Comisin Nacional de Energa Atmica A Review of

Comisión Nacional de Energía Atómica A Review of The Liberalization of the Argentinean Electricity Sector Darío R. Gómez (CNEA) Eduardo Lerner (ENRE) Osvaldo Postiglioni (ENRE) Carlos F. Rey (CNEA)

Introduction At the beginning of the 90´s a deep reform was introduced in the electric power sector of Argentina. • To secure a reliable supply of electricity with appropriate quality conditions • To achieve efficiency in the usage of productive factors • To order an put on a sound financial basis the fiscal relationship between the electricity sector and the state • To establish a regulatory framework appropriate to encourage risk investment from the private sector

Electricity Sector Organization NATIONAL STATE SECRETARIAT OF ENERGY Generators Regulatory Commission MARKET Transporters Large Scale Users Distributors

Wholesale Electricity Market Supply TRANSMISSION Private Generators Binational Generators International Interconnections (imports) Distribution Companies 1 State-owned Generators WEM 2 Demand Large Scale Consumers 3 1. Long Term Agreements 2. Seasonal Market 3. Spot Market International Interconnections (exports)

Stakeholders in the Electricity Sector GENERATION TRANSPORT AND DISTRIBUTION LARGE USERS CAMMESA Competition. Free Entry. Prices are not regulated. Declared as General Interest Natural Monopolies. Concessions. Regulated Prices. Third Party Access. No discrimination. Declared as Public Service Freedom to Contract. Members of the Wholesale Market. Their supply is competitive. Non Profit Organization. In charge of the administration of the Wholesale Market. Economic Dispatch. Hourly prices. Members: l l Generating Companies Distribution Companies Transport Companies Large Users

Electric Regulatory Framework Act 24. 065 - 1992 SECRETARY OF ENERGY ENRE ISSUANCE OF RULES FOR THE ECONOMIC DISPATCH FEDERAL ENERGY COUNCIL GIVES ADVISE TO E. P AND CONGRESS CAMMESA ECONOMIC DISPATCH OPERATION REGULATION ACTS AS AN INSTANCE CONTROL OF APPEAL IN CASE FEDERAL JURISDICTIONAL RESOLUTIONS GIVEN BY ENRE ARE REJECTED ADMINISTER NATIONAL FUND OF ELECTRICITY COMMERCIAL TRANSACTIONS

Regulation PRICE CONTROLS Prices, like under perfect competition, are determined outside the firm. Therefore, profit maximization must be achieved through managerial efficiency (cost reduction, optimization of investment decisions etc). QUALITY CONTROLS The existence of captive demand (there are no alternative suppliers) creates the need for product and service quality controls OBLIGATION TO SUPPLY Distribution companies have the obligation to meet all demand. They can not discharge this obligation on the basis of lack of generation or transport facilities. THIRD PARTY ACCESS Transport and Distribution companies must allow third party access to lines if there is spare capacity.

Privatization 1 transmitter SEGBA 5 thermal power plants 3 distributors HIDRONOR 5 hydropower plants Agua y Energía Eléctrica 4 transmitters 1 distributor 9 thermal power plants 8 hydropower plants Assets that belonged to several provinces were also privatized and incorporated to the WEM

Number of Members of the WEM Performance of the Electricity Sector under the Liberalization

Generation Installed Capacity (MW) October 2000 Energy Generated (GWh) January -October 2000 TOTAL 22. 945 TOTAL 65. 476 GWh WEM + WEMPS WEM Maximum capacity declared according to demand satisfied at WEM = 12. 415 Self-generation and cogeneration. Imports not included.

Generation - Installed Capacity

Generation by company - 2000

Generation - Prices Energy Prices Sharply decreased from 1992 as result of a new Electric Market Design ENERGY AND SPOT MEDIUM PRICES

NOA NEA CUYO CENTRO BA-GBA Litoral Installed and Demand Capacity by Area 2000 Capacity Demand NOA 1225 MW 952 MW NEA 3248 MW 522 MW CUYO 1276 MW 722 MW CENTRO 2150 MW 1228 MW BA-GBA Litoral 8440 MW 9635 MW COMAHUE 5771 MW 476 MW 836 MW 519 MW COMAHUE MEMSP Source: ENRE

Transmission Grid Transmission Length in km Lines 500 k. V 9. 292 Lines 330 k. V 1. 100 Lines 220 k. V 500 Lines 132 k. V 6. 000 Source: Enre

Transmission è 95 years concession & 15 year management periods. è Free access to purchasers & sellers. è Remove obstacles to purchase or sell energy. è Remuneration for the operation & maintenance. è Quality conditions compliance. è Different grid expansion mechanisms.

Distribution CHARACTERISTICS u u u Natural monopoly with regulated tariffs Submitted to a regulatory framework Obligation to meet demand ensure adequate service. Open access to third parties Tariffs must be fair and reasonable covering operating costs, taxes, amortization and a rate of return Quality standards established by concession contract.

Main aspects related to the environmental performance of the electricity sector u Incorporation of a new generating units to the WEM and phase out of old ones u Improvement of the efficiencies of dispatched thermal machines u Environmental attitude of new business units u Replacement of other types of energy by electricity

Main aspects related to the environmental performance of the electricity sector u Decreasing technical and non-technical losses u Role of the community u Unrestricted fuel choice u No interest for hydropower projects by part of the private sector

Environmental Policy applied to the Electricity Sector - Until 1992 3 Environmental Management Manuals for - hydropower plants - thermal power plants - ultra high voltage transmission lines The Advisory Council on Licensing of Nuclear Facilities of CNEA was in charge of the regulatory role for all nuclear activities

Environmental Controls since 1992 Transmission & Distribution: - Public security risks - Waste treatment Generation: - Gas effluents control - Liquid effluents control - Noise levels - Environmental monitoring of radioisotopes

Environmental Impact Assessment - Mandatory for new facilities - Mandatory to authorize modifications of power plants or extensions of the systems of transmission or distribution - Requires a public hearing where third party comments, objections and petitions are received

Environmental Legislation in Argentina - Amendment of National Constitution defines the division of roles on environmental protection of national and provincial authorities - Minimum standards must be established at National level - Neither roles or minimum standards are defined - Competence overlapping and impairment of the coordination of administrative environmental activities

Economic Incentives - No economic incentive apart from dispatch priority was included in the privatization scheme - Secretary of Energy maintained programs on rational use of energy and non-conventional energy sources - Act 25019 of 1998 assigns a special regime for wind and solar energy through tax benefits - ENRE has started a discussion process on the tariff for the distribution concessionaires

Trends in the Environmental Impact of the Liberalized Electricity Sector - An exercise on the prospective development of the generation sector of the WEM - Hypothesis: 5% annual increment of demand, 3000 MW exports to Brazil, no imports from Brazil, no exports to Chile, level increment of Yacyretá dam - Results: future installation before 2020 of 32000 MW mostly in thermal power units

Energy Exchange G 9 EE 7 EE 3 G 4 G 5 G 8 EE 4 EE 6 EE 5 EE 1 G 10 G 2 G 3 GAS con CHILE : G 1: GASANDES - 2, 5/5 MMm 3/día G 2: SAN ISIDRO - 1, 8 MMm 3/día G 3: AGUADA PICHANA/S. ROQUE - 1, 58 MMm 3/día G 4: NORGAS - 3, 7 MMm 3/día G 5: ATACAMA - 2, 5 MMm 3/día G 6: METHANEX (1) - 2 MMm 3/día G 7: METHANEX (2) - 2, 75 MMm 3/día con BRASIL : G 8: URUGUAYANA - 2, 5 MMm 3/día G 9: BRASIL - 5 MMm 3/día con URUGUAY : G 10: URUGUAY- 1, 5 MMm 3/día ELECTRICIDAD P 1 con URUGUAY : EE 1: Salto Grande (500 k. V) - CH Binacional 1890 MW C. Elía-San Javier (500 k. V) – Contrato 400 MW firmes con PARAGUAY : EE 2: El Dorado-C. A. López (132 k. V) EE 3: Clorinda-Guarambaré (220 k. V) – 150 MW no firmes EE 4: Yacyretá (220 k. V) - CH Binacional 2700 MW con BRASIL : EE 5: P. Libres-Uruguayana (132 k. V) – 50 MW no firmes EE 6: Garabí (500 k. V) – Contrato 1000 MW firmes con CHILE : EE 7: Güemes-Atacama (345 k. V) - 630 MW, 5000 GWh/año G 7 G 6 PETROLEO con CHILE : P 1: 15 Mm 3 -día