Electric power: higher costs for companies

In addition from creating the “Energy Plus” Program, Resolution No 1281/2006 established the application of different charges to Large Users of power and Large Consumers. These charges have either increased or become effective, as the case may be, by virtue of recent notes issued by the Secretariat of Energy.
1. Surcharges for failure to comply with CAMMESA’s demand reduction orders
The "Criteria for the Implementation of Resolution SE 1281" notified by means of Note SE No 1374/2006 (the "Criteria"), set forth the collection of surcharges to those users who failed to comply with CAMMESA’s demand reduction orders, issued as a result of current restrictions in energy supply currently in force.
The surcharges are calculated by assessing the failure to comply with the demand reduction orders in MW. This number in MW is later multiplied by the number of hours in which such failure was registered, and then a penalty of Ar$ 3,000 per MW is applied to the result.
By means of Notes SE No 287/2008 and SSEE No 380/22008, dated March 18 and April 3, 2008, respectively, the Secretariat of Energy instructed CAMMESA to identify the users that did not comply with the demand reduction orders issued during the winter of 2007 and to apply the corresponding surcharges.
The surcharges are not applicable to users that sign power supply contracts before June 16, 2008 to meet their Base Demand (demand equivalent to demand registered during 2005). The deferral of these surcharges is no longer applicable in case of a new failure to comply with a demand reduction order until August 2009.
2. Charges for consumptions exceeding the Base Demand
Point 6 of Annex V of the Criteria provided that the price of the energy exceeding the Base Demand would be calculated in the first place by a coefficient and as from November 1, 2007, by the Marginal Cost of Operation (CMO) -real cost- for each hour in which the excess in demand is verified. However, this point has been subsequently amended in order to replace the real cost for a fixed cost. Through Note 567/2007, the Under-secretariat of Electric Energy established this fixed cost at AR185 MWH and/or AR225/MWH, as the case may be, and stated that the excess demand to be invoiced could in no case be higher than seventy-five percent (75%) of the real demand. This cap was reduced to 50% as from the economic transactions of 2007 to December 2008 inclusive (Notes SSEE 899/2007 and SE 72/2008).
However, at the Secretariat of Energy’s request, CAMMESA created the account “Charge for Excess Energy ” within the Stabilization Fund, where the differences between the fixed cost and the real cost (without the invoicing cap) are still being entered for each one of the Large Users and Large Consumers. Despite the fact that these amounts have not been so far invoiced, it is possible that these invoices may be issued at some point and that users are billed the corresponding amounts.
Note SE 83, dated January 28, 2008, established that, between November 1, 2007, and December 31, 2008, the hourly price for the excess energy consumed (CEEh) shall be calculated with a formula whose variables include the Marginal Cost of Operation, the Hourly Market Price and the Average Additional Cost of the power generation units dispatched to meet the increases in demand. The implementation of this formula has already entailed an increase in energy costs, due to the high marginal cost at which the system is currently operating. It is expected that with the arrival of winter, costs will be substantially increased due to the necessity of liquid fuels for thermal power plant operation as to replace natural gas.
The possible invoicing of the amounts accumulated in CAMMESA’s account “Charge for Excess Energy" is another factor that could dramatically increase the cost Large Users currently face in connection with their power consumption.
This insight is a brief comment on legal news in Argentina; it does not purport to be an exhaustive analysis or to provide legal advice.