Reliability Auction, Investment and Energy Supply: What Is at Risk with the New Tax on Generators

Energy & Natural Resources attorney Inés Elvira Vesga was interviewed by Portafolio about the potential impacts of a decree issued by Colombia's Ministry of Mines and Energy, adopted under the economic emergency, that imposes a 2.5 percent tax on electricity generation companies to address Air-e's outstanding debt. Ms. Vesga noted that the decree could undermine the stability of the industry's regulatory framework and create operational and investment uncertainty in the electric power sector, with potential effects on supply and key processes such as the reliability charge auction. She also explained that the measure is subject to automatic constitutional review, but it carries a presumption of legality and must be complied with unless and/or until it is struck down.

"In my view, there are several reasons to conclude that the decree is not consistent with the Constitution: It is not based on unforeseen events that would justify an exceptional measure, and it is confiscatory because it compels generators to contribute to the Superintendency of Public Utilities' Business Fund to pay Air-e's debt to the generators – in other words, the generators are funding the debtor to pay the debt," she said.

READ: Reliability Auction, Investment and Energy Supply: What Is at Risk with the New Tax on Generators