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Legal framework

Policy and law

What is the government policy and legislative framework for the electricity sector?

Argentina is a federal country where the electricity market is subject both to federal and to local jurisdictions. The federal legal framework is based on Law No. 15,336 and basically applies to the federal interconnected system, leaving local generation and distribution facilities to provincial jurisdiction.

Federal energy policies are coordinated with the provinces through the Electricity Federal Council established in 1961 by Executive Decree 2073. Its role is to administer specific funds and to act as an adviser for the national executive branch and for the provincial governments with respect to the electricity industry. The Council consists of representatives of the national executive branch and of the 24 provinces of Argentina.

In 1991, the federal government carried out an overall privatisation and deregulation programme of several industries held by the federal government.

In 1992, the federal Congress enacted Electricity Law No. 24,065, which established the rules and procedures for the restructuring and privatisation of the electricity sector. This federal legislative framework, still effective today, divides generation, transportation and distribution of electricity into separate business units, each with particular regulations.

In 2001, Argentina experienced an economic crisis that seriously affected the electricity sector and that was followed by 12 years of government subsidies and regulatory interference, causing Argentine electricity generators, transporters and distributors to defer investments, and creating a vast structural deficit in the electricity market.

In 2015, Macri’s administration took office and aimed its policy at eliminating subsidies and regulatory interference in the electricity industry, switching to a more cost-realistic and market-oriented policy.

2Organisation of the market

What is the organisational structure for the generation, transmission, distribution and sale of power?

The organisational structure of the electricity market is based on the following,

Generators

There are approximately 120 generation companies in Argentina, operating one or more generation facilities. Argentina’s installed power capacity is covered as follows: 61 per cent from thermal generation; 33 per cent from hydraulic generation; 5 per cent from nuclear generation; and 1 per cent from unconventional energy.

Transporters

Each transporter holds an electricity transportation concession or licence, for transportation from power generation facilities to distributors, through high-voltage power transportation systems. Transporters cannot participate in the market through purchases or sales of power. Transportation is carried at 500kV, 220kV and 132kV through the national interconnected system, which covers approximately 90 per cent of the country’s electricity demand.

Distributors

Each distributor holds an electricity distribution concession in a specified geographical area for the supply of electricity to consumers on an exclusive basis. Distribution concessions specify, among other terms and conditions, the type and quality of services, the rates and the concessionaires’ obligation to provide a reliable service.

The National Electricity Regulator (ENRE) monitors compliance by the federal distribution companies (EDENOR and EDESUR), and provincial regulatory authorities monitor compliance of local distributors with their respective concessions and with local regulatory frameworks (EDELAP, Province of Buenos Aires; EPE, Province of Santa Fe; EPEC, Province of Córdoba, etc).

Large energy users

The electricity market classifies large energy users into three categories: major large users; minor large users; and special large users. Each category has different requirements with respect to purchases of their energy demand.

Regulation of electricity utilities – power generation

Authorisation to construct and operate generation facilities

What authorisations are required to construct and operate generation facilities?

Regulatory permits and approvals to be obtained for the construction and operation of generation facilities depend on the type of power plant to be built. Thermal and renewable energy power plants do not require the granting of specific regulatory authorisations. Large-scale hydroelectric power plants and nuclear power plants require the granting of special concessions by the government, specifically in connection with the construction of the plants and the use of water. Additionally, federal and provincial environmental and safety regulation authorisations must be obtained for the construction of power plants.

Grid connection policies

What are the policies with respect to connection of generation to the transmission grid?

Connection of generation to the transportation grid requires the prior authorisation of the transportation concessionaire and the existence of capacity in power lines. If the generator’s requirement is not satisfied by the existing capacity of the transportation grid, transportation capacity shall be expanded with the prior approval of ENRE, the Administrative Company for the Wholesale Electricity Market (CAMMESA) and the relevant transmission company.

Alternative energy sources

Does government policy or legislation encourage power generation based on alternative energy sources such as renewable energies or combined heat and power?

In 2015, the federal Congress enacted Renewable Energy Law No. 27,191, later regulated by Executive Decrees 531/16 and 882/16. The Law, which amended Law No. 26,190 on the same subject, established mandatory targets for renewable energies: as of 2018, renewable sources must be no less than 8 per cent of overall electricity consumption, with a 20 per cent target for 2025.

As a consequence of Law No. 27,191, in 2016 the federal government launched ‘RenovAr’, a programme that contemplates a series of fiscal incentives and financial support mechanisms for renewable energy sources. Bidding processes called by the federal government during 2016 and 2017 proved successful and with a large number of awardees, many of them new foreign investors.

Law No. 26,190 invites provinces to adhere to the legislation and develop their own province-level incentives. Some provinces have enacted their own regulations regarding renewable energies (Buenos Aires, Law No. 12,603; Chubut, Law No. 4,389; Mendoza, Law No. 7,822; Misiones, Law No. 4,439; Neuquén, Law No. 2,596; and Santa Cruz, Law No. 2,796).

Climate change

What impact will government policy on climate change have on the types of resources that are used to meet electricity demand and on the cost and amount of power that is consumed?

Argentina has ratified the United Nations Framework Convention on Climatic Change (Law No. 24,295) and the Kyoto Protocol (Law No. 25,438). Argentina is not included among the countries that committed to reduce or limit carbon dioxide emissions. As a developing country, Argentina may participate and promote clean development mechanisms (CDM) through the federal Ministry of Environment. There are no proactive governmental measures promoting CDM.

Storage

Does the regulatory framework support electricity storage including research and development of storage solutions?

The Electricity Regulatory Framework does not contain specific provisions promoting research and development of storage solutions. Private consumers tend to implement domestic energy storage as a result of solar and wind generation.

Government policy

Does government policy encourage or discourage development of new nuclear power plants? How?

Law No. 24,804 regulates the nuclear industry. The federal government is responsible for establishing nuclear policy, regulating nuclear activity and carrying out relevant research and development.

Argentina has three nuclear power plants: Atucha I (launched in 1974: 335MW); Embalse (launched in 1984 and recently refurbished: 648MW); and Atucha II (launched in 2014: 745MW). Almost 5 per cent of Argentina’s electricity needs are covered by nuclear sources.

The federal government encourages the development of new nuclear power plants, most recently through the announcement of the construction of a fourth nuclear power plant, Atucha III, close to Atuchas I and II, with a 745MW electrical power capacity.

Regulation of electricity utilities – transmission

Authorisations to construct and operate transmission networks

What authorisations are required to construct and operate transmission networks?

New transportation networks can be constructed and operated by what the regulations call independent transporters, upon request for a transportation service by a promoter who must be the beneficiary of at least a certain percentage (defined for each project) of the new transportation service. To that end, independent transporters must obtain a technical licence from the relevant transportation concessionaire. A promoter must be an agent or a group of agents of the wholesale electricity market.

The construction of such new transportation networks can be carried out through two different procedures: parties agreement or call for bids. The parties agreement procedure requires that the promoter of the project proposes a certain independent transporter to be responsible for the construction, operation and maintenance of the transportation network.

If the promoter does not have a prior agreement with a prospective independent transporter, a bidding process shall be conducted by the promoter with the purpose of electing an independent transporter. This process is controlled and supervised by ENRE.

Both procedures require:

  • issuance of a Certificate of Public Need by ENRE;
  • agreement of the transportation concessionaire of the relevant area;
  • approval of the technical feasibility of the connection by CAMMESA and the relevant transportation concessionaire; and
  • approval by the relevant provincial authority of the environmental impact assessment.

The former national administration granted 500kV of transportation concessions that were financed with national state funds, but such developments had a special regime outside of the electricity regulatory framework. The capital expense of such investment was rolled over the total national electricity demand.

Eligibility to obtain transmission services

Who is eligible to obtain transmission services and what requirements must be met to obtain access?

The electricity regulatory framework does not establish particular requirements for eligibility to obtain a transportation licence. In the case of the call for bids awarding procedure, particular requirements can be established in the relevant bidding terms and conditions. In the case of the parties agreement procedure, independent transporters shall be evaluated as appropriate for eligibility by ENRE under its own regulatory and financial, not discretionary, standards.

Government transmission policy

Are there any government measures to encourage or otherwise require the expansion of the transmission grid?

The federal government has recently launched a Call for Bids to award expansions of the transmission networks through public-private partnership agreements. Private companies will repay their investments through a specific charge to be included in the tariff paid by the users of the transmission networks. The repayment period will be of 10 years.

Rates and terms for transmission services

Who determines the rates and terms for the provision of transmission services and what legal standard does that entity apply?

If the technical licence has been awarded as a result of a call for bids procedure, during the first 15 years of the licence term the independent transporter shall collect a monthly fee (canon) with the purpose of recovering the invested capital and the operation and maintenance costs. Such fee results from the best bid given during the bidding process. Once the 15-year initial period has been completed, the independent transporter collects a monthly rate calculated on the basis of the operation and maintenance costs and a profit. Such rate is determined by ENRE and revised every five years. Revision of tariffs considers the impact of costs and taxes of the service and the rate of return to the transporter. Approval of new rates requires a public hearing. The fee and rate is rolled over to the agents of the wholesale electricity market beneficiaries of the transportation.

If the technical licence has been awarded as a result of a parties agreement procedure, the recovery of the invested capital will depend on the terms agreed by such parties and exposed to their commercial risk with no guarantee of repayment. ENRE will determine a monthly rate applicable only as from the beginning of the licence term and calculated on the basis of the operation and maintenance costs and a profit. Such rate is revised by ENRE on a periodical basis. Only the rate is rolled over to the agents of the wholesale electricity market beneficiaries of the transportation.

Entities responsible for grid reliability

Which entities are responsible for the reliability of the transmission grid and what are their powers and responsibilities?

Each transportation concessionaire is responsible for the reliability of its transportation grid, under the surveillance of ENRE acting as enforcement authority. Concessionaires’ obligations and liabilities are established in each concession contract and framed under the Electricity Law. Concessionaires are also responsible for the supervision and control of the transportation lines of the independent transporters directly connected to their transportation network.

Regulation of electricity utilities – distribution

Authorisation to construct and operate distribution networks

What authorisations are required to construct and operate distribution networks?

A concession has to be granted to a distribution company in order to operate a distribution network. ENRE monitors compliance by the federal distribution companies (EDENOR and EDESUR) with tariffs and services, while provincial regulatory authorities monitor compliance by local distributors subject to provincial regulatory frameworks.

Access to the distribution grid

Who is eligible to obtain access to the distribution network and what requirements must be met to obtain access?

Distribution companies are generally subject to provincial regulations and there are no restrictions on access to the distribution grid other than the technical and financial capabilities required by provincial regulations.

Government distribution network policy

Are there any governmental measures to encourage or otherwise require the expansion of the distribution network?

The new distribution companies are usually the result of new urban, suburban or housing developments and mostly depend on private initiatives. There are no federal measures encouraging the expansion of the distribution network. Distributors are obliged to extend their relevant grid within their geographical concession area if such extension is required by consumer demand.

Rates and terms for distribution services

Who determines the rates or terms for the provision of distribution services and what legal standard does that entity apply?

Rates and conditions of the distribution service are regulated by the relevant enforcement authorities (federal or local). Rates vary for different consumers (residential, commercial, industrial), and level of voltage required. The Electricity Law and applicable regulations establish that rates must be fair and reasonable, and should allow companies to obtain revenue to cover their costs of operation, taxes and depreciation. Additionally, rates must be revised every five years, after a process that shall include a proposed adjusted tariff based on costs and taxes and a regulated rate of return, and a public hearing for final approval.

Regulation of electricity utilities – sales of power

Approval to sell power

What authorisations are required for the sale of power to customers and which authorities grant such approvals?

The electricity regulatory framework approved in 1992 was based on the principle that sale and purchase of electricity in the wholesale electricity market could be freely negotiated between the agents of the industry.

In 2001, Argentina experienced an economic crisis and governmental intervention, causing the Argentine electricity generators and distributors to defer investments, and creating a vast structural deficit in the electricity supply. As a result of this, the federal government passed emergency regulations intervening in the market (eg, Resolution SE 1281/06), interfering with the free sale of electricity from generators to their customers, particularly through actions by CAMMESA, with the purpose of avoiding shortages to commercial and domestic demand.

Although the current administration is eliminating regulatory interference, nevertheless certain regulations may require the supply of electricity to certain priority customers on the basis of regulated or subsidised prices.

Power sales tariffs

Is there any tariff or other regulation regarding power sales?

In 2005 the federal government determined a minimum required power level for each agent of the wholesale electricity market. As from that moment, sale and purchase prices of electricity in the wholesale electricity market for supplies above 300kW and exceeding certain minimum power levels established by regulation (as at 2005) could be freely negotiated between the generator and the customer.

The sale of energy to distributors below 300kW is made at a ‘stabilised price’ defined by ENRE or the relevant provincial authorities, as applicable, including certain highly subsidised prices as a ‘social tariff’.

Rates for wholesale of power

Who determines the rates for sales of wholesale power and what standard does that entity apply?

Wholesale power rates for sales to distributors below 300kW are defined by ENRE for the federal distributors and by the relevant provincial authorities at local level.

Sale and purchase prices for supplies above 300kW and exceeding certain minimum power levels established by regulation (as at 2005) are freely negotiated without any intervention of the regulatory authorities.

Public service obligations

To what extent are electricity utilities that sell power subject to public service obligations?

The Electricity Law establishes that the distribution and transportation services shall be considered public services. Otherwise, electricity generation is considered an independent and free industrial activity, although subject to public interest. However, as mentioned above, certain emergency regulations still in place may result in mandatory supply at regulated prices to certain priority consumers.

Regulatory authorities

Policy setting

Which authorities determine regulatory policy with respect to the electricity sector?

Regulatory policy with respect to the electricity sector is established at a federal level. The main authorities are:

  • the Secretariat of Electricity, which acts within the sphere of the Ministry of Energy and Mining;
  • ENRE, a decentralised agency within the scope of the Ministry of Energy and Mining;
  • CAMMESA, a private company owned by the federal government and by the electricity market agents (generators, distributors and transporters); and
  • the Electricity Federal Council (CFEE), adviser to the federal and provincial governments on electricity matters.

Scope of authority

What is the scope of each regulator’s authority?

The scope of each of the authorities mentioned in question 23 is the following.

Secretariat of Electricity

  • Executes the national policy related to the electricity sector;
  • approves the import and export of electricity;
  • intervenes in the process to elaborate nuclear energy policy;
  • intervenes in procedures for the execution of international agreements related to the electricity sector; and
  • assists the Ministry of Energy and Mining in all matters related to the electricity sector.

ENRE

  • Supervises the execution of and compliance with the Electricity Law, its regulations and the concession agreements;
  • issues regulations, technical procedures and resolutions related to the electricity sector;
  • prevents anticompetitive, monopolistic and discriminatory conduct between agents of the electricity sector;
  • establishes the basis for tariff calculations;
  • establishes the basis for the granting of distribution and transportation concessions;
  • intervenes in the extension, assignment or expiration of concessions;
  • organises the public hearing processes established for tariff recalculation; and
  • applies sanctions established in the Electricity Law and in the concession agreements.

CAMMESA

  • Its main original function was to provide the dispatch of the electricity market with transparency and economy;
  • its singular feature is that it is a non-profit corporation;
  • owing to the economic and financial crisis in 2002 and the passing of the Economic Emergency Law No. 25,561, the federal government entrusted CAMMESA with commercial intervention in the natural gas and electricity markets through the domestic purchase of natural gas and the import of liquefied natural gas and the resale thereof to electricity generators, and the domestic purchase and import of electricity and its resale to distributors and large users at subsidised or discretionary prices; and
  • the federal government has publicly stated its intention to gradually give CAMMESA back its original role.

Electricity Federal Council

  • Acts as an adviser to the federal and provincial governments on matters related to the electricity sector;
  • recommends amendments to the regulations applicable to the electricity sector; and
  • coordinates the development plans of the electricity sector at federal and provincial level.

Establishment of regulators

How is each regulator established and to what extent is it considered to be independent of the regulated business and of governmental officials?

The Secretariat of Electricity acts within the sphere of the National Ministry of Energy and Mining, and therefore of the national executive branch. The person holding the position of Secretary of Electricity is appointed by the president.

ENRE, as a decentralised agency, is independent as to functional and economic aspects from the national executive branch. That notwithstanding, it is run by a board of directors consisting of five members appointed by the executive branch.

CAMMESA is a private company created by Executive Decree 1192/92. CAMMESA’s stock capital is held by the agents of the Wholesale Electricity Market, in equal shares: generators, transporters, distributors and large users hold 20 per cent each, and the remaining 20 per cent is held by the federal government.

The Electricity Federal Council was created in 1960 by Law No. 15,336 and regulated by Executive Decree 2073/61; its role is to administer specific funds only intended for the electricity sector and to act as an adviser to the national executive branch and to the provincial governments with respect to the electricity industry. The Council consists of representatives of the national executive branch and of the 24 provinces.

Challenge and appeal of decisions

To what extent can decisions of the regulator be challenged or appealed, and to whom? What are the grounds and procedures for appeal?

The administrative decisions of the regulator may be subject to administrative appeals. Generally, the appeal does not suspend the effects of the administrative decision, as this is presumed legitimate by virtue of law. The resolution of the appeal must always be subject to judicial review. The appeal may be filed before the same authority that issued the decision (motion for reconsideration), or before a higher administrative level (hierarchical motion). In the case of ENRE, an appeal can be filed before the Ministry of Energy and Mining, or an action for nullity before the Federal Court of Appeals, depending on the matter of the decision to be challenged.

Acquisition and merger control – competition

Responsible bodies

Which bodies have the authority to approve or block mergers or other changes in control over businesses in the sector or acquisition of utility assets?

Antitrust Law No. 27,442 establishes the prohibition against acts limiting, restricting or distorting competition or constituting an abuse of dominant position, and also provides rules for antitrust control of mergers, acquisitions and other consolidation processes. The enforcement authority is the Federal Antitrust Authority.

Review of transfers of control

What criteria and procedures apply with respect to the review of mergers, acquisitions and other transfers of control? How long does it typically take to obtain a decision approving or blocking the transaction?

The Antitrust Law provides that to verify that an economic concentration does not infringe the prohibition under such Law, it must be notified to the Antitrust Authority when the aggregate ‘business volume’ of the companies involved in the given transaction exceeds approximately US$55 million. By ‘business volume’, the Law means domestic sales and exports from Argentina.

The Antitrust Authority must, within 45 business days of the filing of a complete notification form, decide to authorise the transaction, subject it to conditions or prohibit it. Once this term has expired without the Antitrust Authority having issued a resolution, the transaction will be deemed tacitly approved. The whole process generally takes, depending on the complexity of the transaction, between one and two years.

Foreign companies making their first acquisition in Argentina are exempted from making an antitrust filing.

Prevention and prosecution of anti-competitive practices

Which authorities have the power to prevent or prosecute anti-competitive or manipulative practices in the electricity sector?

In addition to the Antitrust Authority, the Electricity Law entitles ENRE to prevent anticompetitive, monopolistic and discriminatory conduct between agents of the electricity sector, including producers and consumers.

Determination of anti-competitive conduct

What substantive standards are applied to determine whether conduct is anti-competitive or manipulative?

The Antitrust Law prohibits economic concentrations, the purpose or effect of which is, or may be, to reduce, restrict or distort competition, thus damaging the general economic interest.

In addition, articles 30, 31, 32 and 33 of the Electricity Law establish rules that prohibit vertical integration of the agents of the industry.

Preclusion and remedy of anti-competitive practices

What authority does the regulator (or regulators) have to preclude or remedy anti-competitive or manipulative practices?

Both the Antitrust Authority and ENRE are entitled to impose sanctions on companies that perform anticompetitive or manipulative practices and to prevent transactions contrary to the provisions of the Antitrust Law and the Electricity Law.

International

Acquisitions by foreign companies

Are there any special requirements or limitations on acquisitions of interests in the electricity sector by foreign companies?

There are no special requirements or limitations on the acquisition of electricity related interests by foreign companies or individuals. The Electricity Law establishes that transportation and distribution activities shall be entrusted to private companies. The state and state-owned companies can only carry out such activities in case no awardee results from a bidding process.

Activities in Argentina that can be deemed a permanent establishment require the creation of a local entity, be it a subsidiary or a branch.

Authorisation to construct and operate interconnectors

What authorisations are required to construct and operate interconnectors?

Resolution 21/97 of the former Secretary of Energy establishes the procedure for the granting of electricity transportation concessions for international interconnection. The main permits and approvals to be obtained are:

  • execution and approval by ENRE of the construction, operation and maintenance (COM) agreement (COM Agreement) of the interconnector’s facilities;
  • execution of the concession agreement; and
  • granting of the electricity transportation concession for international interconnection by the Secretariat of Electricity through delegation of the executive branch.

Interconnector access and cross-border electricity supply

What rules apply to access to interconnectors and to cross-border electricity supply, especially interconnection issues?

In addition to the regulatory approvals and permits established in question 32, customs authorisations shall be obtained and dispatching agencies of both bordering countries shall coordinate operating and technical issues related to the cross-border supply.

Transactions between affiliates

Restrictions

What restrictions exist on transactions between electricity utilities and their affiliates?

Articles 30, 31, 32 and 33 of the Electricity Law establish the following limitations to the participation in other electricity related companies:

  • transportation companies (including subsidiaries) are not allowed to sell or purchase electricity;
  • generation and distribution companies (including parent companies and subsidiaries) and large customers are not allowed to own or have a participating interest in the capital stock of a transportation company or in a parent company of a transportation company; and
  • two or more transportation companies, or distribution companies, may only belong to a single economic group with the prior authorisation of ENRE. The same authorisation is needed if a transportation or distribution company acquires a participating interest in the capital stock of another transportation or distribution company, respectively.

Enforcement and sanctions

Who enforces the restrictions on utilities dealing with affiliates and what are the sanctions for non-compliance?

ENRE is responsible for enforcing the limitations established in articles 30, 31, 32 and 33 of the Electricity Law. The infringement of such provisions shall be sanctioned with fines, disqualification, suspensions or seizures.