CNE reaffirms the duty of energy supply companies to comply with obligations of contracts signed in tenders for supply to regulated clients

This is a machine translation of the original release issued in Spanish.

PRESS RELEASE from CNE
November 5, 2024

The National Energy Commission (CNE) issued two administrative acts related to the duty of energy suppliers to comply with the obligations established in the contracts signed in the tenders for electricity supply to regulated clients carried out between 2016 and 2017.

The regulatory body rejected Cox Energía 's appeal against the previous Resolution that denied the request for postponement of the supply start date, project replacement, authorization of temporary backup supply, opening of a price review procedure and, alternatively, early termination due to force majeure.

In addition, the CNE responded to the distribution companies that, in its opinion, the reasons established in the supply contracts were met for them to request the Commission to terminate the Copihue Energía contracts early.

Cox Energy Contract

The CNE issued Exempt Resolution No. 576, dated October 30, 2024, which rejects the appeal for reconsideration filed by Cox Energía SpA, winner of Tender 2017/01 for 140 GWh per year, against CNE Exempt Resolution No. 401/2024, which denies requests for deferral of the supply start date, project replacement, authorization for temporary backup supply, opening of a contract price review procedure and, alternatively, if the above is denied, early termination of the contract due to force majeure.

In its analysis of the reinstatement, the CNE points out that the events alleged by the supplier as force majeure, and which would justify the latter's claims, do not have such character. Consequently, the CNE, making a detailed analysis of the factual and legal background alleged by the supplier, has determined that the request made by the latter should be denied.

It is relevant to indicate that, with respect to the price review procedure established in article 134 of the General Law of Electric Services, the resolution issued by the CNE has been emphatic in stating that the right to request its activation cannot be exercised by a supplier that is in breach of its supply obligation since January 1, 2024.

With the CNE's ruling and with no pending appeals, it will be up to the distribution companies to request early termination of the contract due to non-compliance with its obligations.

Copihue Energy Contract

By Ordinary Official Letter No. 756, dated 2024, the National Energy Commission informed the distribution companies that, in its opinion, the reasons established in the supply contracts were met for them to request approval of the early termination of the contracts of Copihue Energía, winner of Tender 2015/01 for 286 GWh per year and a subsidiary of the Mainstream Renewable Power Chile Group.

The above, because said companies had informed the CNE of the non-compliance by the generating company, requesting a ruling regarding the early termination of the contract.

This case began in June of last year, when the generating company informed the National Electric Coordinator that it was unable to meet its payment obligations resulting from the balance sheets prepared by said entity, so the latter ordered the collection of the guarantee provided by Copihue Energía to participate in the Short-Term Market, suspending the company from this instance, date from which it has been in breach of the contractual obligation of supply with the distribution companies.

With the CNE's response, it is expected that the distribution companies will formally begin the process of early termination of the contract with Copihue Energía.

It should be noted that, to date, the distribution companies executed the respective guarantees of faithful compliance with the contracts, for a total of UF 85,801.

Renewable Energy Contract Summer Three

For its part, the CNE's ruling on a request submitted by Empresas Eléctricas AG indicated that the conditions for the early termination of the Verano Tres Renewable Energy contract, awarded 540 GWh per year in Tender 2017/01, were also set for the same reasons of failure to provide the supply according to the terms of the contract.

In this way, the contract will also soon be in a position to have its early termination approved, once the application is submitted to the CNE by the distribution companies.

Location of the San Andrés Wind Farm

Additionally, it should be noted that previously, in August of this year, the CNE approved the early termination of the contract of the supplier Parque Eólico San Andrés , winner of Tender 2021/01 with 273 GWh-year and start of supply in 2026, in accordance with the provisions of article 135 ter of the General Law of Electric Services. This legal provision enables the supplier to request the termination of the contract in the event that, for reasons not attributable to the supplier, its generation project faces conditions that make its construction unviable.

Effect on rates

The effect of the termination of the Copihue Energía, Energía Renovable Verano Tres and Cox Energía contracts on a typical residential electricity bill represents an increase of approximately 1.1%, since such contracts had a price lower than the average of the current contracts. However, since the suppliers of said contracts were already failing to comply with their supply obligation, being covered by the remaining contracts, the effect on the tariff was already being passed on to customers through energy price re-settlements, in particular, in the accounting of balances of the price stabilization mechanism.

The aforementioned contracts involve previously submitted guarantee bonds for a total amount of approximately 22.8 billion pesos, which benefit regulated customers through discounts on their electricity bills, in the event of being charged due to early termination of the contract due to breach of contract.