The challenges of mass incorporation of free clients with the decrease in power

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

PRESS RELEASE from Acen
September 4, 2024

If the reduction of the connected power from 500 kW to 300 kW is carried out, the number of free customers could double or triple. This implies regulatory challenges, from the energy marketing companies themselves and from the National Electric Coordinator (CEN). “If one looks from 2018, there has been an increase in both the installed capacity of the system as well as the coordinated companies, from 400 to more than 750. Although it is expected that 3,500 new customers will be added, the penetration rate is different if one separates between industrial customers and residential customers. One would expect that industrial customers would be the first to change. As a Coordinator it is a challenge, but we are prepared,” said Paulo Oyanedel, director of the Competition Monitoring Unit at the CEN, in the webinar organized by ACEN and called “The challenges of reducing the power limit” broadcast this Tuesday, September 3.

He added that the expectation is that this will be a gradual process and that it will probably be necessary to reinforce certain IT infrastructure and launch a training campaign on how this market works, training that was also supported by the other panelists who stressed that it should be a joint effort of all the actors involved.

Regarding the requirements that these new free clients must meet, Oyanedel pointed out that it would be relevant to make it an obligation, currently it is optional, to incorporate powers of less than 5 megabytes to the Platform for Receiving Measures for Economic Transfers (PRMTE). “From the Coordinator's point of view, adequate measurement systems are required. What is important is that the eventual barriers to competition are minimized and if the meter is a barrier, it is necessary to analyze whether it is fulfilling its objective or not.”

In this regard, the international guest, Xavier Farriols, Electrical Business Managing Director at Factor Energía, indicated that “today in Spain the regulations are being changed because the new meters allow very fast changes of supplier. From 2026, in Spain there is talk of the change being within 24 hours. That is, if there is a price advantage, the customer sees it immediately. Therefore, the issue of the smart meter is a key issue.”

Farriols added that as the consumer is smaller, the meter belongs to the distributor and is rented in the monthly bill to the distributor, so that when changing distributors the meter is not a barrier to entry, as recommended by the Coordinator.

Although in Spain, 30 kW customers have a person behind them who speaks to them, it is worth asking whether the products and services currently offered by retailers in Chile will be as personalized with the opening of the market. Along these lines, Rodrigo Moya, General Manager at Imelsa Energia , said that the profile of customers between 500 kW and 300 kW is different, with an average consumption of 0.5 GWh/year, “that will clearly mean an increase in the mass of customers and a different type of service, but for retailers this is an opportunity. We have to see how retailers are attractive to that customer. The challenge is to present an attractive value offer to that customer, to make them more active in what they do and not just price takers as they are today in distribution. We have to move towards a demand that participates.”

Claudia Medina, Commercial and Regulation Manager at Ferrovial , mentioned that competitiveness not only improves the price, but also the service offered by the products. In addition, it drives innovation and transparency and generates that trust with the client, which is essential. However, she stressed that “in order to have cheap, 100% renewable energy rates, we obviously have to promote more penetration of renewable energy in the networks and to do so, we need to have more secure, robust and resilient transmission. This will translate into all regulated clients through tenders and non-regulated clients through bilateral negotiations, we will have cheaper and cleaner energy.”

According to the Spanish expert, if retailers have cheaper energy, so do consumers and industry. “Renewables help to liberalise the market, but it is liberalised because the price is cheaper.”

The Spanish experience can reveal a lot about the steps that should be taken in the context of market opening. Farriols pointed out that in Spain there is what is called the Supply Point Information System “which is technical information to which all marketers have access. It is the customer consumption curve and profile for the last two years. This has helped us a lot to generate competition and products and to make personalized offers.”

International experience indicates that, in market openings, coordination between the marketer, the distributor and the Coordinator is important as a first step, above all, to establish protocols since billing is a key element that cannot be failed.

For his part, Eduardo Andrade, executive secretary of ACEN, concluded by commenting that “we are in the first wave of contract renegotiations. Overwhelmingly, all free customers have preferred to continue being free customers and not return to being regulated customers. We hope that the report (of the TDLC) is positive and that as soon as it is published, the Ministry of Energy will make the necessary regulatory adjustments so that as soon as possible this large number of small industries can benefit from the free market. This step from 500 kW to 300 kW is a first stage, and in the medium and long term, we will reach what happens in countries like Spain where everyone can be a free customer.”