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Electricity and natural gas services in Colombia are not and will not be free even in times of pandemic

Los servicios públicos de energía eléctrica y gas natural en Colombia no son ni serán gratuitos aún en tiempo de pandemia

The easing measures in public energy and gas services issued by the National Government in times of pandemic, can be summarized in 3 aspects: i) financing of payments to social categorization 1 to 4; ii) moderating the price increase of invoices; and iii) empowering territorial entities to assume the payment of services. With these measures, the National Government stands firm in respecting the investment of individuals in public services in the sense of recognizing the right of Utility companies to receive a payment for the provision of services, while at the same time eases the rules to enable customers to pay and to enable territorial entities to assume the payment of invoices on behalf of the customer.

The relevant rules that develop these measures are found in the decree 517 of 2020 and resolutions 048, 058, 059, 105 and 108 of the same year issued by the CREG. Let’s start by analyzing each of the measures. Regarding electric energy bills that coincide with the time of the pandemic, costumers of social categorization 1, 2, 3 and 4 will have the option of not paying the invoice, in which case the service supplier, instead of suspending the service, shall defer the debt to 36 months for social categorization 1 and 2 and 24 months for social categorization 3 and 4. However, the issue is in the financing of the payments, as the National Government opened a line of credit through FINDETER that allows Utility companies to access resources with an interest rate of 0%, but only to finance social categorization 1 and 2, comparing to social categorization 3 and 4, the Utility company will have to obtain resources in the financial sector and pass that interest rate on to the costumers.

The second measure is technically known as the tariff option (“opción tarifaria”) and requires service providers to defer increases in the cost of providing the service in more than one year, to prevent invoices from increasing significantly from one month to the next. This measure that aims to moderate price increases becomes relevant in this time of the pandemic since two elements increased prices during the crisis: i) the shortage of rain; and ii) the increase in the dollar exchange rate. However, it is important to clarify that the customer will finally pay for the increase in electricity and natural in a deferred manner, so that this measures aims to ease the increase and does not aim to impose a price cap to the service. 

The last measure is very interesting, since the National Government, following the principles of autonomy and decentralization, allowed the territorial entities to assume all or part of the cost of public services, which implies that the Mayors are free to decide whether to allocate resources from their budget to pay the Utility Company. Since April 4 decree 517 of 2020 enabled this measure, the largest number of City Halls that are assuming the payment of bills, are about water supply and sewerage, but there also cases related to electricity and gas such as i) the Mayor’s Office of Pereira who signed the agreement CO1.PCCNTR.1495069 with the Pereira Energy Company to assume the payment of the energy service of social categorization 1, 2 and 3 for April and May; and ii) the Bogota City Hall issued decree 123 of 2020 which assumes the payment of 10% of the electricity and gas bills for social categorization 1, 2, 3 and 4 of April, May, and June.

In conclusion, Colombia opted for a model that encourages private investment in public utilities, according to which Utility companies have the right to receive payment as consideration for providing the service. In this time of the pandemic, criticisms of this scheme arise, which called for the exoneration of payments while the crisis continues, a scenario to which the National Government reacted by issuing rules to defer payments to the customer and to enable territorial entities to assume the economic burden on behalf of the customer, in which case it will be up to the respective Mayor’s Office to assume the payment before the Utility company because in Colombia electricity and gas services are not free.