Superservices completed a comprehensive evaluation of Municipal Companies of Cali, EMCALI

This Superservicios release was published using machine translation.

Bogotá DC, August 11, 2022. At the end of the comprehensive evaluation carried out on the Municipal Companies of Cali, Emcali, the Superintendence of Residential Public Services showed an increase in their operating income and better financial behavior due to their operational efficiency. It also found some shortcomings related to the application of Corporate Governance, alleged omission in the disclosure of relevant financial information for users and findings associated with non-compliance with regulatory aspects in the provision of water and sewage services, among others.

In the comprehensive evaluation, carried out in the first half of the year on the management of the period 2019 to 2021, corporate governance, technical, operational, financial, commercial and administrative issues of this company, which provides aqueduct, sewerage and electric power.

Disseminating the results of the report, the superintendent in charge, Lorenzo Castillo Barvo, stated: “The comprehensive evaluation is part of the surveillance exercises carried out by the superintendence to monitor management and determine the real status of the supervised companies. In 2021, Emcali obtained a net result higher than that of 2020, as a result of the efficiency in its operation, having higher income and a lower level of expenses. The energy service accounts for 63% of income. In the evaluation we also identified some shortcomings and aspects to improve in the reports and monitoring of the Governance Framework Agreement with the district of Cali, information reports to the Single Information System (SUI) of the sector, distribution of financial surpluses, sampling and analysis of water quality, tariff application, and attention to users, among other topics analyzed”.

The following are some of the results of the comprehensive evaluation.

Corporate governance

Between Emcali and the Special District of Cali there is a mandatory Governance Framework Agreement. When evaluating it, it was identified that in the periodic reports to the District Council the progress of the management was presented, but details on the effectiveness of the Corporate Governance measures against the development of the business and the impact that this could have on the management were not included. .

Additionally, when analyzing the notes to the financial statements of the last three years, it was noted that the company has not distributed to the district, in a period of 23 years, the agreed financial liquid surpluses.

Finally, it is highlighted that the general manager is appointed by the mayor and is obliged to follow what is ordered by the board of directors. However, there is no mechanism to verify such compliance.

Financial management

As of December 2021, Emcali recorded operating income of COP 2.34 trillion [1] , representing a growth of COP 116,280 million (5.2%) compared to the previous year. This behavior was mainly due to the increase in rates and the permanence of consumption in the aqueduct, sewage and electric power services.

The company generates enough operating income to allow it to pay its debts with the Nation. However, according to the projections of the lender, with the debt payments, a negative net cash flow is expected for the years 2024 and 2025, which generates an alert about its liquidity in 2024. Omission of relevant information for users was also evidenced. on the financial statements of the company, an obligation that it has for not being listed on the stock market and not attracting or managing public savings.

Electric energy service

The provider reported on the difficulties that affected the provision of the service and the fulfillment of regulatory goals, mainly associated with the pandemic and the national strike. It was identified that, at the level of investments in the distribution network in 2020, it executed 34% of what was planned, but, by 2021, it achieved greater management, reaching 96% of the planned investments. Regarding the level of the loss index, the provider did not meet the regulatory goal approved for the periods 2019, 2020 and 2021. In the last year it approached the regulatory indicator, registering 10.48% of losses compared to the goal of 10 .31%.

In service quality indicators, Emcali met the average quality goal during 2020 and 2021, closing 2021 with 7.87 hours of interruptions per year (SAIDI) and 12.4 interruptions per year (SAIFI). In the case of individual quality indicators, 35 subscribers in its entire market had an interruption duration greater than 365 hours in 2020, by 2021 no user presented this condition.

In compliance with the Technical Regulations for Electrical Installations (Retie), shortcomings were identified in the safety distances and locative conditions of the infrastructure visited. This generates an alert for priority attention by the company, given the electrical risk that may arise.

In commercial aspects, Emcali is applying the tariff option, authorized by the Energy and Gas Regulatory Commission, which allows it to reduce impacts on users' bills due to the high prices of the service due to variations in the costs of provision. When analyzing the rates, there was a variation in the calculation due to the reduction in demand during the pandemic, a difference that must be compensated to users. Likewise, inconsistencies were found in the information reports to the SUI, which must be adjusted by the company.

It was evidenced that the provider has taken steps to guarantee an adequate consumption measurement process, and is advancing in the evolution and technological change of meters. In subnormal neighborhoods, it works on the normalization of the energy service, in some cases, with advanced measurement instruments.

Aqueduct and sewage services

In the analysis of the information reported by Emcali, the superintendency showed that all the provider's supply sources have a valid surface water concession, granted by the Regional Autonomous Corporation of Valle del Cauca - CVC.

Regarding the measurement of flows at the inlet and outlet of the drinking water treatment plants, the company has macro-measuring instruments, except in the La Reforma and La Rivera plants. The continuity of the aqueduct service during the year 2021 classified as continuous in all the hydraulic sectors, in accordance with the provisions of the regulations.

Regarding the quality of the water, according to what was reported by the health authority to the Surveillance Information System at the National Reference Laboratory (Sivilab), Emcali supplied water not suitable for human consumption in the municipality of Candelaria in April 2020, by not meeting the free residual chlorine parameter. During 2021, in the municipality of Yumbo, the company failed to comply with the minimum frequency of sampling and analysis of water quality control in the distribution network.

During the evaluation, Superservicios found that the Cañaveralejo wastewater treatment plant operates below its installed capacity, which is why the excess flow is being discharged into the Cauca River without treatment. And about Emcali's Emergency and Contingency Plan, it is reported that, presumably, it does not meet some minimum guidelines established in the sector's regulations.

Regarding tariffs, the findings are related to the differences between the average costs reported and those adopted as maximum costs, in particular in the expected value for the Average Cost of Investment (CMI) of the sewerage service. However, it presents the supports of the adjustments to the rate structure that applies in the areas of provision of aqueduct and sewage services.

It was also observed that the value provided on the invoice is higher than the rate reported to the SUI. And in the application of the percentages of subsidies and contributions there is a difference in decimals, with respect to those approved by the municipal councils.

User protection

Emcali received 80,918 claims from users between January 2020 and January 2022, related to non-conformities with invoiced consumption, average charges, unpaid payments and significant deviations, among other causes. The superintendency reiterated to the provider the duty to attend to them, as well as to carry out the respective analyzes to improve the satisfaction of subscribers and/or users.

There were untimely shipments or files that Emcali had to send to the superintendency to address claims from users in the second instance were not fulfilled. The provider is obliged to comply with the timely delivery and quality of said documents.

For the years 2020, 2021 and so far in 2022, it was found that 42% of the employees willing to care for users had received training on their work. On the other hand, it was observed that in some offices the minimum 40 hours of weekly service are not met.

In addition, other user service channels were evaluated, such as the website, the WhatsApp “Soy Mile”; availability on social networks and telephone hotlines.

Faced with the results of this evaluation, the Superintendency will follow up on the corrective actions that Emcali must implement to address the evidenced findings.

The comprehensive evaluation is available at the following links:

Aqueduct and sewage services: Evaluation of providers / Valle del Cauca / Emcali

Electricity service: Evaluation of providers / Emcali