Reforms to the Regulations of the Organic Law of the Public Electricity Service

August 31st, 2022

On August 23, 2022, the Executive Decree No. 540 was issued, which contains the Reform to the Regulations of the Organic Law of the Public Electricity Service . Below, we present the most relevant points of Decree 540:

Transmission by the private sector.– Decree 540 regulates the conditions under which transmission activities may be delegated to the private sector, by granting an enabling title after a Public Selection Process (PPS).

To carry out the transmission activity, the private company with an enabling title must sign a Commercial Management Contract with the public transmission company. The declaration of commercial operation will oversee CENACE.

Electricity storage.– Complementary services include energy storage, a service that may be provided by generation companies or legal entities that are authorized to provide these complementary services.

For projects included in the Electricity Master Plan (PME), the Ministry of Energy and Mines (MEM) may grant enabling titles to the private sector, to participate in the activities of complementary services and energy storage. The selection will be made through PPS.

For projects that are not included in the PME, the project may be proposed by private initiative.  The MEM will determine the public interest and viability of the project. The delegation will be made through a PPS, in which any of the following benefits will be applied to the proposer: i) An additional bonus for the qualification of the economic offer, which will be determined in the bases of the process.  (ii) Improve the offer when other bidders are presented in the PPS.

Sale of energy to large consumers.– Projects for the sale of energy to large consumers may be delegated directly to the private initiative through bilateral contracts not foreseen in the PME, provided that the MEM determines that the projects are consistent with sectoral planning, and that they make optimal use of the available resource. Surpluses may be sold to distributors through regulated contracts, or settled as a short-term transaction.

Expansion distribution system.– When the distributor cannot comply in a timely manner with the electricity expansion to meet the demand or the execution of projects in agricultural and aquaculture sectors, special economic development zones, free zones, industrial parks and / or industrial development poles, the works may be financed and executed by those who will receive the service.

Grounds for revocation.– In determining the existence of a ground for revocation, the Government will apply objective evaluation criteria, which may be established in the enabling title, to guarantee due process and the principle of proportionality provided for by the Constitution.

Termination of the concession due to force majeure.– if an event of force majeure whose affectation extends in a prolonged manner; in accordance with the term, conditions and with the procedure established in the Concession Agreement, the parties must proceed in accordance with the provisions set at the enabling title.

Termination for reasons attributable to the MEM.– The Concessionaire may request early termination, in the terms established in the enabling title, when by virtue of a rule, act, fact or omission attributable to the MEM, prevents or hinders the fulfillment of the object of the concession , including the expropriation of any part of the Project or the assets thereof; or that the concessionaire’s collection rights are affected, in accordance with the procedure established for the effect in the contract.

Reversion of assets assigned to the public electricity service. – The enabling title will establish the terms for the reversal of assets and technical, economic and legal evaluation of the assets and liabilities that make up the project or activity of the electricity sector.

Excluded from this reversal obligation are the assets of generators installed by the end user for self-sufficiency, the goods of self-generators and co-generators.

Transitional Provisions.- 1.  The MEM and the ARCERNNR within six months, counted from the issuance of Decree 540, will issue or update the necessary regulations.  2. Draft contracts that come from PPS in process or already awarded that have not been signed on the date of publication of Decree 540 must, prior to their subscription, be modified to adapt their stipulations to the provisions of Decree 540.

Validity.- Decree 540 will enter into force from its date of publication in the Official Gazette .



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