A new law will stabilize electricity prices in Chile
Chile Administrative Law Alert
In the context of the New Social Agenda presented by the Chilean government on November 2, 2019 Law No 21,185 was published in the Official Gazette, creating a transitional mechanism for stabilizing electricity prices to customers under the regulated price system.
The mechanism cancels the 9.2% price rise that should have been applied to regulated customers under Decree 7T, and postpones the price increase for the sale of electricity contracts between generation and distribution companies that start supplying before 2021. This will be carried out by creating a Stabilization Fund implemented by the National Energy Commission (CNE) and funded by the companies in the generation industry (not including any small distributed generation suppliers).
The law determines that the final tariff to be paid by regulated clients consists of the sum of the transmission price, the added distribution value and the average node price, which is set every six months by the CNE by decree.
The price stabilization mechanism will take effect in the following stages:
Periods between July 1, 2019 and December 31, 2020:
On publication of the law, decree 7T is repealed and the value determined in decree 20T is kept in force (the Stabilized Regulated Customer Price).
Period between January 1, 2021 and the end of the stabilization mechanism (which cannot go beyond January 31, 2027): Distribution companies will charge the average node price set by the CNE, which cannot go above what is established in Decree 20T adjusted in line with the Consumer Price Index, from January 1, 2021 (the Adjusted Stabilized Regulated Customer Price).
The law additionally lays down that in any average node price decrees that are adopted, the prices that the distribution concession holders pay their suppliers must include an adjustment factor that ensures that their charges are consistent with their expected revenues by reference to the Stabilized Regulated Customer Price or adjusted Stabilized Regulated Customer Price of the distributor concerned. So, if the average node price is higher than the Stabilized Regulated Customer Price or adjusted Stabilized Regulated Customer Price, the prices will be decreased leaving a credit balance for these suppliers. Otherwise, if the average node price is below the Stabilized Regulated Customer Price or adjusted Stabilized Regulated Customer Price, it will be adjusted to the extent needed to cover the outstanding payment balances.
Every six months the outstanding balances to the suppliers will be monitored, so that, from July 2023 or until a total balance amounting to 1,350 million dollars has accumulated, these balances will not be increased.
This mechanism will remain in force until all outstanding balances have been discharged, which cannot under any circumstances take place after December 31, 2027.