A matter of public policy, regulation and economic decisions of the energy distribution agents, plus a proposed solution.

It is difficult for ordinary citizens who have access to permanent electricity to understand and measure the cost of not enjoying this service, but those who do not have it, feel the world on their shoulders.

The lack of access to energy is a barrier to the progress of families, it becomes an irony and conflict situation, when near the populations there is electrical infrastructure, a high voltage transmission line or there is a generation plant and access to energy is not possible for the neighbors, a matter that deserves attention for the electricity sector of Guatemala; It is the equivalent of having a highway near our homes and not being able to use it for our personal transportation, or having a large produce market near our homes but not being able to buy or sell there, isolating us from the connection to the world and the benefits of the shared infrastructure developed, in theory, for the common good.

This article is developed to collaborate with the identification of solutions for rural electrification investments that provide access to energy.

Where does the phenomenon originate?

The traditional explanation in Guatemala is that any company, or energy transmission or generation companies do not have the possibility of distributing energy to end users in accordance with the law; likewise, the General Electricity Law -LGE- does not oblige companies that provide distribution services to install distribution networks in homes located more than 200 meters from the existing network, in addition to the fact that the expansion of networks for rural electrification must be subsidized in some way due to their location, are, among others, the existing justifications for not installing such networks.

The companies that by business initiative and with state authorization, manage distribution, decide that it is not profitable to expand the networks to certain communities based on an economic and legal analysis, contrasting the costs they will incur, versus the income they would have according to the opportunities, obligations and rights provided by the current regulation, and of course, they do not internalize the social cost that represents the lack of access to energy.

Some points to connect:

There is implicitly a shared responsibility between the agents of the electricity distribution market and those institutions that define and execute the public policy of access to energy for the population; also implicitly resulting in a proposed solution, better execution of public policies and the coherent reaction of the companies dedicated to this area.

One piece of news – evolving – in recent months, which gives a breath of fresh air to the situation, is that regulatory instruments have emerged that give light to indicate that traditionally known barriers to energy access can be overcome.

There are regulatory instruments issued by the National Electric Energy Commission -CNEE- that facilitate the achievement of rural electrification projects and their recognition in the electricity tariffs, being a regulatory mechanism established in the Regulations of the General Electricity Law -RLGE- that allows the expansion of transmission networks through bids, and the precedent set by the Ministry of Energy and Mines – MEM- in the National Transportation Expansion Plan – PETNAC-, confirms this.

With evidence that bidding works harmoniously with regulation, a mechanism along the same lines can be determined to find the efficient costs to be paid by users of the transmission system, which could be extended to distribution.

On the other hand, considering that the means must lead to the ends, it is important to bear in mind that the expansion of the transmission grid, and particularly PETNAC’s objective is also to promote rural electrification, and it is expected that MEM’s subsequent actions in terms of infrastructure development will be congruent to effectively achieve this objective, in order to strengthen this pending link in the chain.

Given that the latter is not being developed due to the apparent unrealistic level of efficient costs recognized by the CNEE to fix the payment in the tariff to distributors, it is proposed that these costs could be known and fixed through public bidding mechanisms for rural electrification works – similar to what is established for transmission works -.


Read the second part:

light bulbs

What is the current framework for grid expansion?

The current Distribution model recognizes for revenues “the costs of supply, according to the structure of an efficient company[1]”, the theory behind them is to provide economic signals of cost recognition to bring it closer to what an efficient company would do…