The energy shortage price in Colombia is a central element in the Reliability Charge scheme, since it indicates from when the Firm Energy Obligations (OEF) become payable to generating companies that participate in this mechanism.
According to the Energy and Gas Regulatory Commission (CREG), the scarcity price determines a risk allocation of the stock market price between power generation companies with OEF and demand in a critical period (as occurred in the Phenomenon of El Niño) and, therefore, It is key in defining the charge that generators receive for the reliability they provide to the system..
It is worth remembering that The scarcity price was adopted with CREG Resolution 071 of 2006 and, subsequently, complemented with the marginal scarcity price -PME- which was endorsed with CREG Resolution 140 of 2017..
“The scarcity price in the Reliability Charge mechanism fulfills three relevant functions: i) activates the critical condition; That is, it defines the moment from which the OEF is payable, ii) it is the price ceiling that the demand pays for its purchases on the stock market, and iii) it defines the price at which the OEF is remunerated to the generator when they become payable. ”, recalled the Commission.
That is why, taking into account what happened during the El Niño Phenomenon 2023 – 2024, The CREG sees it advisable to carry out an analysis to determine whether the energy shortage price in Colombia complies with the functions established for it in the regulation and, based on this, propose adjustments in this regard.
Recommended: Colombia’s electricity sector on alert: energy price on the stock market exceeded the shortage price
“It has been shown that the Marginal Scarcity Price has lost the function of being a ceiling for stock market purchases, which could be called a second level ceiling, given that the first level ceiling for stock market purchases are the long-term contracts,” the entity indicated.
Continue reading the story
Now, taking into account that in the Colombian Electrical Sector there are technologies with low and high variable costs, The CREG sees it possible to have two types of energy shortage prices in Colombia, one for low variable cost plants and the other for high variable cost plants.
To define price for low variable cost plants, The Commission proposes to use the price duration curve methodology, where it could be set with the 95% percentile. “With this value the variable costs would be covered, the hiring incentive is maintained and the inframarginal incomes are maintained,” said the regulatory entity.
In the case of plants with high variable costs, It is considered that the methodology defined in CREG Resolution 140 of 2017 can be maintained, meeting the previous criteria. without the financial problems that occurred during the 2015-2016 El Niño Phenomenon.
“With this combined scarcity price scheme proposed, the three functions of the scarcity price (mentioned above) are fulfilled. In addition, the signals are maintained to ensure reliability in the system,” highlighted the CREG analysis.
In this sense, the proposed scheme It could be applied from the moment the new methodology is adopted. However, to apply the proposal to the assignments of current Firm Energy Obligations, it is necessary to establish a transition mechanism to respect the acquired commitments.
Recommended: Is the energy price on the Colombian stock market indicating a shortage?
Thus, to migrate from the current scarcity price methodology to the CREG proposal -for low variable cost plants-, The regulatory body also proposed a contract menu mechanism so that the user has an equivalent costfor which the amounts of the remuneration of the position are determined so that the net present value -NPV- of the methodologies are equal.
What are the steps to define the future of the energy shortage price in Colombia?
It is worth saying that the CREG document – which exposes the current situation with the price of energy shortage in Colombia and its possible adjustments – It is a first approach to discuss with the sector the proposals made by the Commission.
Taking the above into account, the entity identified some of the steps to follow to move the initiative forward:
-
Receive comments and analysis from interested parties on the proposals that are proposed. As well as alternative proposals that are considered to be raised.
-
Carry out an analysis of the implications of having several scarcity prices in the Reliability Charge auction rules and in the allocation process.
-
Evaluate the comments, suggestions and alternatives that refer to the proposals contained in the present document.
-
Prepare a draft resolution on scarcity price adjustments for comments from sector agents and interested third parties.
