March 3rd/2023.
On February 16, 2023, Decree 0227 of 2023 (the “Decree 0227”) was issued, by means of which “some of the presidential functions of a regulatory nature regarding residential public services are resumed and other provisions are issued“, in exercise of the functions provided in articles 189, 211, 365, 367 and 370 of the Political Constitution and article 68 of Law 142 of 1994.
Accordingly, it is important to highlight the powers based on which the President of the Republic of Colombia issued Decree 0227 and determined to retake, for a term of three (3) months, the delegated general functions (1) to the Comisión de Regulación de Agua Potable (“CRA”) and the Comisión de Regulación de Energía y Gas (“CREG” and jointly the “Commissions”):
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- Article 370 of the Constitution establishes that: “Corresponds to the President of the Republic to indicate, subject to law, the general policies of administration and efficiency control of residential public services and exercise, through the Superintendence of Residential Public Services, the control, inspection and surveillance of the entities that provide them“.
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- Along the same line, Article 68 of Law 142 of 1994 states that the presidential functions entrusted to the President by Article 370 of the Constitution may be delegated to the commissions for the regulation of public services; and may be resumed at any time, if the President so decides.
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- By virtue of the two normative provisions described, the CREG has exercised the powers that the President delegated to it in terms of regulation of public services, as well as those powers that, according to a criteria of specialization and technical independence, the legislator directly assigned to it, such as those referred to in Article 23 of Law 143 of 1993, in accordance with the provisions of Article 2.3.2.2.1.2 of Decree 1073 of 2015.
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- Thus, Law 143 of 1994 assigned to the CREG the functions of regulating the electricity service, without these powers corresponding to the presidential functions regarding the administration and efficiency control of the public service, as stated by the CREG(2) and explained below.
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- The motivation for issuing Decree 0227 is associated to the convenience and opportunity, without further detail, for the President to “temporarily assume the competence to issue general rules of regulatory scope, through which the President may indicate the general policies of administration and control of the efficiency of residential public services, which is entrusted to it by Article 370 of the Political Constitution” in the terms of Article 68 of Law 142 of 1994.
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- Notwithstanding the said temporary resumption, Decree 0227 determines that the Commissions will continue issuing the administrative acts of particular nature that they exercise on the date of issuance of Decree 227. Additionally, the President may request technical support of the Commissions, when required, to comply with the provisions of Decree 0227.
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- On the other hand, the regulatory provisions issued by the President in exercise of the provisions of Decree 0227 must consider, among others: The principles, purposes and constitutional values; the guarantee of disclosure and citizen participation in actions of this matter; the relevance, opportunity and quality that guarantee the principles of efficiency, sufficiency, integrality and tariff solidarity; and the criteria of the tariff regime of economic efficiency, neutrality, solidarity, financial redistribution, simplicity and transparency.
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- Finally, Decree 0227 is in force as of February 16, 2023, and will repeal all provisions that are contrary to it.
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It is worth noting that neither the Law nor the delegation Decrees have determined which are the general powers related to the presidential competence to indicate the general policies of administration and control of the efficiency of residential public services, which is why, in communication of February 14, 2023, CREG highlighted that the functions set forth in Article 23 of Law 143 of 1994 were assigned to it in its capacity as a special administrative unit, with administrative, technical and patrimonial independence.
In its communication, the CREG also mentions that its legal functions include, among others: Defining the methodology for calculating energy tariffs and their approval; create the conditions to ensure the availability of an efficient energy supply, capable of satisfying the demand under social, economic, environmental and financial viability criteria; and promote and preserve competition, functions that it would continue to perform independently and in coordination with other institutions.
As we pointed out in our previous Newsletter, there are elements of judgment that support the position of the CREG, that despite setting the rates through administrative acts of general nature, the current rate regime would be outside those functions that correspond to the President of the Republic under Article 68 of the Constitution and therefore, outside the framework of the powers that will be temporarily reassumed by means of Decree 0227, the sector’s tariffs could not be modified.
Despite the foregoing, by temporarily assuming the power to “issue general norms of regulatory scope” and establishing that the Commissions would continue to exercise administrative acts of particular nature, it would seem as if it is intended to include aspects related to the tariff regime (which is set through general administrative acts) in the functions to be retaken.
Perhaps anticipating the scope that the Government will give to the new regulation, the CREG warned in its communication of February 14, 2023, that “an intervention in tariffs outside the scheme created since 1994, will certainly affect the obligations to provide the service and will intrinsically modify the remuneration conditions“. To this extent, the continuity and quality of the service could be affected, directly impacting the users, the sustainability of the sectors involved and discouraging investment and efficient prices formation. However, since there is no precedent to differentiate the powers of the Commissions from those delegated under Article 68 of Law 142 of 1994, several interpretations will be discussed on the scope of the presidential functions regarding the administration and control of the efficiency of public services.
Therefore, if in the exercise of Decree 0227 the President of the Republic introduces a tariff modification, most likely the corresponding administrative act would be controversial before the jurisdiction and the judges would be called upon to determine if the functions related to the tariff regime of the electric service constitute competences delegated by the President of the Republic, as the National Government seems to understand it, or whether they are functions of the CREG.
If the latter is the interpretation adopted by the judges, any administrative act issued by the President modifying the tariff regime for the service would be vitiated of nullity due to lack of competence.
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(1) In accordance with Article 1 of Decree 2553 of 1994, the President delegated to the CREG the functions set forth in Article 68 and concordant provisions of Law 142 of 1994, without prejudice to the provisions of Article 2 of Decree 1524 of 1994, according to which, the CREG will exercise the functions set forth in Article 23 of Law 143 of 1994 under the terms of said law and other concordant provisions.
(2) In communication dated February 14, 2023, the CREG stated: “The Committee highlights that Laws 142 and 143 of 1994 are complementary, and Law 143 directly assigned to the Energy and Gas Regulation Commission the function of regulating the electricity service. Consequently, the CREG, in relation to this service, must fulfill the functions assigned to it by Law 143 of 1994, in its Article 23. These functions include, in addition to defining the methodology for the calculation of energy tariffs and their approval, creating the conditions to ensure the availability of an efficient energy supply, capable of supplying the demand under social, economic, environmental and financial viability criteria, promoting and preserving competition; also, establishing the operating regulations to plan and coordinate the operation of the national interconnected system, among others“.