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Renewable Energy: Draft Regulation for Corporate PPA´s

The National Ministry of Energy and Mining has published on its website a draft regulation (hereinafter, the “Draft Regulation”) for corporate power purchase agreements from renewable resources (hereinafter, “PPA”).

The Draft Regulation will be subject to public consultation for 15 days starting on June 9^th, 2017.

The Draft Regulation sets out several relevant rules, including, not only the ones referred to PPAs, but also, pertaining to issues such as curtailment and how dispatch will be assigned in such cases. Furthermore, it sets guidelines for Targeted Large Users (please, see below) who must comply with renewable portfolio targets.

The main aspects of the Draft Regulation are summarized below. Please do not hesitate to contact us for further information.

Main aspects of the Draft Regulation

1) Specific Fees

These provisions enable Targeted Large Users to assess the costs of Wholesale Electric Market Management Company´s (hereinafter, “CAMMESA” for its Spanish acronym) joint purchase mechanism in comparison with other available alternatives.

• The Draft Regulation provides for a Trading Fee and an Administration Fee referred by Decree No. 531/2016 (the “Decree”), regulatory of Law No. 27.191 (the “Law”). Electricity consumers whose average electricity demand in the previous calendar year exceeds 300 kW (“Targeted Large Users”) and opt to comply with their consumption obligation through the joint purchase mechanism must pay the Administration and Commercialization Fee.
• The Commercialization and Administration Fees are stipulated in U$S/MWh and will vary according to their consumption obligation and electricity demand. The Commercialization Fee will be allocated to the Stabilization Fund of the Wholesale Electricity Market (“MEM” for its Spanish acronym) and its value is set to increase through the years (starting in U$S 4/MWh up to U$S 20/MWh). The Administration Fee will be a fixed charge, destined to fund administrative expenses of the joint purchase mechanism.

2) Curtailment

The Draft Regulation seeks to establish a priority dispatch in cases of curtailment.

• A priority order is established until transmission risks are overcome.
• The priority order is as follows:
1. Run of the river hydroelectric power plants and renewable energy power plants that have achieved commercial operation (“COD”) before January 1st, 2017.
2. Power plants awarded with a PPA under “Program RenovAr, Rounds 1 and 1.5”.
3. Power plants that will be awarded with PPAs in future Rounds of Program RenovAr.
4. Power plants that operate under the corporate market and have been granted priority after future Rounds of Program RenovAr are published. If priority has been obtained before such publication, these power plants will have priority over the ones mentioned in (iii).
5. Between the power plants that operate under the corporate market, the one who has obtained priority earlier, will have priority dispatch. If they had the same order, dispatch will be done at pro rata basis.

3) Registries

• The Draft Regulation provides the creation of a Priority Dispatch Assignation Registry (“RAPID” for its Spanish acronym) under CAMMESA.
• The creation of a National Renewable Energies Project´s Registry (“RENPER” for its Spanish acronym) under the Renewable Energy Sub-secretary where generation, cogeneration and self-generation projects connected to the Argentinian Interconnection System (“SADI” for its Spanish acronym) must be registered.

4) Main aspects of the corporate market

• For purposes of complying with the consumption target, power generated from authorized projects will be considered. Authorized projects will be generation, self-generation or cogeneration projects that:
1. Achieve COD after January the 1^st, 2017;
2. Are registered at the RENPER.
3. Are not committed under other contractual arrangements or are expansions of projects committed under another contractual regime; the latter, only for the expanded power capacity and must have an independent commercial measuring system for the expanded capacity.

• Tax benefits will apply and will be ruled by Resolution MEyM No. 72/16.
• The terms of the PPA will be freely negotiated between the parties.
• Up to 10% of the project´s energy generation can be sold to CAMMESA or in the spot market under Resolution SEE No. 19/2016, or its amendments.
• Priority dispatch order: a specific procedure is prescribed, which will depend on proposed COD and tax benefits. Generators that assume the costs for transmission capacity expansions will have priority.
• Capacity back-up: will not be required.

5) Authorized Large Users (“ALU”)

• CAMMESA will publish a list of ALU obliged to individually comply with the consumption obligation.
• After the list is published, the ALU will have twelve (12) months to opt out from CAMMESA´s joint purchase. Such exclusion, since communicated, will last for five (5) years.
• Within the twelve-period term, the opt out can be made two (2) times per year, according to seasonal programming of the MEM.
• The Draft Regulation provides the effects of the exclusion of the joint purchase mechanism and the obligation to inform and register the PPA or the self-generation or cogeneration project.
• The audit of consumption target is annually and year past due.
• The procedure for the fines is regulated. A 10% tolerance is prescribed that can be compensated the following year. The standards to establish sanctions is stipulated.
• Authorized Large Users can choose to assign their energy consumption to base energy or energy plus program.

The Draft Regulation provides answers to the strong expectations that have been in place regarding the Argentine energy market around the possibility to start a corporate market.

Public consultation favors the opportunity for business players to state their opinions and proposals regarding the Draft Regulation.

This is good news for all the interested parties in the development of the renewable energy market in Argentina.

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