and "MiniFlex." The following chart represents the definition of peak, standard and off‐peak schedules applicable to both the period of high demand and under low demand conditions. Rates applicable to big users are "MegaFlex" and "MiniFlex", which feature the following components:
Charge of Connection (US $)
Monthly rental (US$/kW)
Charge for Service (US $)
Charge for Administration (US $)
Charge for Reactive Energy (US$/Kvarh)
Charge for Demand (US$/kW) * * *
Charge of Active Energy (US$/kWh) for schedule and month: ‐ Peak (June – August) ‐ Standard (June – August) ‐ Off‐peak (June ‐ August) ‐ Peak (September ‐ May) ‐ Standard (September ‐ May) ‐ Off peak (September ‐ May) Overload for Voltage Overload for Transmission, charged for distances from Johannesburg ‐ <= 300 km ‐ >300 km and <= 600 km ‐ >600 km and <= 900 km ‐ >900 km
158 6.5 PERMANENT INFORMATION SYSTEM. Information of final rates paid by big users can be permanently upgraded with the monthly reports of the company that renders the electric power service to the biggest amount of Big. Users. Website: www.eskom.co.za. 6.5.1 Procedure for setting rates for Large Users To figure out the prices of South Africa the information of monthly charges as published by Eskom are taken, in addition to a consumption model reflecting the information of a typical industrial connected to the transmission system. Charges associated to the load curve are calculated for every month. CHART 6.4 MONTHLY CHARGES Megaflex Monthly rental (US$/kW) Charge for service (US$) Charge for Admin (US$) Charge per Demand (US$/kW) Peak (June ­ Aug) Estándar (June ­ Aug) Fuera de Pico (June ­ Aug) Peak (Sep ­ May) Standard (Sept ­ May) Non­peak (Sept ­ May) Overcharge for Voltage Overcharge for transmission (distances from Johannesburgo) < 300 km > 300 km and < 600 km > 600 km and < 900 km > 900 km The used model consumption is: Billable demand = 9,696 kw Energy P. = 69.696 kwh Energy I. = 3.361.920 kwh Energy B. = 2.459.040 kwh Rates in USD$/KWh Rates in USD$/KWh Jan Feb 1.15 1.15 Jul Aug 1.55 1.55 March Apr 1.15 1.15 Sep Oct 1.15 1.15 May Jun 1.15 1.55 Nov Dec 1.15 1.15 Upon having the availability of charges for billable demand, in coherence with the procedure of calculation described in annex 1, the following monthly average costs are figured out which 1.5% of over charge is included for reasons of transmission.
159 South Africa Dec/03 Generation plusTransmission 1.06 Distribution plus others Taxes Total 0.09 0 1.15 Mean price of December / 2003 is 1.15 US$/kwh. In accordance with the previous study, generation + transmission represents 92% that is 1.06 cUSD $/ KWh and Distribution plus others represents 8%, that is 0.09 cUSD$/KWh.
160 ANNEX II. CALCULATION OF MONOMIAL RATES Keeping in mind that in most of the countries the price billed to big energy consumers is composed by the price of the used maximum power and of the price of energy consumed within the different ranges of schedules. The following is the methodology used to convert these prices into a monomial rate of comparison. Case 1: Collection for power and energy at the same price for 24 hours. This methodology is used when scheduled prices are non‐existent for charging for energy. The formula to make the calculation is the following: Where 730 corresponds to the number of hours within the month. Chile Norte Grande Price power (US$/KW ­ mes) Price energy (US$/KWh) Charge factor Average price (US$/KWh ) By way of example, charges corresponding to rates of Chile – Norte Grande are taken. For the case of Chile, the figured‐out price corresponds to the sale value in node, that is, it includes only charge for energy and transmission. Case 2: Collection of power using scheduled rates This methodology is used when scheduled prices are used, that reflect the different demands. In general, there exist schedules of maxim demand (called lead energy in other countries), of mean demand (intermediate energy) and low demand (base energy). As an example, the following charges are taken, which correspond to prices applicable in Mexico for March 2003. Charge of lead energy = 0.1607 US$/KWh Charge of base energy = 0.0378 US$/KWh Energy charge of intermediate = 0.0409 US$/KWh Charge of power = 4.3758 US$/KW To make the calculation, a model of typical consumption is used: Power = 9,696 KW Energy of lead = 696,960 KWh Intermediate energy = 3,361,920 KWh Low energy = 2,459,040 KWh Using the previous data, the charge is calculated by energy and charge for demand of power. Energy charge Charge for energy = (lead energy * charge for peak power) + (intermediate energy* charge of
161 intermediate energy) + (energy bases * charge for base energy )) = 241,654 US $ Charge for demand Charge for demand = Demand for maximum power * Value of demand for power = 9696kw * 4.3758USD$/kw = 42,427 US $ The average price that is paid for the energy supply; is the result of dividing the Summation of charges into the total amount of energy consumption.
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