Energy auction process in Colombia ends, no contracts have been awarded and a new process is expected
Energy Colombia Alert
The conditions for competition set for the auction were not met. The next auction is expected to take place in the second quarter of this year. Before June 30, 2019 in other words.
On February 26 the public hearing took place for the auction of long-term contracts on the sale of energy, for energy generation projects using non-conventional sources. Despite a wide response from the market, bearing in mind that 12 purchase bids by marketers were submitted and eight sale bids by generators, as was explained at the public hearing, and the price ceiling set by the Gas and Energy Commission (CREG) was also achieved, the contracts were unable to be awarded, because the conditions for competition set for the auction were not fulfilled.
The conditions for competition required the satisfaction of three indicators: (i) participation, (ii) concentration and (iii) dominance. The first of these indicators, relating to participation, was the only indicator achieved. It measures the number of independent bids, in other words, how many generators did not have relationships of control with other bidders or participants at the top end of demand. The second indicator, relating to concentration, referred to the existing concentration of marketers in the market, which means it determined whether a potential monopoly scenario existed. Lastly, the third indicator, related to dominance, looked at whether the marketer with the greatest share of the market, exercised a role of dominance at the auction. These last two indicators could not be satisfied, and for this reason the auction was unable to go ahead.
It therefore appears that not all the necessary requirements were satisfied and, as explained at the hearing, the auction of energy contracts was brought to an end and a new process needed to be started.
It must be noted that the mines and energy minister gave assurance that the next auction will take place in the second term of this year, in other words before June 30, 2019.
We will continue keeping track of events with the government agencies involved, to be able to provide further information.