Evolution of the electricity tariffs in Colombia before electricity market reform in 1994
Authors: A. I. Arenas-Molina; B. J. Ruiz; L.S. Hoyos
“The Electric Power Company of Bogota notifies the next street lighting tariffs that will apply from 1st July/1920. The street lighting service will cost COP$ 1,00 for energy consumption less than 30 W/month; further consumption will entail a surcharge of COP$ 0,30/month. For each ampere consumed during the night time, the cost will be COP$ 6,00/month (…) Notes: special or transitional services will require contracts. Industrial services supplying power or heating will have the same prices. The leasing of materials for street lighting will cost COP$ 0.10/month for each luminaire.” (The Electric Power Company of Bogotá, 1999).
The Resolution 086 of 1986 set out three main objectives:
• Establish three consumption blocks for the residential sector with increasing tariffs.
• Set targets, as a percentage of LRIC, for each consumption block and for non-residential consumption.
• Unify the fixed charge at the national level, differentiated by stratum, making it the most important instrument of cross subsidy.
Regulatory Decree 1555 (Congreso de la República de Colombia (Pdte. Presidente Virgilio Barco-Vargas), 1990) and Resolution JNT 090 of 1990 (Gaceta Constitucional DNP, 1990) stablished:
The Washington Conquest:
i) liberalize trade and its outward orientation, eliminating any tariff and non-tariff barriers.
ii) privatize public enterprises.
iii) deregulate economic activities (Rangel & Garmendia, 2012)
National Constituent Assembly - ANC was in charge of drafting the new political constitution of 1991.
Law 142 of 1994 "by which establishes the regime of the public services domiciles"
Law 143 of 1992 "by which It establishes the regime for the generation, interconnection, transmission, distribution and commercialization of electricity in the national territory, authorizations are granted and other provisions are enacted in the area of energy"
i) the Colombian electrical system is hydro-dependent.
ii) the climatic events have enormous consequences on energy activity.
iii) the country's thermoelectric power station was incipient to cope with periods of drought.
iv) the power system was inefficient; its losses equaled the supply of thermal energy.
The legislative process of the tariff system in Colombia, until the reform of the electricity system in 1994, had significant changes that changed the economic behavior of companies.
In the first period (1913-1935), the lack of an effective governmental entity that oversaw the activity of the companies, the Government made that the first step towards a regulation of the service was not effective.
The following period (1936-1967) had two facts that marked its general tendency. The first showed the interest of the national government to regulate the economic activity of the utilities more than the price that it established to the residential users, and the second was significant by the realization of an electrical interconnection between the companies of the center of the country. This centralized the operation of the power system and forced the issuance of a regulation that established a unified pricing scheme for the whole country. During this period, it was shown that the main problems of this regulatory initiative were the administrative relays between governments making lost regulatory advances.
The regulatory policy of the electric sector was not a state policy; it depended to the governments on duty.
The analysis of the last period (1968-1994) showed that the tariff regulation in Colombia was politicized with each of the incoming governments. Some presidential candidates promised to freeze or even reduce the price of electricity to win votes in the electoral population. It should be noted that the creation of the National Tariff Board was the biggest advance, in regulatory terms, to establish a homogenous tariff policy.
The National Tariff Board was endowed with the necessary administrative tools to set the state's criteria in a tariff policy. This policy until the 80’s seemed to have a social tendency, it was spoken of "consumptions of minimum survival" with subsidies towards the lower socioeconomic level; But in the later years, this trend was dismantled until finishing in the reform of 1994.
These years, from 1985 to 1994, were critical for the Colombian power sector. The sum of macroeconomic interests, technical problems, and climatological phenomena converged in the power system reform, which will be discussed in future works.
RESEARCH SEMINAR
2.2.
An attempt for regulating the electricity tariffs by Central Government (1936-1967): non-regulated monopoly
Classified the utilities in two groups, the utilities located in regions (municipalities) with a population less than 10.000 and the utilities in areas with a population greater than 10.000.
4.
Conclusions
2.
How did the electricity tariffs work before the electricity reform in 1994?
3.1.
Political causes
3.
Causes to electricity market reform in 1994
Three main stages comprised the electricity tariff evolution before the market reform in 1994:
1. 1913 - 1935
2. 1936 - 1967
3. 1968 - 1993
Acknowledgements
PAPER STRUCTURE
The period between 1990 and 1994 was decisive for defining the future of the Colombian electric sector; several political and technical events converged in the electricity market reform of 1994, then the main causes of this reform are shown.
Funding to support this work came from National Financing Fund for Science, Technology, and Innovation Francisco José de Caldas, and Universidad Nacional de Colombia Sede Manizales through the research project 643 of Colciencias with the contract 548 of 2014 – “Planeamiento integrado de la expansión del sistema colombiano de generación y transmisión de energía eléctrica, incluyendo integración de fuentes renovables, almacenamiento, demanda flexible y generación distribuida”
Abstract
1. Introduction
2. How did the electricity tariffs work before the electricity reform in 1994?
2.1. The electricity tariffs fixed by local and regional companies (1913-1935): regional regulated monopoly
2.2. An attempt for regulating the electricity tariffs by Central Government (1936-1967): non-regulated monopoly
2.3. National Tariff Board of Public Services (1968-1993): national regulated monopoly
3. Causes to electricity market reform in 1994
3.1. Political causes
3.2. Technical causes
4. Conclusions
5. References
Acknowledgements
3.2
Technical causes
2.1.
The electricity tariffs fixed by local and regional companies (1913-1935): regional regulated monopoly
The UPME energy balances were the main source for an energy analysis of the Colombian power system for the period between 1984 and 1995. This analysis allows to argue four things:
Regional or municipal utilities:
Electric Power Company of Medellin after 1918; The Electric Power Company of Bogota; and The Electric Power Joint-Stock Company of Bucaramanga.
Regulated monopoly: a single utility providing electricity to its service area, vertically integrated. The owners of the utilities were the national, regional or local governments, cooperative of consumers, or private sector (Rothwell & Gómez, 2003).
2.3.
National Tariff Board of Public Services (1968-1993):
national regulated monopoly
During this period were created the National Superintendence of Prices and the National Tariff Board to control the essential good and services prices and the public service tariff respectively.