Thermal Generation and Trading
Generation and wholesale market
For 2021, the Brindisi Sud, Sulcis, Portoferraio and Assemini plants were declared eligible for the cost reimbursement scheme. These plants had already been declared eligible for reimbursement for 2020 as well.
The Porto Empedocle plant is eligible for long-term cost reimbursement until 2025, while plants located on the smaller islands are automatically eligible for cost reimbursement for all years in which they are declared essential, including 2020 and 2021. Admission to the cost reimbursement scheme guarantees coverage of the operating costs of the plants, including a portion of return on invested capital.
For 2020 and 2021, the remainder of essential capacity was contracted under alternative contracts which provide for the obligation, on the Ancillary Services Market (ASM), to offer to go up/down to prices no higher/lower than the values identified using methods established by the Regulatory Authority for Energy, Networks and the Environment (ARERA) for a fixed premium.
On June 28, 2019, the Minister for Economic Development issued a decree approving the definitive rules governing the capacity remuneration mechanism (the capacity market). On November 6 and November 28, 2019 two auctions were held with delivery in 2022 and 2023 respectively: Enel was awarded capacity for both years. A number of operators and a sectoral trade association contested the decree and the results of the two auctions before the Milan Regional Administrative Court. Two operators also challenged the European Commission decision approving the Italian mechanism before the EU Court. Both proceedings are under way.
ARERA has confirmed the transitional capacity payment mechanism for 2020 and 2021 in order to ensure continuity with the new capacity market, which will produce a financial impact starting from 2022.
In 2020, ARERA, acting on a proposal from Terna, approved a pilot project for the forward procurement of a new ultra-fast frequency regulation service (the “Fast Reserve”). Contracts for delivery in 2023-2027 were awarded through a tender. Enel was awarded contracts to supply this service.
In February 2020, Law 8/2020 (ratifying Decree Law 162/2019, the “Milleproroghe” omnibus extension act) was published. It contains provisions to activate the implementation of experimental configurations of collective self-consumption from renewable sources or renewable energy communities, pending the transposition of Directive (EU) 2018/2001.
Following this measure, in August 2020 ARERA issued Resolution no. 318/2020/R/eel, containing the provisions on the regulation of economic items relating to electricity subject to collective self-consumption or sharing in the scope of renewable energy community.
The Ministry for Economic Development, by means of the Ministerial Decree of September 16, 2020, has therefore identified the incentive rate for the remuneration of renewable source plants included in these experimental configurations.
Remuneration parameters for generation from renewable sources, cogeneration and waste
The measure TED/171/2020 of February 24, 2020 updated the remuneration parameters applicable to standard plants and to certain plants for the generation of electricity from renewable sources, cogeneration and waste for the second regulatory period, with effect for both from January 1, 2020.
European Commission Decision C (2020) 3401 on electricity production in Spanish non-peninsular territories (NPT)
On May 28, 2020, the European Commission approved the regulatory scheme established with Royal Decree 738/2015 of July 31, 2015 regulating the production of electricity in the non-peninsular territories (NPT), concluding that it meets the criteria for services of general economic interest and is compatible with the internal market. The regime is initially applicable until December 31, 2025 in the case of the Balearic Islands and until December 31, 2029 in the case of the Canary Islands, Ceuta and Melilla with the possibility of requesting an extension.
Order to revise fuel prices in non-peninsular territories (NPT)
Order TEC/1260/2019 of December 26, 2019 revised the technical and financial parameters of the remuneration of generation units in the electrical systems of the non-peninsular territories (NPT) for the second regulatory period (2020-2025). With regard to fuel prices, the Order established that within three months the prices of energy products and logistics would be reviewed by the ministerial order, with effect from January 1, 2020. On August 7, 2020, Decree TED/776/2020 of 4 August was published in Spain’s Official Journal, revising these prices.
Law 5 of April 29, 2020 of the Autonomous Community of Catalonia
On June 2, 2020, Law 5 of April 29, 2020 of the Autonomous Community of Catalonia concerning fiscal, financial and administrative measures in the public sector and the introduction of a tax on generation plants with impacts on the environment was published in Spain’s Official Journal. Among other aspects, this law includes the creation and regulation of a tax on structures affecting the environment within the Autonomous Community of Catalonia. In particular, this new tax is levied on the production, storage, transformation and transport of electricity. Electricity generation is taxed at a general rate of €5/MWh, and a dedicated rate of €1/MWh for combined-cycle plants, while excluding hydroelectric plants and generation from renewable sources, as well as from biomass, biogas, high-efficiency cogeneration or sewage. With regard to the transport of electricity, a quota is established based on the voltage level, while transport structures with a voltage of less than 30 kV and transport infrastructures for renewable power evacuation are exempted.
Following the entry into force of Regulation no. 943/2019/EU and the expected transposition of Directive 2019/944/EU, the prohibition on long-term bilateral negotiated contracts (PPAs) under Romanian law since 2012 was weakened following the adoption of Government Emergency Ordinance 74/2020, which allows new power generation facilities to sign long-term PPAs (more than one year) in order to secure financing for construction.
During 2020, following Balancing Market reforms, the price caps that link the closing market price of the Balancing Market to the closing prices on the Day-Ahead Market were eliminated. Furthermore, the dual pricing system will be replaced by a single price, and the period relevant for settlement purposes will be changed from hourly to an interval of 15 minutes.
Electricity and capacity markets
In January 2020, the Federal Antimonopoly Service established the rates for capacity and electricity provided under regulated contracts. For Enel Russia, the rate for the Nevinnomysskaya GRES plant is lower than that envisaged in the 2020 budget.
In March 2020, Enel Russia signed compromise agreements with the North Caucasus guarantee suppliers to reschedule the time limits for fulfillment of the electricity and capacity payment obligations under the wholesale market contracts accumulated before January 1, 2020, subject to the payment of interest at the reference interest rate set by the central bank.
Rate revision - Introduction of a transitional electricity price stabilization mechanism
On November 2, 2019, Law 21.185 of the Ministry of Energy was published. It introduced a transitional electricity price stabilization mechanism for customers on the regulated market. Consequently, the prices to be charged to regulated customers in the 2nd Half of 2019 were set at the level of those applied in the 1st Half of 2019 (Decree 20T/2018) and were defined as “Stabilized Prices for Regulated Customers” (PEC).
Between January 1, 2021 and the termination of this mechanism, the prices charged will be those set every six months on the basis of Article 158 of the Electricity Act and cannot exceed the PEC adjusted for consumer price inflation.
Any differences between the amount billed in application of the stabilization mechanism and the theoretical bill determined on the basis of considering the price that would have been applied under the terms of contracts with the various electricity distribution companies will be recognized by generators as receivables for invoices to be issued, up to a maximum of $1,350 million until 2023. These differences will be recognized in US dollars and will not accrue interest until the end of 2025. Any imbalances in favor of the generation companies will have to be recovered no later than December 31, 2027.
Enel Green Power
The Ministerial Decree of July 4, 2019 provided for competitive procedures based on Dutch auctions and registers, depending on the installed capacity and by technology groups, including photovoltaic systems. In particular, up to September 2021, seven procedures will be held with:
- Dutch auctions for plants with a capacity of more than 1 MW;
- registers for plants with a capacity of less than 1 MW.
Unlike previous decrees, the Ministerial Decree of July 4, 2019 provides for a new method for supporting renewable sources through two-way contracts for differences under which the successful tenderer returns any positive differences between the zonal price and the auction price.
At October 31, 2020 the indicative annual cumulative cost was around €5.3 billion, compared with a ceiling of €5.8 billion for termination of the incentive mechanism.
Royal Decree Law 23/2020 provided an important impetus to accelerate the development of renewable energy in Spain. It established the legal basis for auctioning power generated from renewable sources based on the long-term price of electricity. It also regulated various aspects to improve management and reduce speculation in managing the access and connection of renewable energy projects to grids. In particular, it established that at sites where coal or thermonuclear power plants have been closed, account can be taken of environmental and social criteria, as well as technical criteria, in allocating grid access capacity. Finally, the royal decree proposes various improvements for faster administrative processing of renewable energy projects.
In 2020, the Spanish government worked to define a roadmap for hydrogen and a storage strategy.
In the closing months of the year, various regulations governing auctions were also approved, including a royal decree for renewable energy auctions (Royal Decree 960/2020) and a ministerial decree governing auction procedures and establishing an indicative calendar (Ministerial Decree TED 1161/2020), while, finally, a 3,000 MW auction was announced for January 2021.
During the year, proposals were submitted for regulations governing grid access and connection for the generation of electricity from renewable sources. In December, a new royal decree concerning access and connection was published (Royal Decree 1183/2020). This regulation will be completed in January 2021 with the approval of a circular by the National Commission on Markets and Competition. The entire access and connection regulatory package will be completed in the 1st Quarter of 2021 with the approval of the Detailed Specifications of technical criteria. It will grant greater access capacity to grids for renewable generation and establish rules improving management of the system.
Following approval by the European Commission, the Minister of Energy extended the remuneration regime for interruptibility services until September 30, 2021. Interruptibility is a demand response service willing industrial consumers interrupt their consumption when required, in exchange for a fee fixed by auction. The scheme is financed by all generators operating on the mainland, including EGPH, through the transfer of a percentage of their revenue. The percentage applied differs depending on the generation technology used: wind = 1.8% (previously 2%), small hydro = 0.8% (previously 1%), PV = 3.6% (no change).
Law 4759/2020 published in December 2020 introduced measures to reduce the deficit of the renewable energy remuneration fund, which finances incentives for producers. These measures include a retroactive contribution of 6% of the 2020 annual turnover of renewable energy generators, which will only apply to renewables plants that entered service 2015. Electricity sellers are required to pay a levy of €2/MWh for power purchased in 2021.
The decision of the Regulatory Authority for Energy (RAE) no. 1538/2020 published in December 2020 set the UOCC contribution for 2021 at €0.325/MWh, slightly lower than the previous year (in 2020 it was €0.326/MWh). This rate applies to monthly revenue from the electricity generation of all renewable and cogeneration units in operation and serves to cover the operating and investment costs of DAPEEP, the Greek operator responsible for the management of incentives for renewable generation and the issue of guarantees of origin.
In May 2020, the United States Treasury Department amended the administrative guidelines for section 45 of the Production Tax Credit (PTC) for investments in wind plants, granting eligible projects two more years to enter service and maintain eligibility under the “continuity requirement”. The guide was published to take account of construction and supply chain delays caused by the COVID-19 emergency. Eligible wind projects that began construction in 2016 can now be put into service until 2021, receiving 100% of the PTC (for example, $25/MW, adjusted annually for inflation) for the first 10 years of operation. Projects that started construction in 2017 can now be put into service until 2022, receiving 80% of the PTC (for example, $20/MW, adjusted annually for inflation) for the first 10 years of operation.
In December 2020, the US Congress approved and President Trump signed a two-year extension of the Investment Tax Credit (ITC) for investments in Section 48 solar systems and a one-year extension of Section 45 of the PTC for investments in wind farms.
Eligible solar projects can now receive an Investment Tax Credit of 26% of the project capital costs if they start construction before January 1, 2023 and enter service before January 1, 2026. Eligible projects that begin construction before January 1, 2024 and enter service before January 1, 2026 can receive an ITC of 22% of the capital costs of the project. Eligible wind projects can now receive 60% (i.e. $15/MWh) of the PTC (adjusted annually for inflation) for the first 10 years of operation if construction begins before January 1, 2022. Wind farms have no statutory deadline for entering service but, as discussed above, US Treasury Department guidelines generally dictate that projects must start operation within four years of starting construction. A project that started construction in 2020 is therefore expected to enter service before January 1, 2025, and a project that begins construction in 2021 is expected to enter service before January 1, 2026.
Africa, Asia and Oceania
In August 2020, the Risk Mitigation Independent Power Producer Procurement Program (RMIPPPP) was launched, an auction for the development of 2,000 MW of capacity, which should enter service by June 2022. In the event of an award to Enel Green Power, the payments for the electricity generated, for capacity and for ancillary services will have a positive impact on Enel Green Power’s results.
A further procurement auction for 11,813 MW (of which 6,800 from renewable sources) under the long-term energy development plan (Integrated Resource Plan - IRP 2019) was approved by the regulator NERSA in September 2020 and is expected to take place in 2021.
From October 2020, municipalities (which together with Eskom are South Africa’s electricity distributors) have been able to purchase power directly from renewable energy producers and no longer only from Eskom. This change in the rules improves Enel Green Power’s earnings outlook.
The government took a number measures in 2020 to protect the renewable energy sector from the adverse effects of COVID-19. The pandemic was declared a cause of force majeure, which allowed operators to suspend their obligations without incurring penalties. To safeguard renewable generation projects, a 5-month extension of the deadline for entering service was granted, which is also applicable to EGP India’s 285 MW Coral project.
In addition, the government issued strict instructions to protect private generators from any arbitrary curtailment decisions by discoms at a time of very weak electricity demand, as well as to ensure timely payment of power purchases by discoms.
In 2019, the Ministry of Energy had ordered discoms to issue letters of credit to private generators under the terms of their respective power purchase agreements (PPAs). The Gurajat State Distribution Company was forced to open and maintain a letter of credit in March 2020. This reduced the risk faced by Enel Green Power projects.
In September 2020, the regulator AER agreed a change in approach by the AEMO system operator with regard to new connections, moving from the parallel evaluation of new connections to a sequential approach (where generators are placed in a progressive queue). Each connection request is evaluated on the basis of the impact it has individually on the grid. AEMO will be able to begin the evaluation of an application only if the previous application has received a no-impact assessment on grid security (or – if not – if actions have been taken to remove the impact). This change added significant delays in the connection of Enel Green Power plants in Cohuna and Girgarre (whose connection was expected in 2020), with a significant impact on Enel Green Power’s financial performance.
Infrastructure and Networks
The rate for the fifth regulatory period (2016-2023) is governed by ARERA Resolution no. 654/2015/R/eel. This period lasts eight years and is divided into two sub-periods of four years each (NPR1 for 2016-2019 and NPR2 for 2020-2023).
With regard to the NPR2 period, ARERA published Resolution no. 568/2019/R/eel, with which it updated rates for distribution and metering services in force in the 2020-2023 period, publishing the new integrated texts (TIT 2020-2023 and TIME 2020-2023).
With Resolution no. 639/2018/R/com, ARERA set the value of the WACC for distribution and metering activities, valid for the 2019-2021 period, at 5.9%.
As for distribution and metering rates, ARERA approved both the definitive reference rates for 2019, calculated by taking into account the actual balance sheet data for 2018 (Resolution no. 144/2020/R/eel), and the provisional reference rates for 2020 on the basis of the preliminary balance sheet data for 2019 (Resolution no. 162/2020/R/eel). The definitive reference rates for 2020 are expected to be published in the early months of 2021.
With Resolution no. 449/2020/R/eel, ARERA adjusted the grid loss regulations for the 2019-2021 period, revising the conventional percentage loss factors to be applied to low-voltage withdrawals and making a number of changes to the methods for calculating the annual equalization amount.
As regards service quality, ARERA, with Resolution no. 646/2015/R/eel as amended, established output-based regulation for electricity distribution and metering services, including the principles for regulation for 2016-2023 (TIQE 2016-2023). With Resolution no. 566/2019/R/eel, ARERA completed the update of the TIQE for the 2020-2023 semi-period, proposing tools to bridge gaps in quality of service still existing between the various areas of the country, taking account of the time needed to implement interventions on the grid as well as the effects of climate change. With Resolution no. 534/2019/R/eel, ARERA published the list of interventions in the 2019-2021 Resilience Plan of e-distribuzione eligible for the bonus-penalty mechanism envisaged under the provisions of Resolution no. 668/2019/R/eel, which introduced an incentive mechanism for investments to increase the resilience of distribution grids in terms of resistance to loads deriving from extreme weather events.
Finally, in 2020 ARERA adopted three measures (Resolutions no. 431/2020/R/eel, no. 432/2020/R/com and no. 213/2020/R/eel) containing extraordinary measures for the sterilization of effects of the COVID-19 emergency with regard to service quality, resilience and the installation plan for e-distribuzione’s 2nd generation meters.
Energy efficiency - White certificates
With Resolution no. 270/2020/R/efr, ARERA updated the rules for defining the rate subsidy to be paid to distributors under the energy efficiency certificate mechanism, in compliance with Lombardy Regional Administrative Court ruling no. 2538/2019 published on November 28, 2019. The provisions included confirmation of the cap on the rate subsidy set at €250/certificate and the introduction of an additional unit fee directly related to any shortage of available certificates. e-distribuzione challenged this resolution (with an appeal to the President of the Republic), contesting the failure to extend the additional contribution to 2018 and the failure to provide mechanisms for reimbursing costs for the purchase of virtual white certificates.
Method for calculating costs of electricity and gas plants
On July 7, 2020, the Ministry for the Ecological Transition and the Demographic Challenge launched consultations for two draft decrees concerning the methods for calculating the costs of electricity and gas plants, which will supplement the methods for calculating the access rates. These decrees must be approved by the National Commission for Markets and Competition. At the end of 2020 only the decree relating to the gas system had been approved, while the decree for the electricity system is still awaiting approval.
Bill establishing a National Fund for the Sustainability of the Electricity System
On December 16, 2020, the Ministry for the Ecological Transition and the Demographic Challenge has launched a public consultation for a bill to create a National Fund for the Sustainability of the Electricity System, which would finance, in whole or in part, the costs connected with specific remuneration scheme for generation from renewables, cogeneration and waste, currently included in electricity grid access rates. The Fund will be financed with contributions from operators in the different energy sectors, taxes envisaged under Law 15/2012, the proceeds of auctions of CO2 emission allowances and, in the maximum amount of 10% of the annual value of the Fund, the general State budget or EU funds. The preliminary bill envisages a mechanism to redistribute the cost associated with achieving renewables objectives at the national level among all energy sectors and provides for a gradual introduction of five years.
The regulated rate of return (RAB) was reviewed by the energy regulator ANRE. After an order that set the value at 5.66% in 2019, it was set at 6.39% in 2020, with a 1% bonus for new investments.
With Law 155/2020, Parliament introduced an obligation for distribution system operators (DSOs) to finance the connection to the network of new non-residential customers located less than 2,500 meters from the electricity distribution grid.
With Law 290/2020, the Parliament introduced an obligation for DSOs to finance all new connections of new residential customers.
On December 21, 2019, the Ministry of Energy published Law 21.194 which lowered the remuneration of distribution companies and enhanced the process for setting electricity distribution rates. The law changes the discount rate for the calculation of annual investment costs, which went from 10% to a rate that must be between 6% and 8% post tax. The post-tax remuneration rate for electricity distribution companies must not be more than two points above or three points below the remuneration rate set by the CNE (National Energy Commission). Finally, from January 2021 the distribution companies will have to operate exclusively in the distribution field.
CNE Resolution no. 176/2020 - Exclusive activity
On June 9, 2020, CNE Resolution no. 176 was published, specifying the substance of the obligation of exclusive activity and separate accounting in the provision of public electricity distribution services in accordance with the provisions of Law 21.194.
Under the provisions of the resolution, companies holding concessions for the public electricity distribution service operating in the Chilean national electricity system will have to set up as companies exclusively engaged in distribution activities and will only be able to exercise economic activities involved in the provision of the public distribution service, in compliance with applicable legislation. The rules established in the resolution shall apply from January 1, 2021. Where a company is unable to comply by that date for legitimate reasons, subject to notifying the CNE the application of the resolution may be postponed, but in any case not later than January 1, 2022.
Law 21.249 - Exceptional measures supporting end users of health, electricity and gas services
On August 8, Law 21.249 was approved, introducing exceptional measures supporting the most vulnerable customers, measures that, in large part, Enel Distribuzione Chile was already implementing voluntarily. The measures include a moratorium on the interruption of supply due to arrears and make it possible to pay electricity bill arrears in installments for electricity for customers defined as vulnerable. These measures were extended and strengthened with Law 21.301.
Average bare price
On October 5, 2019, the Ministry of Energy published Decree 7T/2019 in the official journal, setting the “bare price” for the supply of electricity and set adjustments and loads for the application of the Residential Rate Equity Mechanism, with retroactive effect from July 1, 2019. On November 2, 2019 the Ministry of Energy published Law 21.185, which introduced a transitory mechanism for stabilizing the price of electricity for customers subject to regulated rates.
On November 2, 2020, the Ministry of Energy published the average bare price to be applied starting from January 1, 2020. Considering the price stabilization mechanism established with Law 21.185, the publication of this decree had no effect on end-user rates.
Short-term bare price
On October 23, 2019, the Ministry of Energy published Decree 9T/2019, setting the bare price for the supply of electricity with effect from October 1, 2019.
On April 7, 2020, the Ministry of Energy published Decree 2T/2020, which sets the bare price for the supply of electricity, valid from April 1, 2020.
On December 3, 2020 the Ministry of Energy published Decree 12T/2020, which sets the bare price for the supply of electricity, valid from October 1, 2020.
Determination of 2020-2024 distribution rates
With Resolution no. 24 of 21 January 2020, the CNE published the preliminary technical bases for the calculation of the components of the aggregate distribution value for the 2020-2024 period and the study of the service costs associated with the supply of electricity, initiating the process of determining distribution rates.
Following the stages of the process established under applicable legislation, the companies submitted their comments and, on June 11, 2020, the CNE published the definitive technical bases with Resolution no. 195.
On July 17, 2020, with CNE Resolution no. 256 of the CNE, the Study Committee of the cost established in Article 183-bis of the General Electricity Services Act was established. INECON was selected to conduct the study, with the final report to be delivered by April 2021.
Determination of the 2020-2023 transmission rates
As part of the process of determining 2020-2023 transmission rates, the following processes are being developed:
- qualification of transmission plants and systems;
- determination of the useful life of transmission plants;
- definition of the technical and administrative basis for the determination of transmission rates.
In this context, on June 5, 2018, the CNE approved a definitive technical document determining the useful life of transmission systems (Resolution no. 412).
Taking account of the studies determining the value of the installations, the Definitive Report on the National Transmission System was issued in October 2020 and the related public hearing was held on November 13, 2020. In November 2020 the Definitive Report on the Zonal Transmission System was issued and the related public hearing was held on December 2, 2020.
COVID-19 pandemic response measures
As part of its response to the COVID-19 pandemic, the Argentine government introduced the following measures:
- the issue on March 17, 2020 of Decree DNU 287/2020 - Declaration of a state of health emergency from 12 March 2020 for a duration of 1 year;
- the issue on March 20, 2020 of Decree DNU 297/2020 - Mandatory preventive social isolation and subsequent extensions;
- the issue on March 20, 2020 of Decree DNU 298/2020 - Suspension of administrative deadlines for government proceedings during the lockdown;
- the issue on March 25, 2020 of Decree DNU 311/2020 - Limitations on the suspension of basic services, including users for whom the service interruption procedure had been initiated. However, this benefit is applicable only to users with reduced or subsidized rates.
COVID-19 payment moratorium
On May 15, 2020, in response to the difficulties generated by the COVID-19 pandemic for economic, financial and industrial activities, the regulatory authority ENRE issued Resolution no. 35 allowing all users who have suffered a reduction of 50% or more in their electricity usage requirement to suspend payments or make partial payments on account for contracted power supply until their demand returns to 70%. The obligation to pay additional charges and taxes is unaffected.
The measure also defines the defaulting users who will be able to benefit from a repayment plan that provides for payment of 30 consecutive installments of the same amount. These repayment plans must be notified to ENRE and Cammesa by Edesur in order to benefit in turn from a similar treatment for purchases of that power.
Postponement of rate revision
On June 19, 2020, Emergency Decree 543 was published in the Official Journal. It established a 180-day extension from the expiry date of the extraordinary rate revision established with Article 5 of Law 27541 (the Solidarity and Economic Reactivation Act). The new deadline for performing the rate review was set as December 17, 2020. Secondly, the measure extends the benefits established under DNU 311/2020 (limitations on suspensions of electricity supply) in the event of late payment or non-payment by customers of up to a maximum of six consecutive or alternate invoices falling due after March 1, 2020.
Additional postponement of rate revision
On December 17, 2020, the Argentine government issued Decree DNU 1020/2020 extending the rate freeze for another 90 days. It also initiated the full rate renegotiation process, which should be completed with the definition of a definitive renegotiation agreement in less than two years. It also authorizes regulatory bodies to set transitional rates and allows the segmentation of rates by user category.
Rate revision for Enel Distribuição Ceará
On April 14, 2020, the regulatory authority ANEEL approved the rate revision for Enel Distribuiçao Ceará, freezing rates to take account of the impact of COVID-19 on the economy.
Note also that the decrease in revenue due to the non-application of the rate revision will be offset by the delayed payment of CDE (Energy Development Account) allowances for May, June and July 2020. These payments were made in five equal installments starting from August 2020. Any differences caused by the delayed application of the rate revision will be recouped in the subsequent rate revision.
Special rate revision for Enel Distribuição São Paulo (2020)
On June 30, 2020, ANEEL approved the rate revision for Enel Distribuição São Paulo, with an average increase of 4.23%.
The rate review took account of the advances received by Enel Distribuição São Paulo on account for COVID-19, thus reducing the impact of this increase on end users. In the absence of these advances, the average rate increase would have been 12.22%.
ANEEL Resolution no. 878/2020
ANEEL took measures valid for 90 days from March 24, 2020, to ensure the distribution of electricity during the COVID-19 emergency, including: banning the interruption of service to residential customers in urban and rural areas; granting permission for the suspension of delivery of invoices issued to consumers, replacing them with the issue of electronic invoices or barcodes; and giving priority to emergency and essential services in order to facilitate social distancing measures and ensure the continuous and reliable supply of electricity.
Provisional measure no. 950/2020 of the Federal government
The provisional measure no. 950/2020 introduced by the Federal government granted a full discount for needy customers billed up to 220 kWh/month, allocating part of the CDE’s resources to fund the measure and allowing the CDE to draw financial resources to address the impact of the COVID-19 pandemic on the electricity sector.
Reduction of ancillary charges and taxes for electricity transmission
In order to provide liquidity to the electricity industry in response to COVID-19, on April 20, 2020 ANEEL approved measures to facilitate the payment of transmission rates by distributors and end users.
The main measure involved moving forward the financial effects of the adjustment scheme for April, May and June 2020. The immediate effect was R$144 million in discounts on the rates charged for the use of the transmission system by of distributors (90%) and end users (10%), with similar discounts in May and June.
On May 18, 2020, the government issued a decree regulating the COVID-19 account, an industry rescue loan to distribution companies in response to the COVID-19 pandemic.
The COVID-19 account consists of a loan obtained from a group of public and private banks, with the intention of preserving the liquidity of companies in the sector and, at the same time, alleviating the impact of the crisis on consumers.
Provisional measure no. 988/2020 of the Federal government
On September 1, 2020 the Federal government issued a provisional measure with special provisions designed to reduce rates in the period of the pandemic and in the medium and long term. The measure is valid for 120 days. It is expected that a law with the same provisions will be enacted at that time.
ANEEL Directives nos. 2177/2020, 2353/2020 and 2640/2020
These directive establish the value of the COVID-19 account resources transferred to the distribution concession holders in July, August and September.
The Energy and Gas Regulation Commission (CREG) determines the remuneration methodology for the distribution network. Distribution rates are set every five years and updated monthly based on the producer price index.
In response to the national and global impact of the COVID-19 pandemic, in March 2020 the Colombian government declared a state of economic, social and ecological emergency for the entire country and ordered mandatory preventive isolation for all inhabitants. These measures led to the issue of a range of transitional rules and regulations by Colombian authorities that govern public services, including electricity supply, in order to ensure the continuity of the delivery of public domestic services and to mitigate financial and social effects in the electricity and natural gas sector. The measures were extended until May 31, 2021.
On June 24, 2020, the Commission issued CREG Resolution 122, which approved the distribution rates of Enel Codensa. Briefly, CREG, in its final approval, corrected the Asset Base and incorporated some additional events in the calculation of quality indicators and established the retroactive application of incentives for service quality.
In Peru, the process for determining distribution rates takes place every four years and is referred to as the “Setting the Aggregate Distribution Value” (“VAD”). Exceptionally, the last rate cycle set a duration of five years, considering that an extra year was necessary to implement the reform approved in 2015 with Peruvian Legislative Decree 1221. Therefore, in 2018 the process of determining the VAD was completed for the years 2018-2022. At the end of this rate process, in general, the rates set for the previous regulatory period (years 2013-2017) were unchanged.
With Decreto Supremo 044-2020-PCM, published on March 15, 2020, a state of national emergency was declared for 15 days. This period has since been repeatedly extended and is now in place until at least March 31, 2021 due to the COVID-19 pandemic. During this period, some social distancing measures were taken to prevent the spread of COVID-19. In particular, Decreto Supremo 044-2020-PCM establishes that the government shall guarantee access to public services and essential goods and services with no restrictions.
Vice-ministerial Resolution no. 001-2020-MINEM/VME, published on March 19, 2020, established that electricity generation, transmission and distribution companies shall:
- activate safety protocols to safeguard staff, contractors and third parties;
- take all necessary actions to ensure the continuity of electricity service;
- send their emergency plans to OSINERGMIN and Ministry of Energy and Mining.
Emergency Decree 029-2020, published on March 20, 2020, introduced a 30-day suspension on the calculation of time limits for the activation of administrative procedures and proceedings of any kind, including those regulated by laws and special provisions, that are subject to deadlines.
Emergency Decree 035-2020, published on April 3, 2020, established that distribution companies can allow customers with invoices issued in March 2020 or that include amounts consumed during the national emergency by “vulnerable” users (those with a consumption of up to 100 kWh/month) to pay in instalments over as many as 24 months. The government will pay compensatory interest on the installments, which will be paid to electricity companies using the Fondo de Inclusión Social Energético. The measure also establishes that electricity companies will not be liable for compensation or penalties for failure to comply with the technical quality standards for electricity service. Various commercial measures have also been introduced, such as the suspension of the obligation to read meters, of the delivery of paper invoices (digital delivery has been introduced), and of the obligation to physically assist customers at customer care centers, while customers may be billed using their average consumption over the last six months until an actual meter reading is possible.
Emergency Decree 062-2020, published on May 28, 2020, expanded the category of customers who can pay their electricity bills in instalments to include those consuming up to 300 kWh/month. In this case, the measure establishes that invoices for May or that include amounts consumed during the national emergency are eligible for the instalment plan. The compensatory interest to be paid to electricity companies will be partly borne by the government and partly by customers. Finally, the measure also establishes that electricity companies will not be liable for compensation or penalties for violation of technical quality standards for up to 60 calendar days after the emergency period.
Emergency Decree 074-2020, published on June 27, 2020, as part of the measures issued under the state of national emergency, introduced the “Bono Electricidad”, a subsidy that covers unpaid consumption in the period from March to December 2020 with consumption up to 125 kWh/month (subject to conditions). This subsidy will cover debts up to 160 Peruvian soles, and the resources will be directly transferred to the distribution companies. The resolution of the OSINERMGIN Board of Directors no. 080-2020-OS/CD, published on July 9, 2020, approved the procedure for applying the “Bono Electricidad”.
Emergency Decree 105-2020, published on September 10, 2020, amended Emergency Decree 074-2020, expanding the beneficiaries of the “Bono Electricidad” to include customers with prepaid supply and those associated in collective supply arrangements.
The resolution of the OSINERGMIN Board of Directors no. 218-2020-OS/CD, published on December 24, 2020, approved the “Manual of the Basic Cost of activities applicable to electricity distribution companies”.
Decree Law 162 of December 30, 2019 (the “Milleproroghe” omnibus extension act), ratified with Law 8 of February 28, 2020, amended the Competition Act (Law 124/2017), providing for the staggered postponement of the removal of price protection in the electricity sector, respectively to January 1, 2021 for small businesses and January 1, 2022 for domestic customers and micro-enterprises. The termination of the gas protection regime for domestic users was also scheduled for January 1, 2022.
With regard to the deadline of January 1, 2021, the implementing decree of the Ministry for Economic Development is expected to be published in the Gazzetta Ufficiale shortly. The Ministry delegates ARERA to define the measures governing the transition to the free market, based on certain criteria and guidelines. With Resolution no. 491/2020/R/eel, ARERA established a last resort service (“gradual protections service”) for small businesses without a supplier as of January 1, 2021.
With Resolution no. 576/2019/R/eel, ARERA updated for 2020 the rate component covering the marketing costs of the operators of the enhanced protection service (RCV) and the levels of the PCV fee, which represents the reference price for sellers on the free market.
With Resolution no. 604/2020/R/eel, the levels of the RCV and PCV components for the 2021 were updated.
The Milan Regional Administrative Court, with ruling no. 565 of 27 March 2020, partially voided Resolution no. 119/2019/R/eel, with which ARERA had introduced changes to the compensation mechanism for the amounts not collected by operators of the enhanced protection service in respect of fraudulent withdrawals of power. In particular, the Regional Administrative Court voided the part of the resolution in which it provided for a reduction in the amounts subject to reimbursement for amounts invoiced in the period prior to its entry into force (April 2, 2019). With Resolution no. 240/2020/R/eel, ARERA amended the rules in compliance with the provisions of the Regional Administrative Court.
With Resolution no. 32/2019/R/gas ARERA established the rules for settling financial items between sellers and end users for the 2010-2012 period with regard to gas for the safeguard service, in compliance with Council of State ruling no. 4825/2016. With ruling no. 38 of January 7, 2020, the Milan Regional Administrative Court voided the part of Resolution no. 32/2019/R/gas in which it excludes customers with an annual consumption equal to or above a certain threshold from socialization of losses. With Resolutions no. 247/2020/R/gas and no. 603/2020/R/gas, ARERA complied with this ruling, recalculating, starting from January 1, 2021, the amounts to be applied to all end users connected the distribution network.
Resolutions no. 577/2019/R/gas and no. 603/2020/R/gas updated the QVD component for 2020 and 2021, respectively, covering the costs of marketing natural gas sales services to customers who use the protection service.
Law 18/2014 of October 15 containing urgent measures for growth, competition and efficiency created a National Energy Efficiency Fund to help achieve energy efficiency objectives. The TED/28/2020 measure of March 23 established that Endesa would be required to make a contribution for 2020 of €27 million to the National Energy Efficiency Fund.
In December 2020, the Ministry for the Ecological Transition and the Demographic Challenge began development of a proposal for an Order that fixes the contribution to the National Energy Efficiency Fund for 2021, bringing the amount proposed for Endesa to €26.6 million.
On August 13, 2020, the Order TED/788/2020 of July 24 was published in Spain’s Official Journal, which establishes the distribution of the financing obligation for the 2020 Social Rate, with the percentage proposed for Endesa being set at 35.57%.
Energy-intensive power users
Royal Decree Law 24/2020 of June 26 concerning social measures to revive employment and protect self-employment and the competitiveness of the industrial sector was published in the Official Journal on June 27, 2020. The legislation created the Spanish reserve fund for the guarantees of energy-intensive entities (FERGEI) to covering the risks deriving from medium and long-term electricity purchase and sale transactions. The fund has a budget of €200 million per year, for a total investment of €600 million over three years.
Royal Decree 1106/2020 of 15 December, which regulates the charter of energy-intensive users, governing the status and obligations of such users and the compensation mechanisms they could benefit from, was published in the Official Journal on December 17, 2020.
Following the issue of government emergency order no. 114/2019, the energy regulator ANRE reintroduced regulated bilateral contracts on the wholesale market and set retail prices for the regulated supply of the universal service at levels that would guarantee the recovery of most of the losses registered by last-resort suppliers (universal service providers) in recent years.