Miércoles 11 de Septiembre de 2024
Novedades
BNamericas conducted the interview to address Chile’s electricity subsidy bill that sets sector alarm bells ringing.
BNamericas: In general, what is the electricity generation sector’s opinion of the bill?
González: 1 believe that, in general, the opinion of the proposal is negative, possibly for different reasons and concerning different elements of the bill. However, 1 would say there is bread agreement on two main points.
First, the subsidy coverage goal is very ambitious and diverges from what would be considered a targeted policy. We’re talking about a subsidy aimed at reaching all households in the top 40% of the social household registry, which comprises 4.7mn families, roughly equivalent to about 10mn people in a country with a population of around 20mn. This subsidy is much broader than the water subsidy used as a reference, which focuses on families that spend more than a certain percentage of their income on sanitation services. In 2023, the water subsidy targeted 1.35mn families, with about 1mn beneficiaries, which is significantly less than the proposed coverage for the electricity subsidy, and one might question why.
Second, to achieve this goal, “self-contained” solutions need to be developed in the electricity sector. We must remember that the rate increases sought to be mitigated result from the need to normalize rates paid by regulated customers and start repaying a debt of over US$7bn owed to generating companies that had their contract prices frozen.
While the reasons for this freeze might have been understandable initially, there is a strong consensus that it !asted beyond what was reasonable and, as the finance minister said, it was like shooting oneself in the foot.
Successive stabilization laws were motivated by political and social considerations, and their funding should come from fiscal resources. In this context, the design of the subsidy should align with the capabilities of the fiscal coffers and existing priorities for public resource allocation, rather than debating which industry players should contribute more or less to the subsidy’s funding.
BNamericas: Which articles or measures are most controversia! or relevant for the generators?
González: The most controversia! measure is the so-called FET charge, which, although it falls on trader agents or [grid] “withdrawals” that are both nonregulated and regulated, it is ultimately borne by the owners of PMGDs under the stabilized price regime contained in the repealed [decree] DS 244.
There has also been considerable discussion about the additional green tax surcharge due to its purely revenue-raising nature, which differs from the more or less broad proposals from the sector that an increase in this tax should be accompanied by a review of its exclusion from variable costs considered for system economic dispatch. Corrective taxes, including emissions taxes, are part of the government’s tax reform agenda, and this measure raises uncertainty about whether the tax’s design will indeed be discussed in line with expert recommendations.
The measure for SMEs is also controversia! because, although the volume of electricity covered by this mechanism is limited, it forces PMGDs to supply energy to distributors, impacting the electricity volume allocated to companies with existing contracts, particularly those with contracts where the average gross price is higher than the stabilized price. This is in a scenario where regulated supply tenders have become less attractive for leveraging investments in renewable energy, as demonstrated by the latest process.
To read the complete interview visit:
https://www.bnamericas.com/en/analysis/spotlight-chiles-electricity-subsidy-bill-sets-sector-alarm-bells-ringing
