Fitch Ratings also joined the discussion on the relevance of President Gustavo Petro temporarily assuming the regulation of public services, especially electricity, in order to find solutions to the high fees who are registering.
Regulatory proposals designed to curb inflation in energy markets could weaken the profitability of utility companiesby avoiding price increases to offset rising production costs,” he warns.
(Also read: Energy: with the threat of intervention by Petro ‘companies would prefer to leave’)
In addition, the rating agency ensures that energy prices could be higher if investments to increase generation capacity do not rise along with the growing demand in the country.
«The lack of an independent regulatory framework with a rate setting process that does not follow technical considerations to remunerate capital investments, administration, operation and maintenance expenses and a fair return on capital could undermine investor confidence and damage the necessary expansion of the system, as well as the quality of the service», are other of the warnings that Fitch Ratings launched.
The regulator’s independence from government explosions has been a key factor supporting companies’ strong credit profiles
The agency forecasts that the Colombia’s electricity demand will grow by 1,500 GWh (approximately 2 percent), on top of last year’s 2,500 GWh growth.
This implies that 1 GW of capacity is needed each year to meet the increase in consumption, without putting additional pressure on energy prices.
Fitch Ratings also highlights that the independence of the Energy and Gas Regulation Commission (Creg) of government interventions has been a key factor supporting the strong credit profiles of rated utilities.
Likewise, it says that the regulatory framework has supported stable cash flows and predictable for market participants, which has improved access to capital, increased coverage, and improved the quality of service in the country.
«A material structural change in the electricity regulatory environment due to political interference still a concern for electricity generation, distribution and transmission companies, and, indirectly, for natural gas and water distribution companies,» he adds.
(Also read: Uncertainty round the electricity sector due to Petro announcements)
Majority of the Government in the Creg
Unions of the electricity sector also state that it is not necessary for President Gustavo Petro to resume regulation, since in the coming months he could have the majority of votes within the Creg for any measure that he wants to take.
The decisions in the Creg are in charge of the finance ministers (José Antonio Ocampo) and Mines and Energy (Irene Vélez)in addition to the director of the National Planning Department (Jorge Iván González).
Six commissioned experts also have a voice and vote, but José Fernando Prada -current executive director- expires his term in the entity in July of this year, so it is up to President Petro to name his replacement.
Jorge Valencia’s term expired in November 2022, but he has not yet retired because he is waiting for the person who will occupy his position to be chosen, while the appointment of Andrés Barreto -on August 2- was annulled by the Council of State.
As for Sara Vélez, who took office on August 5, 2022, the Council of State provisionally suspended the effects of the act of her appointment, but she has not left the entity because there are pending issues in this process.
With this scenario, the peter president could have in their hands the appointment of four commissioned experts from the Creg, since there are still no objections against those of Luis Julián Zuluaga and Natasha Avendaño.
Additionally, it is important to take into account that the sessions of the Creg are chaired by Minister Irene Vélez and, therefore, cannot be carried out without her presence. besides, no regulation can be approved if it does not have a vote in favor of any of the representatives of the National Government.
