Mechanism of Subsidies Applied in Peru

Mechanism of Subsidies
Applied in Peru
Miguel Revolo
Manager of Distribution Regulation
OSINERGMIN
PERU
AEI, Maputo Workshop – World Bank
June 2009
1
South America
Venezuela
Colombia
Brazil
Ecuador
Peru
Bolivia
Paraguay
Chile
Uruguay
Argentina
2
Peru statistics
2008
Population
With electrical
service
No Electrical
Service
Total
No Service
(%)
Urban
18 634 183
1 882 738
20 516 921
9.2%
Rural
Total
1 958 130
20 592 313
4 582 148
6 464 886
6 540 278
27 057 199
70.1%
23.9%
Source: INEI - Censos Nacionales 2007: XI de Población y VI de Vivienda
3
Realities
• Rural costs of supply are more expensive
than urban areas.
• Existing rural tariffs generally do not cover
the expansion of the electrical rural
system.
• The level of investment required per
consumer in rural areas is between two to
five times greater than that required in
urban areas
4
Constraints
• Rural customers can not pay full cost
recovering tariffs (economic).
• All low-income Peruvians must be treated
equally (political).
• A tariff design must be aligned with the
consumer's willingness to pay (socioeconomic)
• What are possible solutions?
5
Possible solutions
• To promote universal access to the rural areas
investment subsidies are necessary (Economic).
• To promote the efficient award of investment
subsidies, the State must provide subsidies to
the utilities who request the lowest subsidy per
connected customer (Economic).
• Tariffs charged to new rural consumers should
be capped at the maximum regulated urban tariff
(Political).
6
Three Types of Subsidies
•
#1--Initial cost of capital subsidy (US $100 million per year)
– Isolated mini-grids under 500 KW power capacity installed.
– Distribution (rural grids outside of utility concession)
– Sources of subsidy: Fiscal fund, international loans (US$ 50 millions), Rural
Electrification Fund (REF) ( US$ 17 millions) and donors.
•
#2--Internal tariff subsidy (US $36 million per year)
Subcomponent A:
– To reduce the price of isolated generation. Source: REF (US$ 23 million per
year)
Subcomponent B:
– To reduce de cost of the distribution added value (DAV) (the “distribution cost
reduction” before to be applied to rural consumers) (US$ 13 million per year).
Source of subsidy: The urban consumers.
•
#3--Consumption subsidy (US$ 31 million per year)
– To obtain similar tariffs between interconnected mini-grids and urban areas
– To obtain similar tariffs between isolated mini-grids and urban areas
– Source of subsidy: The consumers whose consumption is higher than 100 kW.h
per month.
7
#1--Initial capital cost subsidy
•
Implementation Criteria (isolated mini-grids)
– Subsidies are provided for isolated mini-grids projects outside of a
utility's concession with a power capacity under 500 KW.
– The subsidy for isolated mini-grids expansion (mini hydro/thermal power
plants) must be no higher than US$ 1000 per consumer.
– The isolated mini-grids are transferred to the municipality.
– The municipalities operate without concession
– The law concedes the municipalities the rights to ser their own tariff and
to determine the conditions of the service (number of hours of
operations)
– The service is provided between 6 to 13 hours per day and the
consumers pay a fixed charge that varies between US$ 3 to US$ 10 per
month.
– Generally the municipality covers with its own budget the cost of fuel
and maintenance.
– There are 368 municipalities in Peru
8
Components of the Distribution Added Value
Scenario A
100% Utility's
Investment
Distribution
Added
Value
Primary feeder
+
Transformers
+
Secondary
+
Services
+
Meter
aVNR + OyM
DAV =
Demand
Scenario B
100%
Government's
Investment
aVNR × 0,16 + OyM
DAV =
Demand
9
Rural Tariff for a Distribution Company (DISCO)
Sector 5
New Replacement Value - NRV (thousand US$)
NRV medium voltage
NRV low voltage
Service medium voltage
Service low voltage
Total
Annual Investment Cost (thousand US$)
Primary distribution
Secondary distribution
Service medium voltage
Service low voltage
Replacement Cost (thousand US$)
Primary distribution
Secondary distribution
Service medium voltage
Service low voltage
Annual O&M (thousand US$)
Primary distribution
Secondary distribution
Service medium voltage
Service low voltage
Peak Load (kW)
Primary distribution
Secondary distribution
RES 100% DISCO
RES 100%
Goverment
RES 20% DISCO
80% Goverment
2,210.5
3,504.2
----5,714.7
795.8
1,261.5
78.0
577.5
2,712.8
795.8
1,261.5
78.0
577.5
2,712.8
795.8
1,261.5
78.0
577.5
2,712.8
274.4
435.0
-----
98.8
156.6
9.7
71.7
---------
19.8
31.3
1.9
14.3
---------
---------
15.8
25.1
1.5
11.5
12.6
20.0
1.2
9.2
96.0
156.6
-----
34.6
56.4
0.3
8.9
34.6
56.4
0.3
8.9
34.6
56.4
0.3
8.9
3,057.0
2,458.0
395.0
395.0
395.0
395.0
395.0
395.0
9.7
19.3
29.1
59.5
10.8
21.1
14.5
28.8
Distribution Added Value - DAV
DAV medium voltage US$/kW-month
DAV low voltage US$/kW-month
10
Final Isolated Rural Retail Tariffs
(Subsidy #1)
60.0
52,71
32,49
36,54
50.0
ct. US$/kW.h
40.0
22.01
10.65
30.0
7.81
9.58
3.56
4.77
3.32
3.32
3.32
17.80
17.80
17.80
RES 100% DISCO
RES 100% Goverment
RES 20% DISCO 80% Goverment
DAV - Secondary grid
22.01
7.81
10.65
DAV - Primary lines
9.58
3.56
4.77
Power Generation Cost
3.32
3.32
3.32
Energy Generation Cost
17.80
17.80
17.80
20.0
10.0
0.0
11
#2--Internal tariff subsidy
12
Isolated Generation Price
Internal Subsidy
13
Subsidy to Isolated Generation
Attended by Energy Power Utilities
•
Law N° 288832 ( Law for the Efficient Development of the power
generation): created compensation mechanisms for isolated
systems.
•
Objective: compensate the differential between the isolated
generation prices with the bus bar price of the national
interconnected system.
•
Resources: No more than 50% of the Rural Electric Fund created by
Law N° 28749 (General Law of Rural Electrification)
14
Framework: Maximum Tariffs to Regulated
Consumers
REGULATED BY OSINERGMIN
PRICES AS ARESULT OF THE BIDDINGS FOR ENERGY SUPPLY
STABLISHED BY OSINERGMIN
APPROVED BY MINISTRY OF NERGY AND MINES
SPECIFIC
AMOIUNT
NET PRICE
BUS BAR
FULL BUS BAR
LAW SUBSIDY
BIDDING
PRICES
BUS
BAR
PRICE
RGULATED
BUS
BAR
TRANSMISSION
TOLLS
DISTRIBUTION
ADDED
VALUE
ISOLATED SYSTEM
MECAHNISM
OF
COMPENSATION
DISTRIBUTION
ADDED
VALUE
INTERCONECTED NATIONAL GRID
15
NATIONAL INTERCONECTED GRID VS ISOLATED SYSTEMS
SUBESTACIÓN
BASE DE
MAYOR PRECIO
DEL SEIN
IS_ J
IS_A
PMTA > PSEIN
Center
EXP-A
PMTG > PSEIN
EXP-G
~
IS_ B
PMTB > PSEIN
South
East
IS_I
EXP-B
~
PMTC > PSEIN
South
West
LIMA
North
~
IS_ G
IS_ H
PMTH > PSEIN
EXP-H
PMTF > PSEIN
EXP-F
16
EXP-C
Bar Prices Expanded to Primary Voltage
Utility
Adinelsa Chavimochic Edelnor Edelsa Egepsa Electro Oriente Electro Pangoa Electro Puno Electro Sur Este Electro Sur Medio Electro Ucayali Electrocentro Electronorte Emseusa Hidrandina Seal Sersa Tensión kV MT MT MT MT MT MT MT MT MT MT MT MT MT MT MT MT MT PPM US$/kW‐mes 7.10
7.10
7.10
7.10
7.10
7.10
7.10
7.10
7.10
7.10
7.10
7.10
7.10
7.10
7.10
7.10
7.10
PEMP ctv. US$/kW.h 7.24
7.24
7.24
7.24
7.24
10.48
7.24
15.70
16.72
15.70
7.24
7.24
6.77
6.43
7.28
12.17
10.85
PEMF ctv. US$/kW.h 7.24
7.24
7.24
7.24
7.24
10.48
7.24
15.70
16.72
15.70
7.24
7.24
6.77
6.43
7.28
12.17
10.85
Average Price
ctv. US$/kW.h 9.04
9.04
9.04
9.04
9.04
12.27
9.04
17.50
18.51
17.50
9.04
9.04
8.56
8.23
9.07
13.96
12.65
PPM: Peak load marginal power price
PEMP: Peak load marginal energy price
PEMP: Peak out load marginal energy price
17
Annual Compensation
Utility
Adinelsa Chavimochic Edelnor Edelsa Egepsa Electro Oriente Electro Pangoa Electro Sur Este Electro Sur Medio Electro Ucayali Electrocentro Electronorte Emseusa Hidrandina Seal Sersa Total
Annual Compensation
Thousand of US$ Dollars
33
2
29
4
6
22,438
12
214
1
18
179
176
0
110
253
295
23,768
Participation
(%)
0.14%
0.01%
0.12%
0.02%
0.03%
94.40%
0.05%
0.90%
0.00%
0.07%
0.75%
0.74%
0.00%
0.46%
1.06%
1.24%
100.00%
18
Net Bus Bar Price
Utility
Adinelsa Chavimochic Edelnor Edelsa Egepsa Electro Oriente Electro Pangoa Electro Puno Electro Sur Este Electro Sur Medio Electro Ucayali Electrocentro Electronorte Emseusa Hidrandina Seal Sersa Tensión PPM PEMP PEMF Average Price
kV US$/kW‐mes ctv. US$/kW.h ctv. US$/kW.h ctv. US$/kW.h MT 7.10
4.91
4.91
6.70
MT 7.10
4.91
4.91
6.70
MT 7.10
4.91
4.91
6.70
MT 7.10
4.91
4.91
6.70
MT 7.10
4.91
4.91
6.70
MT 7.10
5.28
5.28
7.07
MT 7.10
4.91
4.91
6.70
MT 7.10
5.08
5.08
6.87
MT 7.10
5.69
5.69
7.48
MT 7.10
5.08
5.08
6.87
MT 7.10
4.91
4.91
6.70
MT 7.10
4.91
4.91
6.70
MT 7.10
5.05
5.05
6.84
MT 7.10
5.15
5.15
6.94
MT 7.10
4.91
4.91
6.70
MT 7.10
5.01
5.01
6.80
MT 7.10
5.32
5.32
7.11
PPM: Peak load marginal power price
PEMP: Peak load marginal energy price
PEMP: Peak out load marginal energy price
19
Final Impact on Isolated Bar Price
Utility
Adinelsa Chavimochic Edelnor Edelsa Egepsa Electro Oriente Electro Pangoa Electro Puno Electro Sur Este Electro Sur Medio Electro Ucayali Electrocentro Electronorte Emseusa Hidrandina Seal Sersa Tensión kV MT MT MT MT MT MT MT MT MT MT MT MT MT MT MT MT MT PPM US$/kW‐mes 0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
PEMP ctv. US$/kW.h ‐32%
‐32%
‐32%
‐32%
‐32%
‐50%
‐32%
‐68%
‐66%
‐68%
‐32%
‐32%
‐25%
‐20%
‐33%
‐59%
‐51%
PEMF ctv. US$/kW.h ‐32%
‐32%
‐32%
‐32%
‐32%
‐50%
‐32%
‐68%
‐66%
‐68%
‐32%
‐32%
‐25%
‐20%
‐33%
‐59%
‐51%
Average Price
ctv. US$/kW.h ‐26%
‐26%
‐26%
‐26%
‐26%
‐42%
‐26%
‐61%
‐60%
‐61%
‐26%
‐26%
‐20%
‐16%
‐26%
‐51%
‐44%
PPM: Peak load marginal power price
PEMP: Peak load marginal energy price
PEMP: Peak out load marginal energy price
20
Distribution Added Value
Internal Subsidy
21
Internal Subsidy DAV
• Rules of Law N° 25844 ( Art. 147): The
distribution added value will be set for each
concession through the application of weighed
factors.
• Ministry Decree: Establish the methodology for
the calculation of weighed factors.
• Objective: compensate the differential price
between rural and urban areas.
• Application: OSINERGMIN set the DAV weighed
factors every year.
22
Weighed factor of the DAV
• The weighed factor is calculated for each
utility.
• The factor is calculated using the sales of
energy separated for each level of voltage
(medium and low voltage).
23
Weighed Factor of the DAV of
Medium Voltage
Company
Coelvisac
Edecañete
Edelnor
Electro Oriente
Electro Pangoa
Electro Puno
Electro Sur Este
Electro Sur Medio
Electro Tocache
Electro Ucayali
Electrocentro
Electronoroeste
Electronorte
Electrosur
Emsemsa
Emseusa
Hidrandina
Luz del Sur
Seal
Sersa
1
0.00%
0.00%
94.51%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
100.00%
0.00%
0.00%
2
0.00%
93.66%
5.24%
75.98%
100.00%
49.59%
47.81%
95.71%
0.00%
92.04%
53.38%
87.87%
71.14%
90.41%
0.00%
0.00%
82.79%
0.00%
82.13%
0.00%
3
5.66%
0.00%
0.23%
10.47%
0.00%
22.57%
17.48%
0.32%
99.60%
5.05%
19.05%
4.66%
21.32%
0.00%
100.00%
0.00%
7.70%
0.00%
8.15%
100.00%
Sector
4
0.00%
6.34%
0.00%
2.94%
0.00%
2.29%
0.00%
0.02%
0.00%
2.91%
8.13%
5.94%
2.99%
0.00%
0.00%
100.00%
2.90%
0.00%
0.87%
0.00%
5
0.00%
0.00%
0.02%
10.57%
0.00%
24.90%
34.33%
3.62%
0.00%
0.00%
18.90%
1.51%
4.29%
9.59%
0.00%
0.00%
6.25%
0.00%
8.81%
0.00%
Especial
94.34%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
SER
0.00%
0.00%
0.00%
0.04%
0.00%
0.65%
0.38%
0.33%
0.40%
0.00%
0.54%
0.02%
0.26%
0.00%
0.00%
0.00%
0.36%
0.00%
0.04%
0.00%
24
DAV
Sersa
Seal
Luz del Sur
Hidrandina
Emseusa
Emsemsa
Electrosur
Electronorte
Electronoroeste
Electrocentro
Electro Ucayali
Electro Tocache
Electro Sur
Electro Sur Este
Electro Puno
Electro Pangoa
Electro Oriente
Edelnor
Edecañete
Sector 5
Sector 4
Sector 3
Sector 2
Sector 1
DAV (US$/KW‐month)
Weighed Factor of the DAV of Medium Voltage
12
10
8
6
4
2
0
Weighed VAd
25
Weighed Factor of the DAV of Low
Voltage
Company
Coelvisac
Edecañete
Edelnor
Electro Oriente
Electro Pangoa
Electro Puno
Electro Sur Este
Electro Sur Medio
Electro Tocache
Electro Ucayali
Electrocentro
Electronoroeste
Electronorte
Electrosur
Emsemsa
Emseusa
Hidrandina
Luz del Sur
Seal
Sersa
1
0.00%
0.00%
94.95%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
100.00%
0.00%
0.00%
2
0.00%
87.87%
4.68%
80.48%
100.00%
53.72%
53.53%
96.13%
0.00%
91.71%
55.60%
83.31%
75.33%
94.93%
0.00%
0.00%
83.59%
0.00%
85.19%
0.00%
3
47.38%
0.00%
0.34%
6.14%
0.00%
18.84%
19.58%
0.82%
99.56%
6.94%
16.85%
5.61%
15.45%
0.00%
100.00%
0.00%
9.78%
0.00%
8.30%
100.00%
Sector
4
0.00%
12.13%
0.00%
2.28%
0.00%
1.72%
0.00%
0.06%
0.00%
1.35%
8.88%
8.67%
3.93%
0.00%
0.00%
100.00%
2.51%
0.00%
1.17%
0.00%
5
0.00%
0.00%
0.03%
11.03%
0.00%
24.74%
26.37%
2.14%
0.00%
0.00%
18.01%
2.36%
4.89%
5.07%
0.00%
0.00%
3.62%
0.00%
5.27%
0.00%
Especial
52.62%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
SER
0.00%
0.00%
0.00%
0.07%
0.00%
0.98%
0.52%
0.85%
0.44%
0.00%
0.66%
0.05%
0.40%
0.00%
0.00%
0.00%
0.50%
0.00%
0.07%
0.00%
26
DAV
Weighed VAd
Sersa
Seal
Luz del Sur
Hidrandina
Emseusa
Emsemsa
Electrosur
Electronorte
Electronoroeste
Electrocentro
Electro Ucayali
Electro Tocache
Electro Sur
Electro Sur Este
Electro Puno
Electro Pangoa
Electro Oriente
Edelnor
Edecañete
Sector 5
Sector 4
Sector 3
Sector 2
Sector 1
DAV (US$/kW‐month)
Weighed Factor of the DAV of
Low Voltage
25
20
15
10
5
0
27
Variation of de Distribution Added
Value
10.0%
5.0%
4.3%
0.0%
-2.9%
-5.0%
-10.0%
-13.2%
-15.0%
-20.0%
-22.7%
-25.0%
Area 2
Area 3
Area 4
Area 5
28
#3--Consumption subsidy
29
Electricity Social Compensation
Fund (FOSE)
Law 28307
Consumers
Inerconected System
Isolated System
Typical
sector
Monthly tariffs reduction Consumption <= 30 KW.h
Monthly tariffs reduction Consumption >= 30 KW.h
and <= 100 Kw.h
Urban
Rural
Urban
Rural
25%
50%
50%
62.50%
7,5 kW.h
15 kW.h
15 kW.h
18,75 kW.h
30
Electricity Social Compensation
Fund (FOSE)
Range
0-30 kW.h
31-100 kW.h
> 100 kW.h (1)
Total
Interconected
1 150 155
1 188 228
2 031 648
4 370 031
Isolated
141 527
97 166
72 705
311 398
Total
1 291 682
1 285 394
2 104 353
4 681 429
Percentage
55%
45%
100%
(1) Consumers with consumption > 100 kW.h are charged with 3% over their energy
bill consumption.
FOSE collection : Million US$ 30.7 per year
31
Final Isolated mini-grid Retail Tariff
Subsidies (#1, #2 y #3)
60.0
52.71
22.07
8.28
50.0
ct. US$/kW.h
40.0
22.01
30.0
9.58
20.0
10.0
3.32
9.01
3.98
17.80
3.32
3.38
Tarifa
Tarifa Subsidido Interno
1.49
1.25
2.16
Tarifa Subsidio Interno + FOSE
22.01
9.01
3.38
DAV - Primary lines
9.58
3.98
1.49
Power Generation Cost
3.32
3.32
1.25
Energy Generation Cost
17.80
5.76
2.16
5.76
0.0
DAV - Secondary grid
32
Conclusions
•
•
•
•
•
It is possible to implement different types of subsidies depending on
the necessity of its use in order to cover social, economical and
political issues.
The model of subsidy applied in Peru is based on recognizing the
economic cost of service.
The reductions in the retail tariffs is financed through monthly
transfers to the utilities.
The subsidies applied in Peru are financed mainly by urban
consumers served by the National Interconnected Grid with a
consumption higher than 100 KWh.
Equalize the rural and urban tariffs stabilize the social environment.
33
Thank you !
34