On November 7, Resolution No. 70/2018 (hereinafter, the “Resolution”) issued by the Secretary of Government of Energy (the “SGE”) has been published in the Official Gazette, with relevant impact towards thermal generators, auto-generators and co-generators, acting within the wholesale electricity market (the “WEM” and “WEM Agents”, as the case may be), whereas by means of this Resolution, Resolution No. 95/13 issued by the former Secretary of Energy (“SE”) has been partially derogated, and therefore, WEM Agents are now entitled to procure their own fuel, whether by their own means or by private third-party fuel supply agreements.
After the enactment of Resolution SE 95/13, WEM Agents were required to receive supply directly from Wholesale Electric Market Management Company (“CAMMESA”, for its Spanish acronym, which acts an independent system operator or ISO), and generators were expected to receive sums arising only under the provisions of Resolution SE No. 95/2013.
By this Resolution that has been recently issued -with abrogating effects regarding Resolution SE 95/13 on fuel-supply matters- WEM Agents may now purchase the fuel that is necessary for their operations in such capacity-.
Because of this Resolution, CAMMESA has ceased to be the sole fuel-supplier of the WEM.
This is significant as the policy adopted by this Resolution is that the SGE has reinstated a fuel-supply market in Argentina, which is aligned with the foundations and criteria originally set forth in Law No. 24,065.
Please find below a brief summary of the Resolution, its relevance and associated business opportunities:
1. Partial abrogation of Resolution SE 95/2013
As indicated before, the Resolution abrogates former Resolution SE 95/2013 on matters regarding CAMMESA acting as sole supplier of the necessary for the WEM Agents’ operation. The former section of Resolution SE 95/13 established that fuel supply, operation and management of the WEM and dispatch of electricity were carried out solely by CAMMESA.
As of the date hereof and by means of this Resolution, WEM Agents may now procure their fuel without resorting to CAMMESA. Associated costs for self or third-party fuel supply will be calculated pursuant to CAMMESA’s variable-fee scheme.
The Resolution further states that CAMMESA shall remain as independent system operator and in charge of supplying fuel to those WEM Agents that do not (or may not) opt-out from CAMMESA’s sole-supply mechanism.
Complementary regulation is expected in the short term by the SGE -or lower-ranked authority depending from the SGE, addressing matters such as technical issues and the opt-out mechanism.
2. Business opportunities
As it is publicly known, hydrocarbon unconventional reservoirs, as Vaca Muerta have generated a big interest for investment.
Vaca Muerta is far yet from achieving its full potential despite notorious advances occurred recently. Analysts estimate that the production of natural gas will be further significantly increased. Such boost would enlarge natural gas supply and in turn, provide a proper environment for new investment and further business opportunities.
Enabling power generators to freely-negotiate the terms and conditions for their fuel-supply, without intervention from CAMMESA, together with growing natural gas production, certainly will enhance efficiency and competitiveness of the electricity markets.
At TRS&M we are available to provide clarifications or further information of any matter addressed above.