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Legal framework

Policy and law

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

Ever since the Constitution of Ecuador was enacted in 2008, it has become the main source of legal principles for the strategic sectors of the economy, especially the power sector. The situation of Ecuador is presently changing because of the switch from a failed market model to a now failing state-owned or state-controlled power sector that has eradicated the term ‘energy wholesale market’ from the law glossary. The policy has now shifted towards opening up opportunities for the private sector. Bills of law are in the pipeline to enable the grant of concessions to the private sector for operating existing state-owned infrastructure and consequent new ventures. This is a consequence of the need for more financing resulting from the government’s excessive borrowing in the past decade.

The industry’s specific legal framework is pillared on the Organic Law of the Public Electricity Service (LOSPEE), which rules the participation of the public and private sectors in activities related to the public electric power service as well as to the promotion and execution of plans and projects involving renewable energy sources and energy efficiency mechanisms. Beyond its statement of purpose, the LOSPEE explicitly makes the state the protagonist of the power sector.

In the first semester of 2018, the Ecuadorian government decided to merge three ministries - Electricity (MEER), Hydrocarbons and Mining - as an austerity and efficiency measure. The new entity, hereinafter the Ministry, has the same legal capacity, powers and obligations that the LOSPEE had granted to its predecessor, MEER. This means that the Ministry will become the governing body of the Ecuadorian power and renewable energy sector. It will also be responsible for satisfying the country’s electrical power needs by drawing up relevant legislation initiatives, as well as policies, plans and strategic projects for ascribing efficiency in the use of national resources. The Electricity Master Plan (PME) presently in place for the sector is valid until 2025 and is mandatory for every sector of the economy.

Currently, the private initiative can participate only on an exceptional basis in small to medium renewal energy source projects authorised by the government by way of concessions. Nevertheless, owing to the national treasury’s lack of financial resources, the government is promoting a significant change in the authorities’ criteria in order to propel the private sector’s participation by offering more financially attractive conditions.

Unlike most of the region’s countries, Ecuador did not implement privatisation in the 1980s and 1990s. Perhaps the time has come for the country to seek large private investments in public services and infrastructure.

2Organisation of the market

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

The LOSPEE names the Ministry as the highest authority in the field of energy policies and governance. ARCONEL is the regulation and oversight agency for the electric power service and CENACE is the national electricity operator.

Major power generation infrastructure and the national power transmission grid are managed by the state-owned corporation CELEC, which holds operation titles to develop power generation and transmission. The distribution and commercialisation agents, hereinafter called electricity companies, are owned mostly by the state and are business units of CNEL, another state-owned corporation. Regardless of whether they are public or private, operators, concessionaires, consumers and end users must observe the regulations and energy efficiency policies issued by the Ministry and ARCONEL.

While small-scale renewable sourced generation is open to private stakeholders in Ecuador, the transmission service is under the strict responsibility of CELEC’s Transelectric Business Unit. Conversely, distribution is divided among 11 state-owned companies in which the Ministry is the main shareholder.

The LOSPEE does not acknowledge the existence of a power wholesale market, but defines the power sector’s stakeholders as follows:

  • public enterprises;
  • private and public joint ventures;
  • private companies;
  • consortiums; and,
  • community-owned entities.

Premised on international treaties and regional regulations, the LOSPEE allows international and regional interconnections for receiving and dispatching energy, depending on availability and the needs of the universe of local customers. The Ministry is responsible for promoting fair policies on international interconnections in benefit of local consumers.

ARCONEL is in charge of coordinating actions and regulatory standardisation with the relevant regulatory agencies of other countries. On the other hand, CENACE coordinates the operation of energy interconnections and ensures full compliance with applicable international technical and financial regulations in energy transactions.

As mentioned above, the electricity companies supply electricity to end consumers, whether individuals or companies, complying with ARCONEL’s regulatory conditions.

To receive the public service of electricity, the consumer or end user must sign an electricity supply contract with an electricity company. The provisions, conditions and other applicable rules for the contract are set by the relevant regulation issued by ARCONEL and revised from time to time.

Energy purchase contracts

Companies qualified as large-scale consumers because of the volume of their electricity consumption are entitled to the preferential purchase of electricity under bilateral, regulated contracts called energy purchase contracts.

Power block transactions are possible solely under energy purchase contracts. CENACE gives a commercial value to the transaction based on the prices agreed under the energy purchase contract. Furthermore, CENACE valuates international electricity transactions on the basis of trade agreements with other countries.

ARCONEL issues regulations to define the terms and conditions of energy purchase contracts and of short-term transactions.

CENACE programmes and operates long-, medium- and short-term energy purchase contracts in pursuit of achieving the lowest operating cost for the system. It also determines the values to be paid to each participant, including compensation for the local and international services of electricity transmission.

Market developments

Over a year ago, one of the country’s biggest energy projects, Coca-Codo-Sinclair, was commissioned. This hydroelectric facility and other ongoing projects help fulfil the energy sector’s growth objective. Different hydroelectric projects are expected to be implemented shortly, while others based on renewable energy sources, such as geothermal, biomass, wind and solar, are under consideration.

The Ministry’s PME identifies priority projects for the electricity generation sector. The PME also includes expansion and enhancement programmes in energy generation, transmission, distribution and supply for isolated areas.

The PME ensures a gradual increase in electricity coverage for isolated areas. The Ministry selects which projects are to be developed by the state and which could be placed under concession to private companies or to companies from the people’s and solidarity economic sector as a result of a public selection process defined by the relevant law.

The investment by institutions and public-sector companies required to execute the generation, transmission and distribution projects under the PME can be paid with funds from the general state budget or from such institutions and public-sector companies or from both.

Alternatively, public-sector companies can take out loans backed by their own or the state’s guaranty. Investments funded by the national budget will be regarded as an equity contribution from the public-sector or as a capital contribution to the company concerned.

Regulation of electricity utilities – power generation

Authorisation to construct and operate generation facilities

What authorisations are required to construct and operate generation facilities?

In exceptional circumstances, the Ministry can delegate electricity sector activities (ie, generation, transmission and distribution) to the private sector, when (i) it is necessary to satisfy public interests; (ii) demand for the service cannot be met by state-owned entities; or, (iii) projects based on non-conventional renewable energy are not included in the PME.

Delegation in the case of either (i) or (ii) is restricted to projects included in the PME under conditions that benefit national interests. The delegation is made as a result of a public bidding process conducted by the Ministry. The awardee is entitled to receive an enabling title (the concession) and is required to execute a regulated contract that is priced according to the bidder’s tender.

In the case of non-conventional renewal energy projects, the Ministry can delegate project development to the private initiative, subject to compliance with the specific requirements regulated by ARCONEL.

The process for securing authorisation starts with a public bidding process under which the company offering the best conditions for national interests is selected to execute the project.

The bidding process takes energy requirements, unregulated demand, terms and conditions, as well as price, into account. The bidder selected through this public process is entitled to a certificate of authorisation and is required to sign a contract that is priced in accordance with its tender. Once obtained, the authorisation and any information concerning operating permits and concession contracts for the electricity sector must be recorded in the Ministry’s National Authorisation Register. It is the responsibility of the electricity company to record the certificate of authorisation at its own expense, pursuant to the law and applicable regulations.

An international bidding process is not required for projects delegated to foreign state-owned entities or their subsidiaries under an international agreement.

Grid connection policies

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

A concessionaire with an enabling title gains legal access to the transmission grid once it has completed the technical studies required by the Ministry. Such studies are necessary for avoiding conflict with the system’s operations and for ensuring the best possible return on investment.

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?

The LOSPEE defines renewable energies or non-conventional energies as those from sources that do not deplete because of their use. These types of energies include, but are not limited to, hydraulic, wind, solar, geothermal, biomass, tidal, nuclear and other energies.

The Ministry promotes the use of clean technologies and alternative energies to achieve the development of a sustainable electricity system based on the use of renewable energy sources. The law guarantees that electricity produced with this type of energy will have the preferential conditions established in a regulation issued by ARCONEL.

Most likely, the primary incentive for alternative energy source projects is the feed-in tariff (FIT). By the year 2012, companies could apply for the original Ecuadorian FIT (granting power generation tariffs for this type of project up to 2027). It introduced significantly high rates (ie, photovoltaic plants received the highest tariffs: US$400 per MWh) that mostly benefited photovoltaic power generation projects. For 2015, Ecuador had a total of 6.2GW of installed generation capacity: 56 per cent from thermal power and nearly 30 per cent from large hydropower generation projects. Virtually clean renewable energies, including small hydropower plants, as well as biomass, wind and solar farms, accounted for only 11 per cent of the total national installed generation capacity.

The first FIT programme benefited approximately 500MW of capacity from 111 power projects (biomass, small-scale hydro, solar and wind sources), in the form of concessions and tariffs. Although the incentives were very attractive, the projects faced many official processing obstacles for achieving success. Therefore, only a few projects have been commissioned thus far.

Renewable energy developers can apply for import tax exemption on clean energy equipment and a five-year income tax waiver. In addition, if these developers apply for an investment contract with the government, they may be granted an income tax exemption of up to 20 years.

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?

Ecuador submitted its unconditional ‘Intended Nationally Determined Contribution’ to the United Nations about three years ago, committing to curtail greenhouse gas emissions (increasing the reduction from 20.4 per cent to 25 per cent) by 2025. The LOSPEE stipulates the obligation to enact policies to achieve energy efficiency and environmental responsibility. Despite these national commitments, the Ecuadorian government has not issued a regulation since 2015 to accomplish these proposals.

Storage

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

The LOSPEE states that energy storage, among other aspects beyond regulatory aspects, should be considered for modernising electricity networks to actively manage the demand and opportunities for offering new products and services.

The Ministry directs a smart network programme called REDIE. The modernisation of electrical networks should consider the following, among other aspects:

  • regulatory matters;
  • transportation networks;
  • energy distribution;
  • communication networks;
  • generation distribution;
  • smart meters;
  • active demand management;
  • opportunities for offering new products and services; and
  • energy storage.

Government policy

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

Ecuador has not developed any nuclear capacity. The only approach to nuclear interest stems from international treaties, but without significant results. There is one treaty with Chile and another with Russia. Therefore, there is no specific policy encouraging or discouraging the development of new nuclear power plants.

Regulation of electricity utilities – transmission

Authorisations to construct and operate transmission networks

What authorisations are required to construct and operate transmission networks?

CELEC EP is in charge of the domestic transmission of electricity and acts through its specialised business unit called Transelectric, based on an enabling title granted by ARCONEL. Transelectric is responsible for expanding the national transmission system, in accordance with the PME. Transelectric is obliged to give third parties free access to its system pursuant to the terms and conditions to be defined in a regulation that will also include applicable interconnection tariffs.

The Ministry may authorise joint ventures and, on an exceptional basis, specialised private power transmission companies to build and operate the electricity transmission infrastructure included in the PME.

Furthermore, the Ministry may authorise generators, autoproducers, distributors, large-scale consumers and end users to build transmission networks at their expense to satisfy their own needs. Every generation project included in the PME is considered a priority project and therefore is eligible for connection with the national transmission system.

Authorisation (enabling title) for a private investor to build transmission infrastructure must be obtained from the Ministry. Before applying for an enabling title, the party interested in developing the transmission infrastructure project must draw up technical studies guaranteeing that its access to the national interconnected system will not adversely affect the system.

Eligibility to obtain transmission services

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

CELEC EP plans and develops transmission system projects, which are managed through its Transelectric business unit. This unit draws up and executes the plan to expand the transmission network.

Prioritised energy projects and other projects by the private initiative that are not an original part of the PME can be given priority so long as certain conditions are met. These may include the condition for the power generation concessionaire (applying for access) to fund and build infrastructure already included in the PME.

The state is responsible for providing the public services of potable water, irrigation, sanitation, electrical power, telecommunications, roads and port and airport infrastructures. During the 2016-2025 period, the state will be responsible for ensuring that the power generated by all generation plants is transmitted to consumption centres for facilitating interconnection with neighbouring countries.

Government transmission policy

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

There are no specific measures by the government to encourage the expansion of the transmission grid. Nevertheless, grid expansion planning is continuously updated by ARCONEL.

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?

Within the first semester of each year, ARCONEL sets the costs of transmission services and other energy sector services to be applied in electricity transactions. These costs are used as the basis for determining rates for consumers or end users in the following year. In cases not expressly provided for in the relevant regulation, the rates approved for the year may be revised.

Based on the relevant study, ARCONEL may set rates that promote and encourage the development of basic industries, taking into consideration the effects of using renewable and environmentally friendly energies at competitive and stable prices, or subsidised, when necessary.

ARCONEL draws up the rate schedules, guided by the constitutional principles of solidarity, equity, coverage costs and energy efficiency. The same principles should also be followed in ad hoc regulations. The same rate should be applied across the nation, depending on consumption and voltage levels. In addition, the principles of social and environmental responsibility should be considered.

The cost of public and strategic electricity services should cover all associated costs for generating, transmitting, distributing and commercialising electricity, as well as for public lighting.

Entities responsible for grid reliability

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

ARCONEL, as the regulation and oversight agency of the electric power service, is responsible for issuing, and supervising compliance with, the regulation on opportunity, service quality and related rates. CENACE, the national electricity operator, is responsible for managing all transactions, while CELEC EP Transelectric is in charge of the maintenance and operation of lines.

Regulation of electricity utilities – distribution

Authorisation to construct and operate distribution networks

What authorisations are required to construct and operate distribution networks?

Electricity distribution companies and energy commercialisation companies are state-owned entities working under an enabling title (basic concession). They are regulated and overseen by ARCONEL and are the only companies entitled to build and operate distribution networks under an enabling title issued by ARCONEL.

Electricity distribution companies are responsible for selling electricity to end users. Energy commercialisation includes the purchase of blocks of electricity for sale to consumers or end users, as well as the entire commercial management associated with buying and selling transactions. Such management covers the installation of measurement systems and meters, as well as consumption-reading-based invoicing and collections. Electricity distribution and commercialisation companies have jurisdiction to exercise the enforced collection of receivables related to the provision of the public electricity service and the service of public lighting.

Any investments associated with the construction of distribution networks must be included in the PME to receive priority. Furthermore, specific works included in the distribution company’s yearly budget will get funding from the Ministry of Finance. When investments have not been ascribed priority, the relevant construction permits will not be granted. Construction permits are issued by ARCONEL, while other permits required for coordinating the construction are issued by the municipality with jurisdiction over the worksite.

Access to the distribution grid

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

In accordance with the constitutional principles of efficiency, responsibility, continuity, quality and fair prices, every user is entitled to the public service of electrical power. This right is granted when the user registers with a distribution company by signing an electricity supply contract.

Distribution companies engage solely in commercialisation and therefore interconnection with private direct energy suppliers is not presently available.

Government distribution network policy

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

The PME sets forth the general objectives, policies, strategies, management indicators and goals. For each one of the operational stages of generation, transmission and distribution, the PME includes plans, programmes and projects for expansion and improvement, indicating the required resources. It also contains the respective execution schedules.

Ever since the LOSPEE was issued, the management of distribution companies has focused on modernising distribution infrastructure, operations and services. In fact, electrical power service coverage has been on the rise since 2008. Nevertheless, the sector’s centralised structure has not allowed distribution companies to develop more competitive projects and plans to enhance service quality and reduce losses, as well as to expand coverage and commercial management. There are no specific taxation benefits to the activities related to electricity distribution beyond those granted to any new venture demonstrating investment in a private-public partnership.

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?

Within the first semester of each year, ARCONEL determines the distribution and commercialisation costs to be applied in electricity transactions and that will serve as the basis of applicable rates charged to consumers or end users for the subsequent year. In any case not expressly provided for in the relevant regulation, the rates approved for a certain year can be revised.

Based on a study, ARCONEL may set rates that promote and encourage the development of basic industries, taking into consideration the effect of the use of renewable and environmentally friendly energies at competitive and stable prices, or of subsidies, when necessary.

Public-sector electricity companies and public-private electricity joint ventures in charge of distribution have the right to the free use of roads, poles, ducts, sidewalks and similar infrastructure belonging to the state through any level of government (regional, provincial or municipal) or belonging to other public-sector entities exempted from paying taxes and contributions with respect to those assets.

Public-sector companies providing the public service of electricity and public-private companies have the right to build transmission lines and other electricity distribution and electricity service facilities within the limits of the terms and conditions of their enabling titles. These rights allow entry into and occupation of land, with adequate compensation for landowners.

When a right of way is established to cross third-party property, it will not constitute a prohibition for transferring the property, but rather an easement, unless the right of way makes the property unusable. In that case, the property would be declared eminent domain and the landowner should receive land damages. The Ministry may grant easements with regard to infrastructure for transmission lines and other electricity distribution and state-owned facilities for the electricity service.

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 approval for carrying out distribution activities and the legal basis for the sale of power to customers (commercial and domestic) is the enabling title granted by the Ministry for these specific activities. On the other hand, customers have to sign an electricity supply contract to be sold power.

Commercialisation activities are not separate from distribution activities and therefore there is no commercialisation market beyond the market for the activities carried out by distribution companies.

Power sales tariffs

Is there any tariff or other regulation regarding power sales?

The electricity tariff is the sole tariff applied across national territory and is defined by ARCONEL, guided by the principles of solidarity, equity, cost, coverage and energy efficiency, but also based on consumption patterns and voltage levels. Differentiated rates may be set for consumers as an exception. According to the Organic Code for Production (a law for attracting investments), contracts for investment in the electricity sector that are executed with the Republic of Ecuador must include a stable power purchase price clause or otherwise a programmed price revision clause.

Rates for wholesale of power

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

ARCONEL issues a regulation each year to determine the costs of generation, transmission, distribution, commercialisation and public lighting that will be applied the following year.

The rate of public electricity services must cover costs related to power generation, transmission, distribution and commercialisation, as well as the cost of the service of public lighting. It is important to note that Ecuadorian law does not recognise the existence of a wholesale power market and, therefore, does not provide specific rules to regulate it.

Public service obligations

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

Regulation of electricity transmission services

Pursuant to the LOSPEE, the following are the rights of consumers or end users and, consequently, the obligations of distribution companies:

  • to access the public electricity power service, in accordance with the constitutional principles of efficiency, responsibility, continuity, quality and fair prices;
  • to receive a commercial invoice based on actual consumption;
  • to file claims with the electricity company in case of a complaint about the public service received or values invoiced, as well as to receive a timely response thereto;
  • to be timely informed through any suitable means about works or actions that could trigger a suspension in the electric service;
  • to be timely informed of the rates to be applied based on actual consumption;
  • to receive equitable, non-discriminatory and non-abusive treatment in the provision of the public electric power service;
  • to have street lighting on public roads, depending on the relevant regulation;
  • to participate in public hearings held by the Ministry and ARCONEL; and,
  • to be compensated for damage caused by substandard quality in the public service.

Regulatory authorities

Policy setting

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

In Ecuador, the Ministry oversees the renewable energy policy and planning. Next in line is ARCONEL, which oversees the electricity sector.

The key players of the sector are the Minister, the ARCONEL Executive Director and the CELEC EP General Manager.

Based on the existing constitutional framework, all the aforementioned public servants are appointed directly or indirectly by the President of the Republic. The Executive Branch is therefore the most influential authority in defining the regulatory policy for the electricity sector and its operations.

Scope of authority

What is the scope of each regulator’s authority?

The regulators

The primary law sources are the Ecuadorian Constitution and the LOSPEE, which designates the Ministry as the highest authority in energy regulation. The Ministry has authority over ARCONEL.

The Ministry is the governing body in the Ecuadorian electricity and renewable energy sector. This entity is responsible for meeting the country’s electrical power needs by drafting relevant legislation, development plans and sector policies for the efficient use of natural resources.

The LOSPEE further provides that power generation or distribution companies can be managed and operated by foreign state-owned companies that have signed agreements with the Ecuadorian state.

The main functions of the Ministry include:

  • increasing the supply of electricity generation;
  • expanding the coverage of transmission infrastructure;
  • boosting efficiency to meet the electricity demand;
  • enhancing the efficiency of distribution companies;
  • improving the quality of the power service; and,
  • elevating the overall safe use of nuclear energy.

The Ministry can authorise public-sector companies, public-private joint ventures or state-owned entities, which are created under the Organic Law on Public Enterprises, to carry out generation, transmission, distribution and commercialisation activities; to import and export electricity; and, to provide the public lighting service. To engage in the aforementioned activities, authorised entities may enter into agreements or contracts for the procurement of goods, the execution of works or the provision of services, as deemed necessary. In most cases, the applicable framework for these contracts is the Public Procurement Law.

In contrast, the Ministry is responsible for processing and issuing operating permits and concession contracts.

There are different regulators for the other segments of the energy industry, each serving under the Ministry’s regime. These are:

  • ARCONEL, the technical administrative body responsible for exercising state power to regulate and oversee activities related to the public electricity service, as well as for safeguarding the interests of consumers or end users;
  • CENACE, the national electricity operator, a specialised technical body that protects the security and quality of operation of the national power system; and,
  • specialised institutions.

The main functions of ARCONEL can be summarised as follows:

  • regulates the technical, economic and operational aspects of the public service of electricity;
  • issues regulations for the power sector and for public-sector or private entities, as well as follows energy efficiency policies;
  • verifies compliance with regulations;
  • establishes the schedule of tariffs for the public lighting service;
  • performs operational planning for the short-, medium- and long-term supply of electricity, optimising transactions at the national and international levels;
  • manages and settles commercial transaction accounts among titleholders;
  • handles technical and international commercial electricity transactions;
  • plans and executes energy generation and transmission maintenance; and,
  • oversees and coordinates the supply and use of fuel for generating electricity.

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 regulator of the electric power sector is ARCONEL. Conceptually, the entity is not independent but rather is a part of the Executive Branch.

The process for obtaining such authorisations is initiated in a public selection procedure that allows the company that will develop the project under the most favourable conditions for national interests to be chosen. Energy requirements are also determined, and the process takes unregulated demand, terms, conditions and prices into account. The bidder selected under this public process has the right to be granted an authorisation certificate. In turn, the bidder is obliged to sign a contract based on the price submitted in the tender. Once obtained, the authorisation and any information relating to operating permits and concession contracts in the electricity sector must be registered with the National Register of Authorisation Certificates under the charge of the Ministry. It is the responsibility of electricity companies to record the authorisation certificate at their own expense, in accordance with the provisions laid down for that purpose in the general regulations of the law.

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?

Administrative complaints or disputes that may rise from any public administration activity for which no specific procedure is foreseen, are substantiated in an administrative procedure, in accordance with the Administrative Code. The special procedures for exercising sanctioning powers and ordering enforcement are regulated in this Code.

People have the right to access public services, to be informed in detail about the terms and conditions of the supply of such services and to file complaints regarding this matter. The following remedies are available: appeal and review appeal.

The highest administrative authority of the public administration office that issued the disputed act will rule on the remedy. Therefore, the remedy must be filed with the same authority that issued the administrative act in dispute. Then, the ruling by the highest administrative authority can be challenged only at the courts. The administration can overturn the administrative act ex officio by exercising its review power. The interested party may request that a declaration be issued to annul the administrative act by filing a claim or administrative appeal.

When an interested party believes that a subjective right to which he or she is entitled by law has been violated, such party can request that a declaration be issued to annul the administrative act, even if he or she was not a party in the prior administrative procedure.

The principles to be considered before making an appeal are:

  • only administrative acts can be challenged through administrative channels by interested parties, even when such parties did not participate in the relevant administrative procedure. Administrative acts are challenged by filing an appeal;
  • the review appeal can be used only with respect to an administrative act resulting from an administrative proceeding in the cases in which such remedy is available by law;
  • if decided to appeal an administrative act at the courts, administrative channels will no longer be available; and
  • any flaw in the appeal will not obstruct the processing thereof.

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?

The Ministry may declare the expiration of concession contracts when: a concessionaire transfers rights or enters into private contracts or agreements for the assignment of one or more of its rights without the authorisation of the Ministry of Electricity and Renewable Energy; or, the concessionaire transfers shares, membership ownership, certificates or other titles that imply a change in the shareholders of a private company or a company from the people’s and solidarity economic sector, without authorisation from the Ministry.

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 transfer of rights or private contracts, as well as the sale of stocks, shares, membership ownership or other securities involving a change in the shareholders of a private company or in a company from the people’s and solidarity economic sector acting as an energy sector concessionaire or agent, will require approval from the Ministry to be legally effective.

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?

The Ministry, ARCONEL and CENACE politically lead the activities in the power sector presently comprising the state-owned emporium wholly owned and governed by the Executive Branch. There are no applicable, specific anti-competitive rules for a sector in which private participation is allowed strictly on an exceptional basis.

Determination of anti-competitive conduct

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

Not applicable.

Preclusion and remedy of anti-competitive practices

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

Not applicable.

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 specific restrictions on acquisitions by foreign companies in the electric sector. Authorisation from the Ministry is required for any acquisition in companies that generate, transmit, distribute or sell energy.

Authorisation to construct and operate interconnectors

What authorisations are required to construct and operate interconnectors?

International interconnectors are subject to the planning of the state-owned CELEC EP business unit called Transelectric. Occasionally, Transelectric will form joint ventures with a cross-border entity that is authorised by the government of a neighbouring country to act as the counterpart in a joint endeavour.

Interconnector access and cross-border electricity supply

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

Premised on international treaties and regional regulations basically stemming from the legal framework of the Andean Community of Nations, Ecuadorian law allows international (regional) interconnectors to receive and dispatch energy, depending on availability and local consumer needs. Over the past 20 years, Ecuador has sold to and purchased energy from Colombia and Peru, though strictly on a sporadic basis.

No power purchase agreements have been signed between independent concessionaires and market agents from both markets to date.

Transactions between affiliates

Restrictions

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

Subject to the specific regulations of ARCONEL, power generators have the obligation to execute regulated contracts when: initiating purchase-sale relations with legal entities (private and public-private capital entities) engaged in distribution and commercialisation activities, in proportion to their regulated demand; and, dealing with large-scale consumers under bilateral contracts.

In the case a power generation facility is owned by a distribution company, the power produced by that facility will be delivered to all distribution companies in proportion to their demand in order to maintain the sole domestic rate.

Enforcement and sanctions

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

ARCONEL acts as the regulatory and oversight authority and therefore is entitled to enforce administrative orders and sanctions within the energy sector.

Update and trends

Update and trends

Are there any emerging trends or hot topics in electricity regulation in your jurisdiction?

Ecuador is facing the urgency of attracting financial international markets to invest in every possible infrastructure project whether new or previously built. The country is promoting and discussing new reforms to the energy efficiency regulation.