Electricity Rate Stabilization Law: Impact, Changes, and Subsidies Explained

Electricity Rate Stabilization Law: Impact, Changes, and Subsidies Explained

2024-04-10 23:30:37

The rule that stabilizes electricity rates was ready to be promulgated as law, following the Chamber unanimously supported the changes made by the deputies in the second procedure.

The proposal seeks to stabilize electricity prices, mitigating the projected increases in the accounts of regulated customers. In addition, it perfects the customer protection mechanism to allow the gradual payment of the debt accumulated with the generating companies and implements a temporary subsidy, aimed at vulnerable households.

During the debate, the congressmen recalled the circumstances that led to the freezing of electricity rates, the technical table made up of advisors from the Ministry of Energy and the senators that allowed the aforementioned subsidy to be shaped, and the relevance of making this instrument permanent.

In details, the project perfects the Rate Stabilization Fundto “stabilize electricity prices” by mitigating increases in the accounts of regulated customers.

Generates changes to the Customer Protection Mechanism (CPM), particularly to the position. Thus there will be two moments: Between the publication of this law and December 2027, a charge of 22 pesos per kw/h will be applied that would allow the debt issued to be paid.

Then, between December 2027 and December 2035, a charge of 9 pesos per kw/h will be applied that would allow balances to be paid and payment documents for unissued debt. This would finish settling the total arrears by 2035, of 5.5 billion dollars.

While it generates the gradual thawing of electricity distribution rates to avoid excessive increases.

The Distribution Added Value (VAD) is unfrozen between 2024 and 2025, with distribution concessionaires that correspond to cooperatives being the first to unfreeze their prices.

The rest of the companies will see their rates updated from the second half of 2024, gradually.

Finally, a Transitional Subsidy is created aimed at one million vulnerable households in order to mitigate increases in their electricity bills. The cost of the benefit corresponds to 120 million dollars (100 million from the Rate Stabilization Fund and 20 million from contributions from the Ministry of Finance). It would apply in the years 2024, 2025 and 2026.

Among the latest introduced to the new law is the creation of a Territorial Generation Recognition Mechanism (RGT) that reduces energy costs by 40% for families living in areas where there are coal generation plants.

Likewise, a working group was created that will last 4 months and will aim to evaluate other sources of financing to increase the annual amount of the subsidy for vulnerable families.

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