The increase is explained by the beginning of contracts between distributors and generators at higher prices, the increase in the exchange rate and the end of a retroactive refund in favor of customers.
Government confirms increase in electricity bills and experts estimate it could reach up to 18%.
(El Mercurio) Regulated electricity customers – which include all households in the National Electricity System, which runs between the Arica-Parinacota and Los Lagos regions, where 98% of the country’s population resides – will see increases in their electricity bills.
According to an estimate by the consulting firm
EcomEnergía Chile
This increase could reach 18%, considering the combination of several effects, including the evolution of factors such as the Average Node Price (PNP), as the value in pesos of the energy agreed in dollars between distributors and generators in the supply bids is called and to which other factors are added (see box).
On the first point, Sebastián Novoa, executive director of EcomEnergía, says that the calculation made by the National Energy Commission (CNE) in January showed an increase in the average price of contracts between distributors and generators due to their indexation formulas and that for some distributors this implied increases of up to 15%.
This was in addition to the start of the obligation to supply long-term contracts subscribed in the auction that was awarded at the end of 2014. Although this process was the first to make the participation of renewable energies -such as wind and solar- viable, these sources, which usually have lower operating and development costs, were not enough to prevent the award price from exceeding US$ 100 per MWh, a level much higher than the US$ 47 average of a subsequent auction.
[SEE ALSO: Electricity bills would go down due to renewable energy boom, but only from 2021].
“In the schedules published by the CNE, there is an increase in the NPP of the SEN in the order of 10% with respect to July 2018. This is mainly explained by the entry into force of the contracts of the companies El Campesino, Norvind and Abengoa, which present energy prices indexed to January 2019 between US$ 100 and US$ 120 per MWh”, says Rodrigo Jiménez, general manager of the consulting firm Systep.
The executive adds that this increase is also explained by the 6% increase in the exchange rate compared to the July 2018 calculation. The impact on the final cost will depend on many factors, such as the client’s geographic location. “The variation of the previous PNP affects a proportion that goes between 40% and 60% of the final bill, which corresponds only to energy and not to the entire bill, which adds transmission, distribution and other charges.”
The CNE says that “the Definitive Technical Report of the January PNP is available on the CNE’s website and it effectively considers the entry into force of the last contracts with prices around US$ 100 per MWh tendered at the end of 2014”. He adds that the respective decree is being processed by the Comptroller General of the Republic, so its final effect on the tariff will be known when the Comptroller General takes note of it.
Novoa added that the factor that makes the big difference between last year’s July calculation, which came into effect in October, when the previous decree came out of the Comptroller’s Office, was the application of a new system of Adjustments and Surcharges, which came to regulate and make the re-settlement system less volatile (in favor or against customers) due to the usual retroactive application of tariffs. In July, these fell 7%, due to a favorable indexation of contracts and the effect of the exchange rate.
In the future, says Jiménez, and contrary to what was projected at the time by former Energy Minister Máximo Pacheco, the effect of the recent tenders, at lower prices than the historical ones, will not be seen in 2021 when these agreements will come into operation, but “these values will be cushioned by the existence of other energy contracts at higher prices, as well as the effect of other components, such as VAT, capacity charges, distribution and transmission costs, among others”.
