Energy prices – El Mostrador

Recently the Government announced several measures to deal with the increases in fuels and electricity. Three bills were announced:

Increase the resources of the Oil Price Stabilization Fund (FEPP).
Continue with the stabilization of the Electricity Accounts (PEC2).
Increase competition in the gas market.

Regarding the first, the FEPP was created in 2001 as a result of the rise in the price of oil derived from the so-called Gulf crisis. It was applied to mitigate changes in the prices of automotive gasoline, diesel oil, liquefied petroleum gas and domestic kerosene. This fund started with 200 million dollars, which were increased steadily over time and also reducing the products that were initially included, leaving only kerosene for domestic use. In this scenario, the current government has decided to inject 40 million and include, in addition to kerosene (paraffin), liquefied petroleum gas, LPG.
In relation to continuing with the mechanism of stabilization of electricity accounts, it should be remembered that the respective law was processed as a result of the social outbreak to avoid the increases that would occur from the year 2020. The idea was to compensate the transitional subsidy that was required with the casualties that had to occur from 2023, thanks to the new contracts, signed in the period of President Bachelet, with new generators that managed to increase competition. The mechanism considers a credit system – Stabilization Fund – that is financed by generation companies, and that could generate an accumulated debt until June 2023 or until a total balance of 1,350 million dollars (MMUSD) accumulates. The bad news is that the total of 1350 million dollars has already been exhausted and, therefore, the accounts of the final customers would rise, unless a new mechanism is implemented to avoid it and this is what the second measure announced by the Government points to.
The third measure announced has its origin in a concise report of the National Economic Prosecutor’s Office (FNE) regarding the malfunction of this gas market. It recommends the vertical disintegration of the LPG market and the opening of natural gas distribution networks, which should result in increased competition and, therefore, lower prices. The FNE report concludes that the margin of GNP distributors has ranged between 50 and 55% of the price in recent years. All of the above gave rise to an initiative by several mayors to distribute gas from the municipalities, which presents significant challenges, particularly security. In this scenario, it remains only to wait to know the details of what the government proposes and hopefully move towards a structural regulatory solution for both the LPG and natural gas markets.
However, the measures announced by the government are very valuable, however, the sense of urgency must also be taken into account, so as not to arrive with them too late.

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Original source in Spanish