Chile: Experts agree that a law is necessary that typifies a new category of free customer in distribution

PRESS RELEASE from Acen
December 2022

(Please note that this is a machine translation of the original release, issued in Spanish)

A set of zonal transmission facilities became dedicated transmission as a result of the Definitive Technical Report on the Qualification of Transmission Systems Facilities for the Quadrennium 2020-2023. The foregoing resulted in some free distribution customers receiving toll proposals by transmission companies, whose facilities were reclassified as dedicated, with absolutely disproportionate amounts. This problem was exposed in the webinar "The dilemma of dedicated toll payments and equality before the electricity law", organized by ACEN, which had as speaker Marco Peirano, Electricity Market Manager of E-Fern Consulting, who proposed, as a long-term measure, that "a legal modification should be made to determine the payment that users of the distribution system must make as a whole, based on the use made by all customers connected to said networks."

Law 20,936 of 2016 sought to strengthen the regime of open and equal access for all to the transmission system under certain conditions, however, according to Javiera Méndez, associate lawyer at Larraín y Asociados Abogados, those free clients who are in areas of distribution that did not request open access to the dedicated system and that, therefore, have a different status from the other free clients. In addition, to the above is added the permanent analysis of the qualification of the transmission facilities, which naturally produces uncertainty for the transmission companies. In this way, "an impact was generated that was not foreseen and that is obviously generating a complex situation in those customers who also have no other alternative to receive their supply than to make use of these dedicated systems," he commented.

Méndez agreed with Peirano that "what practice and experience over the years have shown is that a regulatory change is required because there is a different category of free customer, which are these free customers in distribution areas that deserve different treatment." .

In this regard, Deninson Fuentes, head of the Electrical Department of the National Energy Commission, pointed out that “when there are relevant changes it is impossible that some elements do not have to be adjusted soon. In effect, the electricity law 20,936 did not come to make distinctions between categories of customers. That is a paradigm of the law, it is a foundation and, as long as that foundation exists, free clients in distribution have the same legal burdens as those of free clients such as mining companies. It seems that the empirical evidence shows that there are some differences”.

Regarding whether there was discrimination between free and regulated customers or disproportionate charges regarding this report, Fuentes indicated that "it seemed very strange that some transmission companies charged 100% of the VATT of their installation, it is a bit of common sense, from a line of 100 megawatts when the customer has a 5 megawatt maximum connection, it doesn't seem to float”

He added that we have a law where the classification process for transmission facilities is carried out every 4 years, “that generates risk pressure on agents that may not be good. I think rating stability should be a value. What happens is that there may be certain specific facilities in which it actually has a certain logic that they change their rating. There should be rather few facilities where there could be a change of that magnitude”.

He also agreed with the other panelists that “some regulatory adjustments could be studied in the not too distant future in order to give greater continuity to the qualification of facilities.

OPINION OF THE PANEL OF EXPERTS

This problem reached the Panel of Experts which, according to Méndez, its opinion "is very important in establishing and clarifying something that for many was obvious in the legislation that the charges for dedicated transmission tolls must be for the effective use they make of the clients. Free customers in distribution do feel unprotected and in practice they do not have the capacity for negotiation or understanding to be able to agree on the conditions of these dedicated transmission tolls and that clearly the regulation must consider bearing in mind the future distribution reform which is so necessary."

Those free distribution customers, added Méndez, "who did not have the advice of trading companies in this negotiation process finally entered into contracts with tolls that are quite abusive because they did not know that they had this right to demand that at least the toll be for a effective use and that they did not have to take care of all the slack or oversizing of transmission facilities with respect to which they had no interference, neither in their design nor in the investments associated with those facilities”.

In this context, Fuentes pointed out that “the good thing the Panel did was to indicate that it was not. You have to pay for use. Any other concept about that use, slack, idle capacity, the burden of payment of that difference does not have to be in the free customers”.

Méndez also shared that they have a proposal that is similar to the one expressed by Peirano for these clients in distribution, which is to consider a different category since "we have to pick up this different characteristic, which is basically that they make forced use of an infrastructure because they have no other alternative. To assimilate it closely to the distribution toll for free customers, which in practice ensures that they pay a similar value to customers regulated by VATT because they basically receive the same service. In terms of dedicated transmission, the same thing happens a bit. We should start thinking that this type of customer should pay a charge as regulated customers pay for these mixed-use facilities. It is a quite reasonable alternative that is in harmony with the regulatory principles and with the protection that the regulations must give to this type of client”.