On February 23, 2024, the President of the Republic issued Executive Decree No. 176 containing the Regulations for the Organic Law on Energy Competitiveness (the “Regulations”). These Regulations will come into effect from their publication in the Official Gazette.
These Regulations amend the General Regulations for the Organic Law for the Public Electric Power Service (LOSPEE in the Spanish acronym), with the following main changes:
Definitions:
- A broad definition of Energy Storage is introduced.
New roles and responsibilities:
- The Regulatory Agency for Non-Renewable Natural Resources (the “Agency”) has a new power to take control actions in the areas of technical and financial management related to the operation and maintenance of private companies of the electric power sector.
- The Regulatory Agency for Non-Renewable Natural Resources will monitor and control the Environmental Administrative Authorizations as part of the management of the qualification documents for the electric power sector.
- A mandatory contribution is introduced for companies of the electric power sector (public and private) which cannot exceed 1% of the cost of the electric power service, as a budget financing mechanism for the Agency. The Agency must issue the corresponding regulations within one month.
- It is specified that the National Electricity Operator, CENACE, will not perform the business activities of generation, transmission or distribution and marketing of electric power. Instead, it will focus on its role as the operator of the national electricity system.
Openness to investment in transmission processes:
- The possibility to conduct public selection processes in transmission projects is developed.
- The Commercial Management Contract for transmission activities is defined. This contract must be signed with the company that holds the qualification document to perform the transmission activity.
Delegation to private initiative for NCRE projects up to 10 MW:
- A new direct delegation scheme is established for projects for the generation of Non-Conventional Renewable Energy (NCRE) up to 10 MW that are not covered by the Electrification Master Plan, which sell energy to regulated demand.
- Generators will have priority dispatch and preferential pricing set through regulation.
- The Agency must issue regulations on the specific aspects of this direct delegation scheme.
Declaration of public interest for projects proposed by private initiatives:
- Private companies that wish to propose an electric power project that is not covered by the Electricity Master Plan must submit an application to the line ministry.
- The application must meet specific requirements, such as a description of the project, an economic and financial feasibility report, and the request for feasibility of connection to the national transmission or distribution system.
- The ministry has two months to decide whether the private initiative is of public interest.
- If a declaration of public interest is made, the ministry must convene a public selection process within four months.
Delegation of public lighting systems:
- The power to delegate the construction, operation and maintenance of general public lighting systems to joint ventures or private companies is included.
- At the end of the delegation period, the infrastructure implemented in these projects will be reverted to the State at no cost whatsoever.
Delegation of waste-to-energy generation:
- The generation of electricity from urban waste via direct delegation is authorized.
- These projects will enjoy preferential dispatch and pricing terms.
Participation of foreign state-owned companies:
- The possibility for foreign state-owned companies to take part in the Ecuadorian electric power sector is clarified.
Types of transactions:
The Regulations introduce short-term transactions with the following characteristics:
- Time difference trading:
- The power actually produced by private generators without regulated contracts minus the power consumed by its large consumers.
- The power actually produced by self-generators without regulated contracts, once their own consumption is covered, minus the power consumed under their bilateral contracts.
- Sale of energy actually produced:
- In respect of private generators without regulated or bilateral contracts.
- Trading of energy to cover consumption of ancillary services:
- This corresponds to power consumed by generators and self-generators from the transmission or distribution network to cover their consumption of ancillary services.
Aspects related to distributed generation for self-supply:
- Regulated consumers can inject electric power into the distribution network. However, they must pay charges (tolls) for the use or availability of the distribution network. These charges will apply after five years (the provision that defers the payment of tolls for five years refers to regulated and non-regulated consumers).
Aspects related to distribution infrastructure:
- Construction of distribution networks and infrastructure:
- Commercial and/or industrial clients who are isolated may construct new distribution networks and infrastructure to supply their demand for electric power.
- The construction may be carried out by the consumers themselves or other interested parties, provided that they obtain approval from the distribution company of the area of influence via a "competitive selection process".
- Once the works are completed, all infrastructure will become the property of the electricity distribution company of the area.
- Construction of dedicated transmission lines:
- Sector participants may construct dedicated transmission lines at their expense, with the prior authorization of the line ministry, including equipment for connection to the National Transmission System (NTS).
- Before commissioning, all the equipment and facilities to connect the transmission line to the NTS—either new sectioning facilities or expansion and equipping of existing substations—must be transferred to the transmitter at no cost whatsoever.
- The transmitter will undertake the operation and maintenance of the transferred equipment and facilities.
For more information, please contact Sebastián Cortez-Merlo (scortez@pbplaw.com).
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