GUIA_LEGAL_CHAPTER-9_COLOMBIAN ELECTRICITY (1).pdf

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This document reflects the valid Colombian
legislation at the date of its development and it seeks
to provide general and basic information of the
Colombian law. This message does not represent or
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COLOMBIAN
ELECTRICITY
MARKET
Address:
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Chapter 9
9.1. Electricity as a
public utility
The regime for the provision of public electric power
services in Colombia is generally developed in the
Political Constitution of 1991 and Laws 142 and
143 of 1994.
COLOMBIAN
ELECTRICITY
MARKET
The generation, distribution, transmission, and commer-
cialization of electric energy are domiciliary public
services or activities complementary to the domiciliary
public service of electric energy. Therefore, the legal
regime applicable in its entirety is this special regime.
One of the fundamental pillars of the scheme for provi-
ding public services is freedom of enterprise. Public,
private or mixed agents (public and private capital) have
the right to organize and operate companies whose
purpose is the provision of a public service or one of its
complementary activities. Article 15.1 of Law 142 of
1994 incorporates the legal figure of "Empresa de Servi-
cios Públicos" (E.S.P. for its acronym in Spanish) as one
of the persons authorized to provide public services in the
national territory.
The E.S.P. may be Official, Mixed or Private depending
on the participation of private or state origin in its capital
stock, but they have the similarity of developing their
activity in competition (to the extent that each specific
activity allows it) and contracting under the provisions of
private law. The incorporation of an E.S.P. or the modifi-
cation of an existing company to become an E.S.P. does
not require prior authorization from any authority, and, in
that sense, the process of incorporation or modification to
an E.S.P. will have to follow the process of any other type
of commercial company.
9.2. Institutions of the electricity sector
The electricity sector is mainly comprised of the following
authorities:
9.2.1. Ministry of Mines and Energy
(MME)
Among the functions of the Ministry of Mines and Energy
(MME for its acronym in Spanish), in relation to public
utilities, are the following:
(i) Establish the technical requirements to be met by the
companies.
(ii) Elaborate a plan for the expansion of the coverage
of the public service to be supervised by the Ministry
at least every five years.
(iii) Identify the amount of subsidies that the Nation
should provide for the respective public service.
(iv) Gather information on new technologies and
management systems in the sector.
(v) To promote, under the direction of the President of
the Republic and in coordination with the Ministry of
Foreign Affairs, international negotiations related to
the relevant public service.
(vi) Develop and maintain an adequate sectoral
information system for the use of the authorities and
the general public.
02

9.2.2. Mining-Energy Planning Unit
(UPME)
Organized as a Special Administrative Unit attached to the
Ministry of Mines and Energy, the functions of the UPME (for its
acronym in Spanish) include establishing the energy
requirements of the country's population and economic agents,
based on demand projections that take into account the most
likely evolution of demographic and economic variables and
energy resource prices, issuing tax incentive certificates in
accordance with Law 1715 of 2014 and its amendments, and
preparing the National Energy Plan and the Electricity Sector
Expansion Plan, in accordance with the draft National
Development Plan, among other functions.
9.2.3. Energy and Gas Regulatory
Commission (CREG)
Organized as a Special Administrative Unit of the Ministry of
Mines and Energy, the CREG (for its acronym in Spanish) is
composed by the Minister of Mines and Energy, who
presides it, the Minister of Finance and Public Credit, the
Director of the National Planning Department (DNP for its
acronym in Spanish), six full-time experts1
in energy matters
(appointed by the President of the Republic for four-year
terms) and the Superintendent of Residential Public Utilities,
with voice but no vote.
9.2.4. Superintendency of Residential
Public Utilities (SSPD)
The SSPD (for its acronym in Spanish) is a technical body,
attached to the National Planning Department (DNP),
with legal personality, administrative and patrimonial
autonomy It performs specific control and surveillance
functions independently of the Service Commissions and
with the immediate collaboration of the delegated
superintendents. The superintendent and his delegates
are freely appointed and removed by the President of the
Republic.
9.2.5. Trade Exchange System
Administrator (ASIC)
The ASIC (for its acronym in Spanish) is the unit
responsible for the registration of long-term energy
contracts, settlement, billing, collection and payment of
the value of energy acts or contracts on the exchange by
generators and traders, maintenance of the required
information systems and computer programs, and
performance of the tasks necessary for the proper
functioning of the Trading Exchange System.
9.2.6. Liquidator and Account Manager
Entity in charge of settling and billing the charges for the
use of the National Interconnected System (SIN for its
acronym in Spanish) networks, determining the regulated
income to the transporters and managing the accounts for
the use of the networks caused to the agents of the
wholesale market, in accordance with the regulations in
force.
9.2.7. National Dispatch Center (CND)
It is the authority in charge of planning, supervision and
control of the integrated operation of the generation,
interconnection and transmission resources of the
National Interconnected System (SIN). It is also in charge
of giving instructions to the regional dispatch centers to
coordinate the maneuvers of the facilities to have a safe
and reliable operation, in accordance with the operation
regulations and all the agreements of the National
Operation Council.
9.2.8. National Operating Council (CNO)
The main function of this body, (the CNO for its acronym
in Spanish) is to agree on the technical aspects to
guarantee that the integrated operation of the National
Interconnected System (SIN) is safe, reliable and
economic, and to be the executing body of the operating
regulations. The decisions of the National Operation
Council may be appealed before the Energy and Gas
Regulation Commission (CREG).
9.3. Electric power production chain.
The energy supply chain is composed of the following
activities, namely:
9.3.1. Generation.
Generation is the first link in the energy supply chain
through which energy sources are transformed; in
Colombia, the most common is the generation of
hydraulic energy and there is also evidence of the use of
thermal energy (gas, coal and liquid fuels). Currently,
and due to the used investment mechanisms, incentives
and tax benefits, non-conventional sources have had a
technological and information advance which allows the
entry of new projects and works aimed at generating with
non-conventional renewable energy sources, such as
photovoltaic and wind power.
Additionally, there are no entry barriers for agents whose
quality may vary, i.e., there are generators,
self-generators or co-generators and recently, the
collective self-generator under the legal framework of
energy communities, thus allowing free competition for all
those public, mixed or private entities that wish to enter
the market; on the other hand, they have the opportunity
1
Resolución 105 0003 de 2023 CREG aprobada por Decreto 1573 de 2023 del Ministerio de Minas y Energía.
03

to set the prices to be offered since, although they are
regulated by the CREG, there is no impediment for the
negotiation and placement of the cost of the energy
generation service; however, there are standard systems
to establish the monetary measurements.
9.3.2. Transmission.
Continuing the procedure or supply chain, the second
step or link in the chain of energy service provision is
transmission; this activity is understood as the
transportation or conduction of the electric energy that
comes from the generation plants. In Colombia we find
this process through the National Transmission System
(STN for its acronym in Spanish) which is regulated by the
CREG. This activity is part of a natural monopoly
which is admitted in the Colombian legislation. The
expansion of this system is made through public calls for
tenders administered by the UPME and the income of the
link is given through the charge for the use of
transmission networks that is paid through the tariff for all
users (regulated and non-regulated) connected to the
National Interconnected System (SIN), as defined by the
CREG.
The National Transmission System (STN) is comprised of
the substations, pylons and cables required to transport
electric power, taking into account the respective voltage
levels, which range between 220kV and 500kV.
9.3.3. Distribution.
The third point or link in the supply chain corresponds to
the distribution of energy, which is distributed from the
consumption centers to the final consumer; the size of
these facilities is smaller than those found in the National
Transmission System (STN), since they are part of the
regional lines which are called Regional Transmission
Systems (STR for its acronym in Spanish) and Local
Distribution Systems (SDL for its acronym in Spanish). This
link is also considered as a natural monopoly, since users
cannot decide or choose the individual transmission or
distribution agent to meet the energy demand acquired.
9.3.4. Commercialization.
The commercialization activity is at the fourth level of the
supply chain and is part of a system of purchase and sale
of electricity mediated by the wholesale market (long or
term contracts and transactions in the Energy Exchange)
or the sale of the product to operations carried out in the
same market or to end users.
In this sense, it is understood that end users (regulated
and non-regulated) have a relationship with the distribu-
tor who is responsible for the quality and availability of
the network connected to the service and, on the other
hand, users have a relationship with the marketer who
will oversee measuring, billing and charging for the
service to users.
It is important to mention that Law 1955 of 2019, through
which the National Development Plan 2018-2022 "Pact
for Colombia, Pact for Equity" is issued, determined in its
Article 290 the obligation of the CREG to issue regula-
tions to ensure the efficient provision of public services, to
promote competition, prevent abuses of dominant
position and guarantee the rights of users, within the
regulation of fuel gas, electricity and public lighting
services.
Likewise, it should be noted that the energy market has an
Administrator of the Trading Exchange System (ASIC) of
the company XM, who is in charge of:
(i) Register the boundaries, i.e., the energy consumption
measurement systems, their location and their representative.
(ii) Register the contracts entered into between the agents.
(iii) Settle and invoice the resulting energy exchanges between
the market's generating and trading agents, who sell and
buy in the energy exchange.
(iv) Collect the proceeds from stock exchange transactions and
International Electricity Transactions.
(v) Settle, collect and distribute the money from the charges for
the use of the national and regional transmission systems
among the transmitting agents and distributors owners of
such networks. This activity is carried out by XM through the
Liquidator and Administrator of Accounts for Use of the
National and Regional Transmission Systems (LAC for its
acronym in Spanish).
Finally, the Commercial Exchange System (SIC for its
acronym in Spanish) is the set of rules and procedures
established in the operating regulations that define the
obligations and credits of generators, traders, and
transporters for energy acts or contracts in the exchange
according to the central dispatch.
The SIC includes the settlement process of the value of the
exchanges, the preparation and updating of the statement of
account of each generator, transporter, and trader
participating in the Energy Exchange, the invoicing,
payment, and collection of the value of the transactions
made in the same exchange.
All agents (generators and marketers) must register as agents
with the market and provide guarantees or adjust them if
necessary. The purpose of these guarantees is to ensure
compliance with the obligations arising from the Wholesale
Energy Market (MEM for its acronym in Spanish) agents,
corresponding to energy transactions in the exchange,
reconciliations, complementary services, charges for the use
of the National Transmission System, services and, in
general, for any concept invoiced by XM in its capacity as
ASIC and LAC. Additionally, guarantees to cover charges
for use of the STR and SDL are also contemplated.
04

9.4. Electricity tariffs
In order to determine the tariff formulas for the provision
of electric energy services, Law 142 of 1994 establishes
that the rules on the tariff regime of public utility
companies provided for in this law, the rules of the Code
of Administrative Procedure and Contentious
Administrative Matters (CPACA for its acronym in
Spanish), and the following special rules shall be
applied:
(i) CREG's executive coordination will drive all actions
for its determination.
(ii) If the action is initiated ex officio, the commission must
have sufficient studies to define the formula in question; if
it is initiated at the request of a utility company, the
applicant must accompany such studies.
The rate formulas shall be in effect for five years unless
prior agreement is reached between the public utility and
the commission to modify or extend them for an equal
period. Once the period of validity of the tariff formulas
has expired, they will continue to be in force until the
commission establishes new ones.
Exceptionally, these formulas may be modified at any
time, ex officio or at the request of a party, when it is
evident that serious errors were made in their calculation,
that the interests of the users or of the company are
unfairly harmed, or that there have been reasons of
fortuitous event or force majeure that seriously
compromise the financial capacity of the company to
continue providing the service under the tariff conditions
foreseen.
The rates of the public utility service for household
electricity reflect the application of the principles of
solidarity and income redistribution established in Law
142 of 1994, regarding the Unit Cost of Service
Provision (CU) and are established in Resolution CREG
079 of 1997. The unit cost of service provision (CU) is the
efficient economic cost of providing the service to the final
regulated user, expressed in pesos per kilowatt-hour
($/kWh) and in pesos per bill resulting from applying the
established general tariff formula, and corresponds to the
sum of the efficient costs of each of the activities in the
electricity chain.
The activities in the electricity chain are Generation,
Distribution, Transmission, Commercialization, Losses,
and Restrictions2
.
Indeed, the cost of service or unit cost (CU) can
be expressed in the following formula:
CU= G + T + D + Cv + PR + R
CUv = Variable component of the unit cost of service
provision.
G = Represents the cost of purchasing energy by the
retailer and represents the cost of energy production,
regardless of where it is generated.
T = Represents the value paid for the transportation of
energy from the generation plants to the regional
transmission networks (STN).
D = Represents the value paid for transporting energy
from the substations of the National Transmission System
to the end user (STR and SDL).
Cv = Represents the remuneration for the margin of
marketing energy and includes the variable costs of the
marketing activity, associated with user services such as
billing, reading, customer service, claims, etc.
PR = Costs of energy losses, transportation, and
their reduction.
R = Costs for restrictions and services associated with
generation.
Additionally, when companies bill for energy consumption,
besides calculating the Unit Cost of Service Provision (CU),
they must also consider subsidies and contributions, applying
the principle of solidarity and income redistribution. This
implies that users from strata 5 and 6, as well as industrial
and commercial users, must assist users from strata 1, 2, and
3 in paying for services that cover their basic needs. In
legislation, the subsidy for strata 1 and 2 is up to 60% and
50%, respectively, of subsistence consumption, and 15% for
stratum 3. Stratum 4 users do not pay contributions nor are
they subject to subsidies. Hence, the tariff applied to these
users equals the Unit Cost CU.
Furthermore, it is worth adding that, in accordance with
paragraph 1 of article 290 of Law 1955 of 2019, CREG
has the authority to modify tariff formulas during their validity
when strictly necessary and motivated by the inclusion of
new agents, activities, or technologies, complying with the
criteria established in said article for the implementation of
regulation.
2
CREG Resolution 105 0003 of 2023 approved by Decree 1573 of 2023 of the Ministry of Mines and Energy.
05

9.5. The National Interconnected System
(SIN) and the Non-Interconnected Zones
(ZNI)
9.5.1. SIN
According to our legal system, the SIN is the system
composed of generation plants and equipment, the
interconnection network, the regional and interregional
transmission networks, the distribution networks, and the
electrical loads of users connected to each other.
9.5.2. ZNI
As established by Law 855 of 2003, the
Non-Interconnected Zones - NIZ (ZNI for its acronym in
Spanish) in Colombia are those areas of the country, such
as municipalities, townships, localities, and villages that
are not connected to the National Interconnected System
(SIN), and therefore, must obtain electricity through
independent systems.
The provision of electric energy services in the ZNI must
guarantee the continuity, quality and security of supply,
and the cost of the service must be fair and equitable for
users. The CREG is responsible for issuing the regulation
that guarantees the provision of electric power service in
the ZNI.
The regulation establishes a series of incentives for
investment in electric power generation projects in NIZs,
in order to promote the expansion of electricity coverage
and improve the living conditions of the communities that
live in them. Among these benefits, the regulation
provides for the possibility of accessing credits and
resources, including those collected through the Financial
Support Fund for the Energization of Non-Interconnected
Zones (FAZNI for its acronym in Spanish).
9.6. NON-CONVENTIONAL ENERGY
SOURCES (FNCE).
9.6.1. Regulatory framework.
In order to clarify the scope of the regulation of Non-Con-
ventional Renewable Energy Sources (FNCE for its acron-
ym in Spanish) within the current energy system, it is
necessary to take into account the purposes and objecti-
ves of the following laws, decrees and resolutions:
Law 1715, 2014 : Whereby the integration of
non-conventional renewable energies to the National
Energy System is regulated.
Decree 2469, 2014: Whereby energy policy
guidelines are established regarding the delivery of
self-generation surpluses.
Decree 2492, 2014: Whereby provisions are
adopted regarding the implementation of demand
response mechanisms.
Decree 1623, 2015: Whereby Decree 1073 of
2015 is amended and added, regarding the establishment
of policy guidelines for the expansion of electric power
service coverage in the National Interconnected System
and Non- Interconnected Zones.
Decree 2143, 2015: Whereby the Sole
Regulatory Decree of the Administrative Sector of Mines
and Energy, 1073 of 2015, is added in relation to the
definition of the guidelines for the application of the tax
incentives established in Chapter III of Law 1715 of
2014.
Decree 1476, 2022: By which provisions
aimed at promoting innovation, research, production,
storage, distribution, and use of hydrogen are
adopted.
Decree 1318 de 2022: By which Decree 1073 of
2015, the Single Regulatory Decree of the Administrative
Mining and Energy Sector, is added in order to regulate
articles 21 and 21-1 of Law 1715 of 2014 regarding the
development of activities aimed at generating electricity
through geothermal energy.
Decree 895 de 2022: By which Articles 11,
12, 13, and 14 of Law 1715 of 2014, among other
provisions, are regulated regarding tax incentives.
Decree 1537 de 2022: By which articles 36 of
Law 2099 of 2021 and 30 of Law 2169 of 2021 are
regulated regarding the administrative act of
declaring the public utility and social interest of
projects for the generation, transmission, and
distribution of electricity, as well as projects and/or
execution of works for the production and storage of
green hydrogen.
Decree 1580 de 2022: In relation to the Unique
Fund of Energy Solutions, FONENERGÍA, and other
provisions are dictated.
06

Resolution Ministry of Environment and
Sustainable Development No. 1312 of
August 11, 2016: By which the terms of reference for
the preparation of the Environmental Impact Study - EIA,
required for the environmental license process of projects
using continental wind energy sources, are adopted, and
other determinations are made.
Resolution UPME 319 of 2022 (Added by
Resolutions 504 and 610 UPME of 2023):
By which the requirements and procedure for the
evaluation of requests for evaluation and issuance of
certificates that allow access to tax incentives of Law
1715 of 2014 are established.
Law 1955, 2019: By which the National Development
Plan 2018 - 2022 is issued. "Pact for Colombia, Pact for
Equity".
Law 2099 of 2021: By means of which provisions
are issued for the energy transition, the dynamization of the
energy market, the economic reactivation of the country, and
other provisions.
Resolution CREG 101 006 of 2023: By which the
methodology for determining firm energy for the reliability
charge of wind plants is defined.
Resolution CREG 101 007 of 2023: By which the
methodology for determining firm energy for the reliability
charge of photovoltaic solar plants is defined.
Resolution DIMAR No. 0047 of 2023: Fixing
technical criteria and procedure for granting concessions in
projects for the development and/or construction of
infrastructure for the generation of non-conventional
renewable energy sources - FNCER to be carried out within
the jurisdiction of the General Maritime Directorate - DIMAR.
Decree 0929 of 2023 Ministry of Mines and
Energy: Policies and guidelines are established to
promote efficiency and competitiveness in the public utility
service of household electricity.
Law 2294 of 2023: "National Development Plan
2022-2026 "Colombia, World Power of Life".
Decree 2236 de 2023: Partially regulates article
235 of Law 2294 of 2023 of the National Development
Plan 2022-2026 regarding Energy Communities within the
framework of Just Energy Transition in Colombia.
Decree 2235 de 2023: Regulates article 235 of Law
2294 of 2023 regarding the development of White
Hydrogen projects within the framework of Just Energy
Transition in Colombia.
9.7. Principal milestones for the
development of FNCE and FNCER
generation projects in Colombia.
9.7.1. In property matters.
Securing the land where both the project and the power
evacuation line will be located requires the project developer
to carry out multiple activities in order to evaluate the techni-
cal and legal feasibility of the land, as well as the negotiation
of its use by the owners, or, as the case may be, the use of
the different legal figures available to the developer under
the type of activity it carries out.
As activities to be carried out by the developer for the optimal
securing of the land, the following are highlighted: The
preparation of a Title Study, determination of the useful area
of the property eliminating constructions, restrictions,
easements, and subscription of land use contracts. Accor-
ding to the modalities used in Colombia and the constitution
of electric power easements, among others.
9.7.2. In environmental matters
The environmental license is the mechanism through
which the competent environmental authority approves
the execution of works, projects or activities that may
cause serious deterioration of renewable natural resour-
ces, as well as the environment, or introduce considera-
ble modifications to the landscape.
In the electricity sector, the National Environmental
Licensing Authority (ANLA for its acronym in Spani-
sh) is competent to grant environmental licenses for: (i)
Construction and operation of electric power generating
plants with an installed capacity equal to or greater than
100 MW; (ii) Projects for the exploration and use of
alternative energy sources that are virtually polluting with
an installed capacity equal to or greater than 100 MW;
(iii) Laying of transmission lines in the STN, consisting of
lines and corresponding substations with voltages equal
to or greater than 220kv and; (iv) Nuclear power genera-
tion projects.
In turn, the Regional Autonomous Corporations (CARs for
its acronym in Spanish) are competent to grant environ-
mental licenses in the following cases: (i) Construction
and operation of electric power generating plants with
capacity greater than or equal to 10 MW and less than
100 MW; (ii) Laying of transmission lines in the STN,
consisting of lines and corresponding substations with
voltages between 50kv and less than to 220kv; (iii) Cons-
truction and operation of power plants generating energy
from water resources with a capacity of less than 100
MW, except for small hydroelectric plants operating in
the ZNI with a capacity of less than 10 MW and; (iv)
Projects for the exploration and use of alternative energy
07

3
Projects for the connection of end users to the STN or STR, and projects for the connection of generation, cogeneration, or self-generation to the SIN
different from the projects under the scope of Resolution CREG 030 of 2018, or the one that modifies, adds or replaces it. Modifications requested to the
already allocated capacities will also be considered class 1 projects.
4
Connection projects, or modification of connection conditions, of SDL end users.
Submission of
requests for
transport
capacity
allocation
October
6th
2023
Publication of
the assigned
position for each
project in rows 1
and 2.
opinions for
projects
assigned to row
1
Opinions for
projects
assigned to row
2.
April
5th
2024
July 5th
2024
May 6
th 2024
sources with an installed capacity equal to or greater
than 10 MW and less than 100 MW.
9.7.3. Connection to the National
Interconnected System
The CREG published Resolution 075 of 2021, Whereby
the provisions and procedures for the allocation of trans-
portation capacity in the National Interconnected System
are defined. This resolution applies to those interested in
connecting as generators, co-generators, self-generators
or end users to the SIN. It also applies to the transporters
responsible for the assets related to the connection to the
SIN of the aforementioned interested parties, and to the
commercializing agents in relation to the functions of this
activity.
Class 1 projects3
:
For the determination of the procedure to be carried
out by the promoters for their connection to the SIN,
the regulation differentiates between class 1 projects
that correspond to end user connection projects to the
STN or STR, and projects for connection of generation,
cogeneration or self-generation to the SIN, different
from the projects that are under the scope of
Resolution CREG 174 of 2021 and its amendments.
Those interested in requesting the allocation of
transportation capacity for class 1 projects must
register at the Single Window before carrying out any
procedure. The UPME will be responsible for receiving
and resolving requests for the allocation of
transportation capacity in the SIN for class 1 projects.
For the request, the interested party must carry out a
connection and physical space availability study, analyzing
different alternatives to connect to the SIN, among other
requirements. The allocation of transportation capacity of class
1 projects will be carried out annually, and the project that
results with capacity allocation must grant a guarantee for
capacity reserve of ten (10) USD for the number of kW of the
allocated transportation capacity, as well as subscribe
the connection contract and comply with the other
obligations of the regulation, such as the delivery of
the S Curve before the UPME.
Class 2 projects:
On the other hand, class 24
projects are projects for the
connection, or modification of connection conditions, of
end users in the SDLs. The network operator (OR by its
acronym in Spanish), of the marketing market to which the
assets for which the allocation of transmission capacity is
requested belong, will be responsible for receiving and
approving requests for class 2 projects.
The OR must have a digital information system containing
all the necessary information for the allocation of
transmission capacity to class 2 projects. The interested
party in the connection of a class 2 project may request
the allocation of transportation capacity directly, through
a marketer, or through a third party. For the allocation of
transportation capacity to a class 2 project, the delivery of
a study and/or design of the project may be required for
approval, depending on its characteristics.
On June 8, 2023, the CREG issued Resolution CREG 101
017 of 2023, through which it modifies the schedule for
the allocation of transport capacity for the year 2023. The
schedule is as follows:
08

5
This in turn is the market for large blocks of energy.
6
Amended by Resolution 230 of 2021, by which the deadline established in paragraphs 1 and 2 of Article 12 of Resolution CREG 174 of 2021 is
extended', published on December 30th, 2021.
The transport capacity allocation requests submitted from
October 7, 2023, until March 31, 2025, will be proces-
sed from the latter date onwards, based on the deadlines
set forth in Resolution CREG 075 of 2021. Therefore,
there will be no transport capacity allocation process for
class 1 projects in the calendar year 2024.
9.7.4. Sale of energy.
Law 143 of 1994 established two types of electricitysys-
tem markets in Colombia:
(i) Non-Regulated Market (NRM or MNR for
its acronym in Spanish): where electricity
transactions between agents (traders - generators) and
between these and non- regulated users are free and
remunerated through the prices agreed upon by the
parties.
(ii) Regulated Market (RM or MR for its
acronym in Spanish): where electricity sales to
end users are remunerated, without exception, through
tariffs subject to regulation.
In order to be considered a non-regulated user and
be able to access the deregulated and competitive
market, monthly power and energy limits were
established, as well as the obligation to have hourly
telemetering equipment. Currently, a non-regulated
user is considered to be a user with a monthly
demand of 0.1 MW (power) or 55 MWh (energy).
In Colombia, the generator sells the electricity produced
by its generation unit connected to the National
Interconnected System (SIN) in the Wholesale Energy
Market (MEM5
for its acronym in Spanish), mainly in the
following ways:
(i) Through daily energy offers in the
stock exchange or "Spot" market: The
physical supply of electricity is guaranteed in the
short term, through the centralized dispatch of the
generation units. This dispatch determines the amount
of energy to be produced by the units connected to
the SIN to meet the country's demand. On a daily
basis, each generator submits a price and quantity
offer for all the hours of the following day. ASIC
orders the offers from lowest to highest price until the
identified demand is covered. The last generation
offer needed to cover the last portion of demand
determines the exchange price of all energy
generated and consumed. This process is performed
for all hours of the day.
It is important to clarify that in order to participate in
the spot market, the generation unit must submit to
centralized dispatch. This substantially determines
how the different plants can market the energy they
produce, i.e. whether they do so as explained above
or whether they have special rules. The plants that are
obliged to participate in the centralized dispatch are
all those with an effective capacity greater than
20MW, to which all the dispatch obligations will
apply. There is the possibility that plants between
1MW and 20 MW may voluntarily participate in the
centralized dispatch, in which case all centralized
dispatch rules will apply to them.
On the other hand, smaller plants that do not
participate in this dispatch, may commercialize their
energy produced according to the following rules:
» In the case of a distributed generator, it must take
into account the regulation established in Resolution
CREG 174 of 20216
.
» If it is a plant with an effective capacity greater than
1MW and less than 20MW, they can voluntarily
submit to central dispatch and if they do not wish to
do so, they can market the energy produced: i) by
offering it to a marketer that serves the regulated
market by participating in the calls for tenders opened
by these companies or ii) to generators or marketers
through freely agreed conditions as long as it is for the
attention of non-regulated users.
(ii) Through long-term energy contracts:
These long-term contracts may be entered into to supply
the Non-Regulated Market or the Regulated Market.
The former will be the product of a more or less free
negotiation with another market agent (generator or
trader) or directly with an unregulated user; the latter
are the product of regulated mechanisms (as will be
explained below), i.e. there would not be full freedom
in determining the business, especially because it
involves the service of regulated users.
(iii) Reliability Charge: There is also the
possibility of remunerating this activity with the
provision of services that are not related to
commercialization, but rather services associated with
the reliability of the system. For example, through
regulation services, security generation or
participation in auctions for the allocation of firm
energy obligations (OEF) of the reliability charge
(CxC) of Resolution CREG 071 of 2006 and
Resolution 061 of 2007, among others.
09

7
On September 8, 2023, the Third Section of the Council of State ( file 62492) published the ruling through which it annulled Decree 570 of 2018 and Resolutions No. 40791
of 2018 and No. 40795 of 2018 of the Colombian Ministry of Mines and Energy. However, to date, the energy contracting auctions that have been advanced have not been
annulled, as well as the long-term energy supply contracts subscribed on the occasion of these auctions.
(iv) Public Calls:
Another mechanism is the one defined by the CREG,
through Resolution CREG 130 of 2019, which
established the Public Calls through the Centralized
System of Public Announcements (SICEP, by its
acronym in Spanish and defined the procedure to be
followed by a marketer in the execution of energy
contracts for the regulated market.
9.7.5.UPME registration.
In relation to the registry of generation projects, it is
defined as a voluntary and informative mechanism
used by the UPME to facilitate compliance with Law
143 of 1994. It is used to know the different
initiatives of generation projects in the country, so it
is a fundamental input for the formulation of the
Indicative Plan for Generation Expansion. With the
entry into force of Resolution UPME 0520 of October
09, 2007, modified by Resolutions UPME 0638 of
2007 and 0143 of 2016, the registration procedure
was formalized.
The process is divided into three phases, which are
determined by the state of progress of the project:
Phase 1 corresponds to the pre-feasibility stage of the
project, Phase 2 refers to the feasibility stage of the
project and Phase 3 refers to the fact that the project
must already have definitive designs, as well as the
execution schedule. Once the registration certificate
expires without the respective renewal procedures
having been carried out, the project's registration is
considered expired and it is removed from the list of
registered projects; however, the project information
will continue in the UPME file.
9.7.6. Commercial operation.
Commercial Operation refers to the moment in which
the generation plant has satisfactorily fulfilled all the
necessary requirements to start generating energy in
the Wholesale Energy Market (MEM).
By means of Agreement CNO 1612 of 2022 (which is
periodically updated by the CNO), it was approved
the update of the Procedure for the start-up of transmis-
sion projects that include assets for use of the National
Transmission System (STN), the Regional Transmission
System (STR), users directly connected to the STN, the
STR and generation resources.
The standard establishes the following general require-
ments for the entry into operation of generation resour-
ces:
(i) Registration of the project with the CND and basic
information (Preliminary technical information, Prelimi-
nary models, Single-line diagrams, Adjustment and
coordination of protections).
(ii) Kick-off meeting and coordination of activities for
the incorporation of the project to the SIN.
(iii) Communication informing the CND of how the
supervision will be carried out.
(iv) Communication in which the generating agent
that will represent the generation project is informed.
In the case of a new generating agent, it must be
previously registered as a generating agent before
the Commercial Exchange System (ASIC).
(v) Register commercial borders with ASIC.
(vi) Submit completed Annex 3, which lists the SOE
signals that a project must have available and Annex
4, which lists the SCADA signals.
(vii) Completion of all tests described in the standard
for commissioning and issuance of the corresponding
certificates.
(viii) Coordinate with the CND the date and time of
entry into operation and the Declaration in
commercial operation.
9.8.
Renewable auctions (MCLP or CLPE).
The National Government, with the purpose of promo-
ting Long-Term Energy Contracting Mechanisms
(MCPE for its acronym in Spanish) complementary to
the existing instruments in the Colombian electric
system, is empowered to structure such procedures
and include them in the possibilities in which a Marke-
ter and a Generator may agree on Long- Term Energy
Contracts (CLPE for its acronym in Spanish) and that
these may be included in the regulated user's tariff
formula.
As an example, the Ministry of Mines and Energy
issued Decree 570 of 2018 on public policy guideli-
nes for long-term contracting of generation projects.
This decree served as the legal basis for the creation
of the long-term energy auction for FNCER through
Resolutions 40590 and 40591 of 2019 and 40179
de 2021 of the Ministry of Mines and Energy and
implemented by the UPME7
.
The last long-term energy auction for FNCER was CLPE
03 of 2021, in which long- term energy supply
contracts were assigned to 9 generation companies
with 11 generation projects with a capacity of 796.3
MW, which signed contracts with 7 auction marketers
and 46 marketers of the complementary mechanism,
with a weighted average price of 135.85 COP/kWh
10

In the judicial scenario, on September 8, 2023, the
Third Section of the State Council published the judg-
ment of June 14, 2023, by which it annulled Decree
570 of 2018 and Resolutions No. 40791 of 2018
and No. 40795 of 2018, issued by the Ministry of
Mines and Energy. However, despite this ruling, to
date, the energy procurement auctions that have taken
place have not been annulled, nor have the long-term
energy supply contracts entered into as a result of
these auctions.
For 2024, the government has not announced the
realization of auctions under this mechanism.
9.9. Reliability Charge.
Resolution CREG 071 of 2006 adopted the methodology
for the remuneration of the Reliability Charge in the Who-
lesale Energy Market (MEM), in which it was established
that, to guarantee the reliability of the electric energy
service in the SIN, a Target Demand will be defined that
must be covered by means of Firm Energy Obligations
(OEF for its acronym in Spanish).
Reliability Charge is understood as the remuneration paid
to a generating agent for the availability of generation
assets with the characteristics and parameters declared
for the calculation of the ENFICC8
, which guarantees
compliance with the Firm Energy Obligation assigned to
it in an Auction for the Assignment of Firm Energy Obliga-
tions or in the mechanism that takes its place. This energy
is associated to the Backup Generation Capacity referred
to in Article 23 of Law 143 of 1994 and is the one that
can be committed to guarantee the users the reliability in
the rendering of the electric energy service under critical
conditions, understood as the situation presented by the
Wholesale Energy Market when the exchange price is
higher than the Shortage Price.
Article 18 of the resolution established that the CREG
shall establish, by means of a Resolution, the opportunity
in which the ASIC must carry out the Auction or the alloca-
tion mechanism that takes its place, as well as the schedu-
le of the activities that must be executed.
Thus, through Resolution CREG 101024 of 2022, the
procedures for reliability charge auctions in the Wholesa-
le Energy Market were defined. Among the regulated
aspects, it is highlighted that the Unified Information
System for the allocation processes of OEF for the reliabi-
lity charge, SUICC, will be the only mechanism that
participants must use to submit documentation, declare,
and exchange information with the Administrator.
Within the framework of Resolution 101 024 of 2022, it
was also established that interested parties must be consti-
tuted as Public Utility Companies, and natural or legal
• Existing plants and/or units with works.
• Existing plants and/or units.
• Generation plants or units with construction periods
longer than the Planning Period, when applicable.
• The validity period of the assigned OEF varies
according to the type of plant participating in the
auction.
In the context of the auction procedure, it is provided that
the CREG will deliver the demand function referred to in
Annex 2 of the resolution in accordance with the
provisions therein and using the SUICC, auction
participants will submit bids to the ASIC.
The ASIC, as the auction administrator, will carry out the
auction allocation process on day D plus one hundred
twenty (120) business days between 2:00 a.m. and 4:00
p.m. The ASIC will publish the auction results no later
than the immediately following calendar day of its
realization. This publication must contain at least: the
closing price, the allocations of firm energy obligations
for each of the auction participants, and everything
established in Annex 2 of Resolution 101 024 of 2022
regarding this article. The publication of the auction
results and everything covered by this article must be
published in the SUICC.
The Ministry of Energy and the General Maritime and
Port Directorate (DIMAR) enacted Resolution 40284 of
2022, through which the competitive process for granting
Temporary Occupation Permits in maritime areas for the
development of offshore wind energy projects was
defined, and the first allocation round was convened.
The competitive process is being administered by the
National Hydrocarbons Agency (ANH) and aims to grant
the Temporary Occupation Permit for a period of 8 years,
extendable according to the conditions defined in the
contract, which allows activities related to measurement,
data collection, and information gathering to establish
the viability of the Project, which will be exclusively
developed in the Areas indicated in Annex A of the
Terms, referred to as the Area Proposed by DIMAR or
Polygon A and the General Nomination Area or Polygon
B9
.
Obtaining the Temporary Occupation Permit is one of the
necessary requirements for applying for a Maritime
Concession for the development of Offshore Wind
Energy Projects in Colombia.
Among the main obligations for the awardee of the
Temporary Occupation Permit, which can be a national
or foreign company, is to pay the processing fee for
obtaining the occupation permit, comply with the S-curve
value, cover the costs of compliance inspection, make
available to DIMAR the information and data obtained
9.10. Offshore wind
11
8
ENFICC: maximum electrical energy that a generation plant can deliver continuously, under low hydrological conditions, in one year.
9
Competitive process for the granting of the Temporary Occupancy Permit for the area called in the first round, called "Caribe Central", for the
development of offshore wind energy generation projects.
HYPERLINK"https://www.anh.gov.co/es/hidrocarburos/oportunidades-disponibles/ronda-colombia-e%C3%B3lica-costa-afuera/pliegos-ronda-eolica/
"Link: POT (Subject to modifications).

DEADLINES
STAGES
From 12/12/2024 – Until 21/04/2024
From 22/04/2025 – Until 14/10/2025
By 14/10/2025
From 27/10/2023 - Until 15/10/2024
From 21/12/2023 - Until 26/08/2024
From 27/08/2024 – Until 27/11/2024
during the occupation, which will be used for planning, monitoring, and protection of the marine environment in the short,
medium, and long term.
In this sense, guarantees for the developer of the offshore wind project are also contemplated, among which the possibility
of withdrawal stands out, as there would be no penalty for it; however, the one who withdraws would be obliged to submit
an infeasibility report. Likewise, the possibility of requesting from DIMAR the Concession of the Maritime Area is granted,
which must be requested 9 months before the expiration of the Temporary Occupation Permit, and it will have a validity
period of 30 years, with the possibility of one or more extensions that do not exceed a total of 15 years; likewise, the
regulations also allow for the assignment of the temporary occupation permit or the maritime concession and establish a
term of 2 years prior to its expiration for the dismantling of the project.
From December 21, 2023, to June 21, 2024, those interested in participating in the Competitive Process must submit the
Enablement documents, and thus, the Administrator will conduct a study and formulate the necessary complementation
requirements to obtain the Enablement and its submission by the interested parties.
This competitive process consists of the following stages and deadlines, which can be modified by the ANH through
modifying addenda:
Publication and dissemination
stage of the process
Interested party enablement
stage
Presentation and Evaluation
of Nominations stage
Deposit, Validation, Evaluation of Bids,
and Selection of Awardee stage
Formalization and Issuance of
Temporary Occupation Permit stage
Formalization and Issuance of
Temporary Occupation Permit stage
12

Each proposer may compete for up to two different areas,
provided they meet the technical, financial, and legal
requirements. In general terms, this competitive process
evaluates, at a technical level, the trajectory and expe-
rience requirements of the proposers; financially, credit
ratings, credit limits, and financial statements are
analyzed, and regarding legal requirements, corporate
aspects, disqualifications and incompatibilities, prohibi-
tions, impediments, disqualifications or conflicts of
interest, certifications, and essential documents to be
enabled as a participant in the process are examined.
The Competitive Process currently underway corresponds
to the first round of allocation of Temporary Occupation
Permits for the area known as "Central Caribbean,"
defining an installed capacity equal to or greater than
200 MW and an operational start date within the 10
years following the formalization of the Temporary Occu-
pation Permit.
9.11. Hydrogen
The rise of hydrogen worldwide in the context of energy
transition is due to its great versatility. Hydrogen is the
simplest element in the periodic table and highly reactive,
so it is not normally found freely in nature but combined
with other molecules. This makes hydrogen not an energy
source but an energy carrier, as energy must be used for
its production.
Law 2099 of 2021 incorporated green hydrogen and
blue hydrogen as Unconventional Renewable Energy
Sources in the energy sector. On the other hand, the
National Development Plan 2022-2026 (PND or Law
2294 of 2023) defined white hydrogen, which was
regulated in Decree 2235 of 2023, issued by the Minis-
try of Mines and Energy, and it is worth noting that they
are subject to tax incentives regulated in Law 1715 of
2014.
Green hydrogen is produced from Unconventional
Renewable Energy Sources such as biomass, small
hydroelectric developments, wind, geothermal heat,
solar, tidal, among others; and it is considered a non-con-
ventional source of renewable energy per se. Green
hydrogen is also considered the one produced with
self-generated electrical energy from UNRE, and electri-
cal energy taken from the national interconnected system
-SIN-, provided that the self-generated energy from UNRE
delivered to the SIN is equal to or greater than the energy
taken from the SIN; for this latter case, in the NDP
2022-2026, it was established that the Ministry of Mines
and Energy will establish the procedure to certify this
balance based on the measurement systems already
established in the regulation.
Blue hydrogen, on the other hand, is hydrogen produced
from fossil fuels, especially from methane (CH4) decom-
position, and it includes a carbon capture, utilization,
and storage system (CCUS) as part of its production
process and is considered FNCE.
Finally, white hydrogen was defined as hydrogen that is
naturally produced, associated with geological processes
in the Earth's crust and found in its natural form as free
gas in different geological environments, whether in
continental crust layers, oceanic crust, volcanic gases,
and hydrothermal systems, such as geysers, and it is
considered UNRE.
In terms of direct investment, Law 2099 extends the scope
of action of the Fund for Non-Conventional Energies and
Efficient Energy Management (FENOGE) to financing
and/or executing viable projects at any link in the
low-emission hydrogen value chain.
9.12. Tax incentives for FNCER
In order to promote the incorporation of energy genera-
tion with non-conventional renewable energy sources
(FNCER by its acronym in Spanish), there are in Colom-
bia a series of incentives and tax benefits implemented
from Law 1715 of 2014 - amended by Law 2099 of
2021-, so that the production of renewable energy has a
greater scope and thus stimulate and promote sustainable
development in the country. Based on the above, the
Colombian legal system identifies four (4) important tax
benefits for the generation of energy for FNCER, which
are: (a) Special deduction to determine income tax, (b)
Exclusion of goods and services from VAT, (c) Exemption
from customs duties and (d) Accelerated depreciation.
In general terms, these incentives are available to indivi-
duals or legal entities that make direct investments in
activities such as research and technological develop-
ment in the field of energy production with FNCE and
Efficient Energy Management (GEE for its acronym in
Spanish), including smart metering, or formulation and
preliminary research, technical, financial, legal, econo-
mic and environmental final studies, acquisition of equip-
ment, elements, machinery, and assembly and commis-
sioning.
UPME included in Resolution UPME 319 of 2022 the list
of goods and services required for the production of
energy from FNCE and for the measurement and evalua-
tion of potential resources, according to the technical
criteria between these goods and services and FNCE.
This Resolution 319 of 2022 has been amended by
Resolution 610 of 2023, through which Annex 1, list of
goods and services for UNRE projects for electricity gene-
ration from FNCE, was modified, and Resolution 504 of
2023, which modified Annex 2 of Resolution UPME, list
of goods and services for Energy Efficiency Management
(GEE) actions or measures updated on the occasion of
the adoption of the PAI-PROURE 2022-2030.
13

Blue hydrogen, on the other hand, is hydrogen produced
from fossil fuels, especially from methane (CH4) decom-
position, and it includes a carbon capture, utilization,
and storage system (CCUS) as part of its production
process and is considered FNCE.
Finally, white hydrogen was defined as hydrogen that is
naturally produced, associated with geological processes
in the Earth's crust and found in its natural form as free
gas in different geological environments, whether in
continental crust layers, oceanic crust, volcanic gases,
and hydrothermal systems, such as geysers, and it is
considered UNRE.
In terms of direct investment, Law 2099 extends the scope
of action of the Fund for Non-Conventional Energies and
Efficient Energy Management (FENOGE) to financing
and/or executing viable projects at any link in the
low-emission hydrogen value chain.
9.12. Tax incentives for FNCER
In order to promote the incorporation of energy genera-
tion with non-conventional renewable energy sources
(FNCER by its acronym in Spanish), there are in Colom-
bia a series of incentives and tax benefits implemented
from Law 1715 of 2014 - amended by Law 2099 of
2021-, so that the production of renewable energy has a
greater scope and thus stimulate and promote sustainable
development in the country. Based on the above, the
Colombian legal system identifies four (4) important tax
benefits for the generation of energy for FNCER, which
are: (a) Special deduction to determine income tax, (b)
Exclusion of goods and services from VAT, (c) Exemption
from customs duties and (d) Accelerated depreciation.
In general terms, these incentives are available to indivi-
duals or legal entities that make direct investments in
activities such as research and technological develop-
ment in the field of energy production with FNCE and
Efficient Energy Management (GEE for its acronym in
Spanish), including smart metering, or formulation and
preliminary research, technical, financial, legal, econo-
mic and environmental final studies, acquisition of equip-
ment, elements, machinery, and assembly and commis-
sioning.
UPME included in Resolution UPME 319 of 2022 the list
of goods and services required for the production of
energy from FNCE and for the measurement and evalua-
tion of potential resources, according to the technical
criteria between these goods and services and FNCE.
This Resolution 319 of 2022 has been amended by
Resolution 610 of 2023, through which Annex 1, list of
goods and services for UNRE projects for electricity gene-
ration from FNCE, was modified, and Resolution 504 of
2023, which modified Annex 2 of Resolution UPME, list
of goods and services for Energy Efficiency Management
(GEE) actions or measures updated on the occasion of
the adoption of the PAI-PROURE 2022-2030.
9.12.1 Income tax benefit
Its application is configured through taxpayers who
declare the tax and who, in the development of their
activities, make new expenditures in research, develop-
ment and investment to be able to produce and use
energy generated by FNCE and Efficient Energy Mana-
gement (GEE).
The benefit obtained is the possibility of deducting up to
50% of the value of the investments of the project for a
period not exceeding 15 years, which are counted from
the taxable year following the year in which the invest-
ment has come into operation.
9.12.2. VAT benefit
The regulation establishes that goods and services,
domestic or imported, that are destined to pre-investment
and investment for the production and use of energy from
non-conventional sources, as well as for the measurement
and evaluation of potential resources, and to advance
actions and measures for efficient energy management,
will be excluded from VAT.
9.12.3. Tariff benefit
Natural or legal persons that as of the effective date of
Law 1715 of 2014 are holders of new investments in
new FNCE projects and measurement and evaluation of
potential resources or energy efficiency actions and
measures, shall enjoy exemption from payment of Import
Tariff Duties on machinery, equipment, materials and
inputs intended exclusively for pre-investment and invest-
ment work that are not produced by the national industry
and their only means of acquisition is subject to the
importation of the same.
9.12.4. Benefit Accelerated depreciation
The accelerated depreciation will be applicable to machi-
nery, equipment and civil works necessary for the pre-in-
vestment, investment and operation of the generation
with FNCE and measurement and evaluation of the
potential resources or actions and measures of energy
efficiency, which are acquired and/or constructed, exclu-
sively for that purpose, as of the effective date of this law.
For these purposes, the annual depreciation rate shall not
exceed 33.3% as a global annual rate. The rate may be
varied annually by the owner of the project, prior commu-
nication to the DIAN, without exceeding the limit indica-
ted above.
14

9.13. SELF-GENERATION OF ENERGY
9.13.1. Legal and regulatory framework.
Law 1715 of 2014: "Whereby the integration of
non-conventional renewable energies to the National
Energy System is regulated.
Law 1955 of 2019: Whereby the National
Development Plan 2018-2022 is issued. "Pacto por
Colombia, Pacto por la Equidad" (Pact for Colombia,
Pact for Equity)".
Law 2099 of 2021: Whereby provisions are
issued for the energy transition, the dynamization of the
energy market, the economic reactivation of the country
and other provisions are issued.
Decree 2469 of 2014: Whereby energy policy
guidelines are established regarding the delivery of
self-generation surpluses.
Decree 348 of 2017: Whereby Decree number
1073 of 2015 is added, regarding the establishment of
public policy guidelines on efficient energy management
and delivery of small-scale self-generation surpluses.
Resolution UPME 281 of 2015: Whereby the
maximum power limit of small- scale self-generation is
defined.
Resolution CREG 15 of 2018: Whereby the
methodology for the remuneration of the electric power
distribution activity in the National Interconnected
System is established.
Resolution CREG 38 of 2018: Whereby the
activity of self-generation in non- interconnected areas is
regulated and some provisions on distributed generation
in non-interconnected areas are issued.
Resolution CREG 142 of 2019: Formula for
transfer in the component of energy purchases to the
regulated user of the prices of the contracts of the
complementary mechanism contracts referred to in
Resolution number 40725 of 2019 of the Ministry of
Mines and Energy.
Resolution CREG 174 of 2021: Whereby
small-scale self-generation and distributed generation
activities in the National Interconnected System are
regulated.
Decree 2236 de 2023: It partially regulates
Article 235 of Law 2294 of 2023 of the National
Development Plan 2022-2026 regarding Energy
Communities within the framework of the Just Energy
Transition in Colombia.
9.14. Concepts of Large Scale and Small
Scale.
Resolution CREG 174 of 2021 defines the 3 self-generator
at large scale (AGGE for its acronym in Spanish) as the
self-generator with installed or nominal capacity higher
than the limit defined in article one of Resolution UPME
281 of 2015, or the one that modifies or replaces it. In
turn, it defines the small-scale self-generator (AGPE) as
the one with installed or nominal capacity equal to or
lower than the limit defined in the first article of Resolution
UPME 281 of 2015, or the one that modifies or replaces
it.
Resolution UPME 281 of 2015, "Whereby the maximum
power limit of small-scale self-generation is defined as the
maximum power limit of small-scale self-generation of
one (1) MW, and will correspond to the installed capaci-
ty of the self-generator's generation system.
9.15. Energy Communities
Article 235 of Law 2294 of 2023, numeral 25 was
added to Article 5 of Law 1715 of 2014, defining that
users or potential users of energy services may establish
Energy Communities to generate, commercialize, and/or
efficiently use energy through the use of non-conventional
renewable energy sources (NCRE), renewable fuels, and
distributed energy resources.
This provision indicated that Energy Communities may be
formed by natural and/or legal persons, and in the case
of natural persons and the Self-Government Structures of
Indigenous Peoples and Communities and peasant,
Black, Afro-Colombian, Raizal, and Palenquero commu-
nities that establish themselves as Energy Communities,
they may be beneficiaries of public resources for the
financing of investment, operation, and maintenance of
infrastructure, based on targeting criteria defined by the
Ministry of Mines and Energy.
In compliance with this legal mandate, through Decree
2236 of 2023, the Ministry of Mines and Energy regula-
ted Energy Communities and established that they may
associate with each other to create associations of
energy communities, through an agreement signed
between the parties, to cooperate on projects for genera-
tion, commercialization, and/or efficient use of energy
through the use of Non-Conventional Renewable Energy
Sources (NCRE), renewable fuels, and distributed energy
resources.
In addition, this Ministerial Department stipulated that
energy communities and associations of energy commu-
nities may interact with third parties from the public,
private, and/or popular sectors, through private law
agreements and/or associations of popular public initiati-
ve to cooperate on projects for generation, commerciali-
zation, and/or efficient use of energy through the use of
Non-Conventional Renewable Energy Sources, renewa-
ble fuels, and distributed energy resources.
15

Within the framework of this regulation, two more activi-
ties were enshrined in the chain of provision of the electri-
city service:
° Collective Self-Generation (AGRC): This is the activity
carried out by the energy community that produces
energy, primarily to meet its own energy demand. In the
event that energy surpluses are generated from this
activity, they may be delivered to the grid, on terms
established by the Energy and Gas Regulation
Commission (CREG) for this purpose.
° Collective Distributed Generation (GDC): This is the
production of electricity carried out by the energy commu-
nity, near consumption centers, connected to a local
distribution system (SDL) or a microgrid. The delivery of
energy to the Local Distribution System (SDL) is governed
by the regulation established by the Energy and Gas
Regulation Commission (CREG) for this purpose, within
three (3) months following the issuance of the decree.
According to the referred regulations, energy communi-
ties are not limited to performing the two aforementioned
activities to generate, commercialize, and efficiently use
energy, acting as a Collective Self-Generator (AGRC) or
Collective Distributed Generator (GDC), but they may
also carry out other economic activities or productive
linkages outside the energy sphere.
9.16. Connection.
In the case of self-generation activities, Resolution CREG
174 of 2021 establishes the following requirements for
connection and operation:
In order for self-generators to make the connection
request, a simplified connection form must be filled out
and in the case of self-generators with installed or nomi-
nal capacity greater than 100 kW and with declared
maximum power of less than 5 MW, a simplified connec-
tion study must also be carried out. The simplified connec-
tion study does not apply to self-generators without
surplus delivery.
The ROs must guarantee that the order in which the
networks are filled as a result of the capacity allocation is
in the order of arrival or registration of the projects. The
validity of the connection approval has the following
rules:
(i) The date of notification of the approval of the
connection shall be considered as the effective date of
the approval.
(ii) The start-up date suggested by the interested
party is tentative.
(iii) The term of the approval is six (6) months. In any
case, the self-generator may request, free of charge, an
additional term of three (3) months to make the connec-
tion.
(iv) Once the approved or extended period of validi-
ty has elapsed without the self-generator having connect
ted, a new procedure must be initiated and the Network
Operator will release the assigned capacity.
(v) For self-generators with declared maximum power
greater than 1 MW and less than 5 MW, the validity of
the approval may only be extended once.
On the other hand, the connection contracts between the
self-generator and the Network Operator will be neces-
sary only in the event that at the request of the self- gene-
rator the connection assets are supplied or installed by
the RO or in the event that the capacity of the network has
to be increased. The term for the signing of the contract
between the parties is fifteen (15) business days, counted
from the effective date of approval of the connection.
9.17. Backup service
This backup service, according to the provisions of
Decree 2469 of 2014 and Decree 348 of 2017, must be
contracted on a mandatory basis by self-generators with
systems that exceed an installed capacity greater than or
equal to 100 kW; that is, self-generators that do not have
a self-generation system that exceeds 100kW are not
required to enter into a grid capacity availability backup
contract.
The main purpose of this contract is to remunerate (a) the
investment associated with the infrastructure required for
the connection of the self-generator, and (b) the costs of
Administration, Operation and Maintenance (AOM)
charged to the grid operator.
It generates a remuneration in favor of the Network
Operator which will be freely agreed between the
parties, in accordance with a methodology defined in the
regulation.
9.18. Delivery of self-generation
surpluses
Surplus energy is understood as the amount of excess or
surplus energy that may be higher in any percentage
than the value of its own consumption. As of the entry into
force of Law 1715 of 2014, the delivery of surpluses by
self-generators is allowed, establishing different rules for
the delivery and remuneration of such surpluses depen-
ding on whether it is an AGPE or an AGGE. The latter,
in order to deliver surpluses to the grid, must be represen-
ted by a generating agent duly registered in the Whole-
sale Energy Market (MEM).
Furthermore, it is worth noting that, with the issuance of
Decree 2236 of 2023, the CREG (Energy and Gas Regu-
lation Commission) is responsible for regulating the
scheme for the remuneration of surplus energy from
collective self-generation and the remuneration of energy
from collective distributed generation, based on the
principle of economic efficiency, without allowing ineffi-
ciencies in management or additional costs that affect the
price paid by the marketer or service users to be transfe-
rred.
16

9.19. SOME OF THE MAIN CONTRACTS IN
THE MARKET
9.19.1. Power supply
Refers to contracts entered into by MEM agents for the
purpose of buying and selling energy between agents
and through them, supplying end users. For the registra-
tion of these contracts before ASIC by the MEM agents,
at least the price, quantities and start date of the supply
must be defined between the parties. Marketers may
enter into supply contracts directly with non-regulated
users, with the commercial conditions defined by mutual
agreement between the parties.
9.19.2. Connection Contract.
The connection contract is the one to be signed by any
user interested in connecting to the SIN. Users can be a
generator, a large consumer or a local distributor with a
transporter of the STN.
Resolution CREG 075 of 2021 establishes the obligation
of the interested party with assigned transportation
capacity to sign a connection contract, with some
differences depending on the classification of the project
(class 1 or 2).
For class 1 projects according to the classification made
by the regulation, the transporter responsible for the
system assets to which the class 1 project will be connec-
ted and the interested party must sign a connection
contract that complies with the requirements established
in the Connection Code and the requirements defined in
the regulation.
To sign the contract, the parties will have a term of four
(4) months, counted from the date of issuance of the
connection concept, and may include the guarantees and
other commitments agreed between them. If the above
term elapses and there are still differences between the
parties that do not allow reaching an agreement to sign
the connection contract, a dispute resolution mechanism
shall be used, and the parties are obliged to accept and
comply with the conclusions of the same. In addition, the
parties must send reports to the Superintendency of
Residential Public Utilities (SSPD), where the justified
reasons for not signing the contract are given. With the
information received, the SSPD will decide if there is a
need to initiate an investigation to any of the parties to
the contract negotiation.
In the case of class 2 projects, the network operator shall
enter into a connection contract with the interested party,
which shall be governed, as applicable, by the provi-
sions of Resolution CREG 025 of 1995 and shall be
entered into once the service feasibility has been appro-
ved. Additionally, the connection contract will include the
remuneration of the assets built by the network operator
for the interested party's connection.
9.19.3. Power Purchase Agreement
PPA (self-generation of energy).
The Power Purchase Agreement (PPA) or Long Term
Power Purchase Agreement, is one of the most used
contractual figures for the supply of energy with renewa-
ble sources, which is due to its versatility and adaptation
to the needs of the contracting parties. For the specific
case of Colombian legislation and regulation, we must
differentiate the PPA used for self-generation activity
(self-consumption) and the PPA for energy generation
activity as a public service. In general terms, the elements
and characteristics of the self-generation PPA are:
(i) Bilateral: the contract is entered into, on the one hand, between
a user (hereinafter the "User") (who for the purposes of Colombian
legislation will be a self-generator of energy) and on the other
hand, a company (hereinafter the "Company") or natural person
responsible for the design, supply of equipment, financing,
construction, energy supply, operation and maintenance of the
self- generation system.
(ii) The main obligation of the User is to make timely payment of
the energy bill, while the company's obligation is to supply energy
in conditions of quality and continuity in accordance with the
conditions stipulated in the PPA.
(iii) One of the essential elements is the long term of the same,
since the financing is being carried out by the Company, a term
that allows the return of the investment is required.
(iv) The price per kWh or the mechanism for defining the tariff and
its indexer.
(v) Some essential clauses to include are:
a.Ownership of self-generation assets.
b.The form of remuneration for the use of the same.
c.Remuneration for the operation and maintenance of the
self-generation plant.
d.Remuneration for the supply of energy and the type of energy
supply.
e.Dismantling of the self-generation plant.
f.The disposition or not of the land on which the self-generation
assets will be installed.
g.The ownership and regulation mechanism of energy surpluses;
among others.
(vi)Application and processing of tax incentives under Law 1715
of 2014.
(vii)Guarantees and insurance to be provided by the User and the
Company.
(viii)Termination events and penalties.
As it can be observed, under a correct wording of the
clauses of a PPA (this will vary depending on each
particular relationship), aspects such as the amortization
of the price of self-generation assets can be covered,
having the same or better conditions than these contracts
and everything will depend on the wording of its clauses,
the observance of what the regulation may establish and
the adequate constitution of guarantees, in accordance
with a due identification of the risks assumed by the Com-
pany and the User.
17

Law
Regulatory Framework
Subject
Law 143 of 1994
Whereby the regime for the generation, interconnection,
transmission, distribution and commercialization of electricity in the
national territory is established, authorizations are granted and other
provisions on energy matters are enacted.
Resolution CREG 024 of 1995
Whereby the commercial aspects of the wholesale energy
market in the national interconnected system, which are part
of the Operating Regulations, are regulated.
Whereby the Networks Code is established as part of the
Operating Regulations of the National Interconnected System.
Law 1215 of 2008
Whereby measures are adopted regarding cogeneration of
electric energy.
Whereby the technical requirements and conditions to be met by
cogeneration processes are determined and this activity is
regulated.
Whereby the provisions established in Resolution CREG-051
of 1998, modified by Resolutions CREG-004 and CREG-045
of 1999, whereby the general principles and procedures to
define the reference expansion plan of the National
Transmission System were approved, and the methodology to
determine the Regulated Income for the Use of this System
was established.
Whereby the methodology for the remuneration of the Reliability
Charge in the Wholesale Energy Market is adopted.
Whereby the methodology for the remuneration of the
electricity distribution activity in the National Interconnected
System is established.
Law 2099 of 2021
Whereby provisions are issued for the energy transition, the
dynamization of the energy market, the economic reactivation of
the country and other provisions are issued.
Law 1715 of 2014
Whereby the integration of non-conventional renewable energies
to the national energy system is regulated.
Law 142 of 1994
Whereby the regime of residential public utilities is
established and other provisions are issued.
The Colombian electricity market has a broad and extensive regulatory framework, so without being exhaustive, some of
the main regulations applicable to the sector are presented below:
18

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