On July 9, 2019, the Ministry of Mines and Energy issued Resolution 40590, by means of which it defined the general rules applicable to the energy long-term Auction mechanism, complementary to the existing mechanisms on the Energy Wholesale Market, and Resolution 40591, by means of which the second long-term auction’s specific terms are defined. Both are definitive and final resolutions, resulting from the draft documents previously published by the Ministry of Mines and Energy which were subject to comments and clarifications by those interested in participating in the mentioned auction. Of such resolutions, we highlight the following aspects:
1. The generation projects allowed to participate in the Auction are Non-Conventional Sources of Renewable Energy projects, which are defined on Section 17 of Article 5 of Law 1715 of 2015, which’s Commercial Operation Date takes place after the Auction’s awarding date and which have a total effective generation capacity greater than or equal to 5MW, as long as they subject, for the term of the agreement, to centralized dispatch, in accordance with the applicable regulation.
2. The agreement to be awarded will be “take or pay” and the term of supply will be of fifteen (15) years, effective as of January 1st, 2022 (the date on which the supply obligations will become enforceable).
3. The offers will be submitted by intraday blocks (per each intra-daily block, each seller may submit one (1) or more offers), defined as follows:
- Block No. 1: From 00:00 hours until 7:00 hours.
- Block No. 2: From 7:00 hours until 17:00 hours.
- Block No. 3: From 17:00 hours until 24:00 hours.
Each offer shall indicate the amount of energy packages that will be sold per each intra-daily block and the energy price (in COP$/KWh), excluding the CERE (Spanish acronym for Costo Equivalente Real en Energía del Caro por Confiabilidad). The total energy offered by a seller should not exceed the generation project’s average daily power.
4. The offers of the sellers may extend for a period of two (2) years as of the Commercial Operation Date initially foreseen, without such 2 year extension implying the execution of any of the operational start-up guarantees posted sellers (without such extension suspending the energy supply obligations regarding the seller, meaning that seller must comply with its supply obligations by means of other generation sources).
5. Buyers may submit one (1) or more offers, for a twenty-four (24) hour period, in which they must refer to the maximum energy in MW/h to be purchased per day (MW/h-day) and to the purchase price per Kw/h in Colombian pesos (COP$/KWh).
6. The Auction will consist of a closed envelope mechanism, which participation will be voluntary for both sellers and buyers.
7. The quantity of energy to be auctioned is known as “target demand” and will be defined by the Ministry of Mines and Energy and revealed by UPME simultaneously with the maximum cap to be defined by CREG, after offers from both ends are submitted before the auction’s administrator.
Additionally, On July 10, 2019, CREG made available for comments the general competition terms that the Auction must comply with and the formula for transfer of the prices of such mechanism in the component of power purchasing to the regulated user, by means of CREG Resolution 081 of 2019. The interested parties may present comments to this proposal until July 20, 2019.
On the other hand, on July 12, 2019, by means of Notice No.21-2019, UPME published the draft that sets forth the specific terms and conditions of the Auction, according to which the awarding of the Auction will take place on October 22nd, 2019. Please note that the proposals must be submitted by sellers and buyers through a technologic platform. Thus, the filing of both Envelope No. 1 and Envelope No.2 will be made through the mentioned platform.
As per the schedule contained in the tender draft documents, the interest parties may file comments to said documents until August 15th, 2019, for the UMPE to issue the definitive tender documents on July 30th, 2019, at the latest.
Finally, please note that the Ministry of Mines and Energy also issued the final power purchase agreement’s minute, which must be entered to by the sellers and buyers awarded with such contracts by means of the auction. We will further develop this matter in an additional newsletter.
More information:
Patricia Arrázola-Bustillo, Partner
Juanita Fonseca Duffo, Associate