Colombia eases wholesale contract rules for stricken power distributors

Troubled Colombian power utility Air-e will be free to directly negotiate wholesale contracts with generators as part of wider efforts to guarantee electricity services to final users. 

A resolution published by sector regulator Creg stipulates that electricity providers under government intervention may secure bilateral supply agreements for up to two years. 

Eligible companies must have been subject to government intervention within six months of signing such contracts, according to Creg. 

“The regulation... aligns the incentives of the generators, the stability of the intervened marketers, and the tariff protection of regulated users,” the entity said in the resolution. 

Under previous rules, wholesale energy contracts in Colombia's regulated market could only be secured through public bidding processes or auctions.  

The resolution cites the inability of intervened companies to meet immediate contractual requirements due to operational or financial constraints. 

Analysts say these companies will no longer be exposed to the volatile prices of Colombia’s short-term energy spot market. 

Air-e troubles 

The government assumed control of Air-e in September amid fears of imminent outages in the Caribbean coastal region. 

Air-e, which has estimated debt commitments of more than 1.8tn pesos (around US$420mn), has blamed its financial plight on soaring wholesale energy prices, surging operational costs and mounting unpaid bills by customers.

Formerly known as Caribe Sol – an offshoot of now-defunct utility Electricaribe – Air-e is jointly owned by Empresa de Energía de Pereira and Latin America Capital Corp.

It is one of the largest distributors in Colombia by market size, serving 1.25mn users in the departments of Atlántico, La Guajira and Magdalena.

The resolution can be seen in the Documents box in the top-right corner of the screen.