© todos los derechos reservados por interconexión eléctrica s.a. e.s.p cartagena de indias,...

© Todos los derechos reservados por Interconexión Eléctrica S.A. E.S.P

Cartagena de Indias, October 14&15th - 2003

The ColombianPower Market

Achievements and Achievements and ChallengesChallenges

APEx Colombia 2003 - The Colombian Power Market

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Contents

The Country The Reform The System The Operation The Market Colombian Market Challenges Regional Market Challenges

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The CountryThe Country


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Colombia is a country with large cities, and cultural diversity

Population (2003 P) 44.5 million

Size1.1 million square kilometers(Aprox. twice the size of France)

Cities over a million inhabitants

Bogotá, Medellín, Cali, Barranquilla

(8 cities over 500.000 inhabitants)

GDP, per capita US$ 1,881

Sources: EIA, IGAC, and Statistics and Planning Agencies of Colombia.

Economy7th economy in America and 5th economy in Latin America

Gross Domestic Product GDP

82.2 Thousand Million dollars


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Colombia has outstanding figures in the global context

Varieties of orchids (3.500) Emeralds producer Amphibious (583 species) Species of Birds (1815 species) Flowers exports Three-dimensional books Biggest open pit coal mine Most important gold museum Largest peace meeting (11 mill.)

11stst

Mulberries Species of butterflies (14.000) Agricultural exports to USA

22ndnd

Coffee producer Country in biodiversity Banana exports Lingerie exports

33rdrd

Water producer, 4500 micro basins and 1200 rivers

Species of mammals (456) Coal exports Nickel exports Palm oil

44thth


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Colombia is a country with abundant natural resources and outstanding personalities

Source: www.NationalGeographic.com

30% is Amazonic jungle The only South American country with

two oceans Longest coast over the Caribbean Sea Second in population in South America The Sierra Nevada is the tallest

coastal mountain (5.775 m) Nobel Prize Laureate García Márquez,

Artist F. Botero, sport stars JP Montoya and S. Botero, NASA scientist R. Llinás, Andrés Jaramillo Scientist, singers Shakira and Juanes, ...

Inventions Hakim valve, Iron Gas, babies Passmaker…

Cartagena has been awarded by UNESCO as World Cultural Heritage

Some Facts

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The ReformThe Reform


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In 1994 Congress approved aggressive changes that redefined the role of the Government, as well as the industry fundamentals.

PoliciesRegulationSurveillanceNon ownerJuly of 1994

Public Services Law

Electricity Law

BASIC OBJECTIVESBASIC OBJECTIVES

Changes in the Government role

ReliabilityQualityEfficient pricesCoverage

Improve

Promote Competence

Attract Private Investors


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The reform allowed the electricity sector to adapt to an economy market, according to Global Trends

National Interconnection

Constitutional Reform

El Niño 1992-1993Supply cuts

Act 142 - SSPPAct 143 - Electric

• Low Reliability• State Monopoly• Low private investment• Non-direct subsidies• State as Owner• Users paying costs of

inefficiency• All activities: Monopoly

BeforeBefore

• Reliable operation• Market (competition)• High private investment (USD $

7,000 Million)• Direct subsidies to Demand• State as Consolidate Regulator

and Policy Maker• Agents assume inefficiencies• Regulated natural monopolies

AfterAfterMarket Launch – July 20th 1995Market Launch – July 20th 1995

2000... 20031997 1998 19991994 1995 19961993199219911967...

El Niño 1997 - 1998No supply cuts

Attacks against national grid

Increase in Constraints

Decision CAN 536


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MarketMarketCoordinationCoordination

A comprehensive governance scheme was also completed.

ControlControl& Survillance& Survillance

SystemSystemOperationOperation

RegulationRegulation

PlanningPlanning

PoliciesPolicies

Ministry of Minning & Energy

Minning and EnergyPlanning Agency

National Regulatory Commission of Energy and Gas

National Operation Council

Utilities Superintendency

Advisory Trading Committee CACCAC

Presidency

Ministries M&E and Treassury

DNP

Ministry M&E

Presidency


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The industry was unblunded into regulated monopolies and activities under competition.

DISTRIBUTION

GENERATION

CUSTOMERS

TRANSMISSION

TRADING

OPERATION

ADMINISTRATION

International Electricity Transactions (TIE)

Wholesale Energy Market

NationalDispatchCentre


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The generation market counts with competitive mandatory pool and bilateral financial contracts.

COMPETITIVE MARKET

END USERS

(Freedom for choosing traders and contracting)

WHOLESALE MARKET

(Only the utilities and other agents authorized by article 15 of the Act 142/94)

LONG TERM(Financial Contracts)

SHORT TERM(Pool)


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Incentive payment for long-term reliability

Regulated income

Based on availability

Service Quality(Short-term

balance, Frecuency)

The market also includes other commercial transactions, which complement both the pool and the long-term bilateral contracts.

ELECTRICITY MARKETELECTRICITY MARKET

Generation Control Market,

Penalties forDeviations

Capacity Charge

National and Regional Grids

Payment based on cost

Security generation

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The Electrical SystemThe Electrical System


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A system able to supply the demand with efficient and reliable conditions

44.8 TWh/yearEnergy Demand (2002)

13.3

8.1

5.2

Installed Capacity [GW]

Reserve[GW]

Peak Demand [GW]

10,725 kmTransmission 220-230 kV

1,449 kmTransmission 500 kV

621 MWInternational Interconnections Capacity


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… even under critical situations like the El Niño drought of 1997-1998

Evolution of the Efective Capacity of Generation [GW]

0

24

6

8

1012

14

16

1995 1996 1997 1998 1999 2000 2001 2002 2003

Hydro Thermal

Evolution of the Number of Generation Plants

0

2040

6080

100120

140

1995 1996 1997 1998 1999 2000 2001 2002 2003

Hydro: 24 plants Thermal Units: 103 plants

Hydro (65%)Hydro (65%)

Thermal (35%)

Thermal (35%)


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Investors have been attracted to do businesses within the market scheme.

Evolution

8 8

2518

14

5

31

3

6

11

21

3

0

20

40

60

80

Trading Generation Transmission Distribution

Both

Private

Public

2426

28 2831 31 32

10 10 11 12 12 11 11 11

0

5

10

15

20

25

30

35

1995 1996 1997 1998 1999 2000 2001 2002

DISTRIBUTORS TRANSMISORS

3440

45

55 55

6457 58

17 1923

29 26

35 3338

0

10

20

30

40

50

60

70

1995 1996 1997 1998 1999 2000 2001 2002

TRADERS GENERATORS

In 2003

66

44

32

11


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Until 1998, there were 50 years of continuous growth in the electricity demand. From 2000, the growth has restarted.

40

60

80

100

120

140

01

-19

80

01

-19

83

01

-19

86

01

-19

89

01

-19

92

01

-19

95

01

-19

98

01

-20

01

GWh/day

8 Millon of End Users


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-6

-4

-2

0

2

4

6

8

19

50

19

53

19

56

19

59

19

62

19

65

19

68

19

71

19

74

19

77

19

80

19

83

19

86

19

89

19

92

19

95

19

98

20

01

The electricity demand is highly correlated with economic growth (92% correlation factor between 1995 and 2003).

Year growth rates 1950-2003


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The electricity demand is highly correlated with economic growth (92% correlation factor between 1995 and 2003).

Quarterly growth rates 1995-2003

-8

-6

-4

-2

0

2

4

6

8

10

03

-19

95

09

-19

95

03

-19

96

09

-19

96

03

-19

97

09

-19

97

03

-19

98

09

-19

98

03

-19

99

09

-19

99

03

-20

00

09

-20

00

03

-20

01

09

-20

01

03

-20

02

09

-20

02

03

-20

03

GDP DEMAND

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The OperationThe Operation


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However, the transmission grid has suffered many terrorist attacks since 1999 (1,726)

9 2 15

1 10 3

0

22

1 5 0 17 5

3

24

4

45

4

28

2

26

3

8

38

48

3

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

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19

98

19

99

20

00

20

01

20

02

20

03

Number of Number of Attacks against the high voltage National Grid SystemAttacks against the high voltage National Grid System


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Despite the attacks, no overall blackouts have affected the country, only 0.1% of the National Demand has been rationed by this cause.

Non-served demand as a percentage of the annual electricity demand

0.10%0.07%

0.12% 0.11%

0.19%

0.13%

0.28%

0.22%

0.0%

0.1%

0.2%

0.3%

0.4%

0.5%

2000 2001 2002 2003

Other causes

Terrorism

Terrorism

0.29

0.40

0.20

0.33


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Frequency Deviations

One Each Sixty Days

0

1

2

3

4

Ene

-96

May

-96

Sep

-96

Ene

-97

May

-97

Sep

-97

Ene

-98

May

-98

Sep

-98

Ene

-99

May

-99

Sep

-99

Ene

-00

May

-00

Sep

-00

Ene

-01

May

-01

Sep

-01

Ene

-02

May

-02

Sep

-02

Ene

-03

May

-03

Sep

-03

Promedio mensual Acumulado anual Meta anual

Resolución 080 de 1999



No

. Var

. po

r m

es

Meta 2003: 0.0164 var/mes


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Indicadores de la OperaciónN

° d

e ve

ces

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

Ene

02

Feb

02

Mar

02

Abr

02

May

02

Jun

02

Jul 0

2

Ago

02

Sep

02

Oct

02

Nov

02

Dic

02

Ene

03

Feb

03

Mar

03

Abr

03

May

03

Jun

03

Jul 0

3

Ago

03

Sep

03

@Mensual @Acumulado @Meta

MáximoAcumuladoMensual

MensualMeta

Meta

One Each Six Days

Voltage Deviations

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The MarketThe Market


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Market transactions (pool + contracts) in September reached 137% of total demand, showing increasing liquidity.

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

10

-19

95

04

-19

96

10

-19

96

04

-19

97

10

-19

97

04

-19

98

10

-19

98

04

-19

99

10

-19

99

04

-20

00

10

-20

00

04

-20

01

10

-20

01

04

-20

02

10

-20

02

04

-20

03

Pe

rce

nta

ge

of t

he

De

ma

nd

Pool

Contracts

Hedging

2827

23252424

17

8

13

0

5

10

15

20

25

30

1995 1996 1997 1998 1999 2000 2001 2002 2003#

Typ

es o

f Con

trac

ts


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Wholesale transactions in 2002 reached nearly US$ 2,500 Million

0

50

100

150

200

250

300

350E

ne

-97

Jul-

97

En

e-9

8

Jul-

98

En

e-9

9

Jul-

99

En

e-0

0

Jul-

00

En

e-0

1

Jul-

01

En

e-0

2

Jul-

02

En

e-0

3

Jul-

03

US

$ M

illio

ns

Long Term Contracts FAERFazni Payments to the gridServices Pool PurchasesDeviations Payments per CapacityConstraints AGCFinancial Surplus (Congestion Protifs)

Long Term Contracts

Payments to the grid

Pool Purchases

Capacity Payments

Constraints


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Currently, more than 30% of the demand is traded between suppliers and Non-Regulated Consumers, under the free market

0

500

1.000

1.500

2.000

2.500

3.000

3.500

4.0001

0-1

99

5

10

-19

96

10

-19

97

10

-19

98

10

-19

99

10

-20

00

10

-20

01

10

-20

02

# users

Freedom for choosing supplier. Prices and conditions negotiated with supplier.

1 MW 0.5 MW or 270 MWh/mes

0.1 MW or 55 MWh/mes


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Regulated Users have also switched from the incumbent supplier: more than 2,500 (~2% total demand) new frontiers of aggregated users have registered to the market.

0

500

1.000

1.500

2.000

2.500

3.000

10

-19

95

10

-19

96

10

-19

97

10

-19

98

10

-19

99

10

-20

00

10

-20

01

10

-20

02

# Frontiers of Agregated

Users

Regulated formula. However, freedom for choosing supplier with some limitations.


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Pool price reflects market conditions. Contract prices have allowed pool price volatility hedging.

0

20

40

60

80

100

120

07

-19

95

01

-19

96

07

-19

96

01

-19

97

07

-19

97

01

-19

98

07

-19

98

01

-19

99

07

-19

99

01

-20

00

07

-20

00

01

-20

01

07

-20

01

01

-20

02

07

-20

02

01

-20

03

07

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03

Contracts PoolUSmills$/kWh


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In 5 years, the tariff for regulated consumers reflects the benefits of competition in the market.

6

7

8

9

10

11

12

01-1

998

04-1

998

07-1

998

10-1

998

01-1

999

04-1

999

07-1

999

10-1

999

01-2

000

04-2

000

07-2

000

10-2

000

01-2

001

04-2

001

07-2

001

10-2

001

01-2

002

04-2

002

07-2

002

10-2

002

01-2

003

04-2

003

07-2

003

US

D c

ents

/kW

h

Average tariff for Regulated Consumers


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Compared to other Latin American Countries, Colombia shows the lowest non-subsidized tariffs for end consumers.

Tariff for end-consumers (Dec. 2000)

0

6

12

Bra

sil

Arg

entin

a

Per

ú

Chi

le

Méx

ico

Col

ombi

a

US

cen

t / k

Wh

Planning National Department

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Colombian Market Colombian Market ChallengesChallenges


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Market Challenges

Implementing Financial Derivatives

Fast recovering of damaged Transmission

Network maintaining market conditions


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Market Challenges

Maintain a competitive market that supports

the country economic growth

Power Sector development by balancing:

Market Economy and

Social Policies

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Regional Market Regional Market ChallengesChallenges


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Ecuador-Colombia

Ecuador and Colombia Markets have been

operating totally coordinated since March

2003. Transactions have risen more than

50 million dollars. That represent around

10 percent of the Ecuadorian demand and

4 percent of Colombian demand.


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Market Challenges

Increase Market Integration with Neighbour Countries:

Consolidate the Andean Electricity Market Harmonizing regulation and implement coordinated

operation and commercial transactions between Venezuela and Colombia (2004)

Interconnection and TIE Peru-Ecuador (2004) Implementing Bilateral Contracts for International

trading Bolivia-Peru Interconnection studies (2004)

Linking integrated markets of CAN and SIEPAC Interconnection Panama-Colombia (2007-2008)

MERCOSUR


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Where we want to go?

22

33

11Andean Market

Central American Market (SIEPAC)

MERCOSUR Market

Latin American Market


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COLOMBIAA leading power market in a

country full of opportunities

COLOMBIAA leading power market in a

country full of opportunities

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