Resolution No. 31 issued by the Secretary of Energy (“Resolution 31”) and published in the Official Gazette on February 27, 2020: (i) has repealed former Resolution No. 1/2019 issued by the former Secretary of Renewable Resources and Electricity Market; and (ii) approved a new remuneration structure for legacy power generators, self-generators and co-generators of the Wholesale Electricity Market (“WEM”). The new regime applies to legacy facilities which do not sell their energy under a power purchase agreement (“PPA”).
The purported aim of Resolution 31 is to adjust the remuneration criteria for generators to ensure the sustainability of the WEM under economically reasonable and efficient conditions. To this regard, the resolution states that energy generation costs must be passed through to final users.
The rationale that Resolution 31 invokes as grounds to its issuance is the abrupt change in the exchange rates which negatively impacted the remuneration structure that was stipulated by the former Resolution No. 1/2019.
The most relevant aspects of the Resolution 31 are outlined below:
- Scope of Resolution 31
A new remuneration mechanism for conventional and renewable generation, cogeneration and self-generation, operating without a PPA, has been approved, effective as of February 1, 2020.
- Remuneration in Argentine pesos
The new remuneration structure, unlike the repealed Resolution 1, provides that the amounts paid to the WEM agents identified above will be nominated and paid in Argentine pesos.
Former Resolution 1 determined that the remuneration of such was calculated in US dollars and the payment was in Argentine pesos, using for its conversion the exchange rate published by the Central Bank of Argentina “Reference Exchange Rate Communication ‘A’ 3500 (Wholesale)”, of the day before the due date of the economic transactions.
- Remuneration adjustment mechanism
Remuneration shall be adjusted on a monthly basis according to a formula based on the Index of Consumer Prices (IPC) and the Index of Internal Wholesale Prices (IPIM), both published by INDEC (the Argentine Statistic Agency).
For further information, please do not hesitate to contact either Nicolás Eliaschev and/or Javier Constanzó.