Regulator freezes power rates despite lower costs

Tuesday, November 5, 2002

Bolivia's power regulator has frozen electricity prices for the next six months, despite lower operating costs across the system, a spokesperson for the regulator confirmed to BNamericas.

The regulator froze prices at Cochabamba distributor Elfec, Santa Cruz' CRE, Oruro's Elfeo and Sucre's Cessa. Rates for La Paz distributor Electropaz fell 0.4%, while rates for Potosí distributor Sepsa increased 0.5%.

Power rates are adjusted every six months, on November 1 and May 1, based on supply and demand, turbine prices, natural gas prices and other factors.

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Supply has exceeded demand in the last six months, and furthermore, greater hydro availability has displaced more expensive thermoelectric power, the spokesperson explained. Hydro power was boosted by the rainy season, and by the startup of operations at the Bolivia hydroelectric dam in the Taquesi valley near La Paz.

This combination should have led to a 2.5% cut in consumer tariffs, the spokesperson explained, but under the rules of the electric power stabilization funds created in February this year, the reduction will not be passed on to end-consumers.

Instead, the extra revenues will be used to cancel debts incurred by companies while stabilizing prices in previous periods.

Stabilization funds were introduced on the creation of the wholesale market. They are used to prevent distributors from raising prices by more than 3% in any single semester, thus avoiding major variations in prices.

If costs do indeed rise beyond this 3% barrier, each distributor must cover the difference from their own funds, the spokesperson explained, adding that they recover these costs when prices fall, as is the case this semester.

Newspaper reports Bolivian distributors have accrued debts of US$18mn in recent years when covering this difference, although the spokesperson said the national system operator is calculating the official figure.