The Energy Regulation and Markets Review - Stikeman Elliott

Colombia
transactions. All of the electricity supply offered by generation companies connected to
the NIS and all of the electricity requirements of end users, whose demand is represented
by commercialisation companies, is traded at the MEM. The NIS is formed by generation
plants, the NTS, the regional and inter-regional transmission lines, the distribution lines
and the electrical loading points of the users.
A substantial majority of the electricity generated in Colombia is initially
purchased on a wholesale basis through the MEM. The demand is covered through
electricity sales contracts between electricity generators and traders. In the daily process,
the participating agents converge on the spot market, adjusting their hourly transactions.
XM, through CND, conducts the planning, supervision and control of the operation
of the resources of the NIS. Also, the Liquidator and Administrator of Accounts is
responsible for liquidating the transactions, and XM manages the ASIC and is in charge
of the settlement and administration of the charges for the use of NTS networks in the
interconnected system.
The designated participants of the MEM are generation and commercialisation
companies. Generation companies are required to participate in the MEM with all of
their generation plants or units connected to the NIS with capacities equivalent to or
exceeding 20MW. Generation companies declare their energy availability and the price
at which they are willing to sell it. This electricity is centrally dispatched by the CND.
All commercialisation companies that deal with end-users connected to the NIS
are required to conduct their electricity transactions through the MEM. Electricity
transactions in the MEM are carried out under the following ways: the energy spot
market, bilateral contracts and firm energy. All generation companies in the MEM can
freely enter into any or all of these transactions.
ii Energy market rules and regulation
As we mentioned, Colombian law provides for open access to the NTS, and assures
any trader the right to connect its assets and network to and use the NTS, through the
payment of interconnection and usage charges payable to transmission companies by
users and liquidated by XM on a monthly basis. Access to the electricity exchange is
provided to electricity generators and electricity traders through the facilities of XM. XM
conducts the planning, supervision and control of the operation of the resources of the
NTS, and the administration of the NIS.
In order to have access to the MEM and execute commercial transactions
in the electricity exchange, market participants must enter into a contract with XM,
as administrator of the NIS and settler for the charges for the use of the NTS. The
contracts through which such transactions are executed have the features of mandate
agreements. Pursuant to the agreements, market participants authorise XM to represent
such participants with respect to the execution of transactions in the electricity exchange
and allow XM to collect, settle and distribute revenues received from market participants
in consideration for the use of the NTS and for the spot transactions entered into on the
electricity exchange.
Pursuant to the authority granted under the agreements, XM, as the SIC
administrator, records all the hedging contracts entered into by electricity generators
and traders, analyses dispatch on an hourly basis and calculates the amounts owed to or
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