Almost two years ago, Law 32249 was enacted, which seeks to ensure efficient electricity generation and diversify the energy matrix. For it to be applied, Minem must approve several regulations; among them, the electricity contracting regulations for regulated users, of which there is only one project.
Regulated users – households and small businesses – do not buy energy from generators, but rather through a distributor (Luz del Sur, Pluz Energía, etc.), which acquires it through bidding or bilateral contracts. Law 32249 allows distributors to tender with new options: buy energy separate from power – so that they can compete with RER like solar, which only produces during the day – and do so by time blocks; for example, base, middle and tip. This rule has generated controversy.
On the one hand, there are those who maintain that generators should be able to bid for individual blocks and also for several linked blocks, since that will bring more competition to the benefit of the user. On the other hand, there are those who say that it should only be offered for independent blocks and that only new diversified infrastructures should participate (it is not clear what is meant by new), otherwise investment will stagnate.
In my opinion, the second position is not correct. Law 32249 provides that the awarded offers must be those that together represent the minimum cost to meet the tendered demand during the entire supply period. That is, the law does not mandate awarding block by block, but rather the combination of offers – individual or joint – that covers 24 hours at the lowest total cost. Bidding for blocks does not require evaluating each block separately.
Let’s imagine three blocks. The best individual offers cost US$38, US$62 and US$85 per MWh: covering the day costs US$185. A generator offers US$42, US$53 and US$70, but only if it is awarded all three: US$165. Lose on a block, but win the day. If the regulations prohibit this offer, the user pays 12% more. And it is not worth taking the US$38 of one and the package prices of the other: these only exist if you contract everything.
Beyond the legal level, RER generators can bid in individual blocks or join forces with others to bid 24 hours a day. A joint offer also does not imply giving the tender to a single generator: it can cover two blocks or only part of the volume. And by expanding the combinations and reducing the risk of a partial award, joint offers lower prices. The tender will be able to choose three blocks from different companies, one from one and two from the other, or a package for the whole day: the most important thing is the lowest price for homes and small businesses.
It is not an exotic idea. Chile, whose block scheme is often cited as an example, also allows conditional bids to be awarded together. If we are going to copy, let’s copy the improved version.
If the interest of consumers is not put first but that of the new RER projects, an industrial policy will be created that chooses winners, subsidized by consumers. Furthermore, the law does not exclude existing infrastructures; Doing so by regulation would be illegal and, by law, differential treatment would be difficult to justify to whoever pays the rate.
The RERs have enjoyed for years a regulatory benefit that they would not have obtained in the market: ensuring them a participation of up to 5% of the electricity generated. This benefit had its logic to promote its takeoff, but it is not sustained when there is already installed power of 11.8% of solar and wind generation, there are multiple projects in the making and it is expected that by 2035 they will reach between 27% and 45% (Valgesta, 2025).
That the regulations allow competition with block and joint offers, and that whoever gives the lowest cost for 24 hours wins. The winner must be the user.
