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Argentine Power Sector
CAMMESA
Wholesale Electric Market Management Company
APEX 2003 ConferenceCartagena, Colombia
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Global figuresChanges in the demand and
supply Macroeconomic changes Impact of these changes in the
market and the operationExpectations - Concerns
Outline
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Installed Capacity 24 GWGeneration 2002 80 TWh500 kV 9.100 km220/132 kV 12.000 km
WEM - ParticipantsGenerators 53Distributors 63Large Consumers Ma 302Large Consumers Mi 2006Transmission COs 10Traders 4
Wholesale Electrical Market -Wholesale Electrical Market - 2002 2002
CUYO
COMAHUE
CENTRO
NOANEA
LITORAL
BUENOS AIRES
GBA
PATAGONICO
Hydro51%Thermal
42%
Nuclear7%
77%
23%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Spot Contract
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Installed Capacity WEM
0
5,000
10,000
15,000
20,000
25,000
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
MW
HI
CC
TG
TV
NU
Capacity WEM: 1992 = 13267 MW
2001 = 23284 MW ~70%; 10000 MW increase in Generation Capacity
Outstanding Variables - GenerationOutstanding Variables - Generation
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Annual peak demand
9035 932510104 10213
11243 11776 12269 1273013754 14061 13481
14150
1050 1050 22002200
7000
8000
9000
10000
11000
12000
13000
14000
15000
16000
17000
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
MW
LocalGrowth = 5000 MW
EXPGrowth = 2200 MW
Outstanding Variables – Peak DemandOutstanding Variables – Peak Demand
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Ev de la tasa de crecimiento de la demanda eléctrica
6.6% 6.3%
3.6%
7.5% 7.6%
5.6%4.7% 4.6%
2.3%
-2.0%
6.7%
-4%
-2%
0%
2%
4%
6%
8%
10%
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Porcentaje de variación demanda mensual Grandes UsuariosAño 2002 vs 2001
-4.7%-6.7%
-1.6% -0.8%-2.4%
0.3%
-1.2%
2.3%
6.6% 6.2%
12.0%
-11.3%-15%
-10%
-5%
0%
5%
10%
15%
Ene-02
Feb-02
Mar-02
Abr-02
May-02
Jun-02
Jul-02
Ago-02
Sep-02
Oct-02
Nov-02
Dic-02
Industrial consumers
=>
AnnualDemand Growth
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Traded Energy
Energy Traded - Contract vs Spot
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
SPOT
CONTR
• High exposure to spot volatility
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0
5
10
15
20
25
30
35
40
45
Ene-
00
Mar
-00
May
-00
Jul-0
0
Sep-
00
Nov
-00
Ene-
01
Mar
-01
May
-01
Jul-0
1
Sep-
01
Nov
-01
Ene-
02
Mar
-02
May
-02
Jul-0
2
Sep-
02
Nov
-02
Ene-
03
Mar
-03
u$s/
MW
h
0
0.5
1
1.5
2
2.5
3
3.5
4
Monomial $
Monomial u$s
rate $/u$s
SPOT PRICE EVOLUTIONSPOT PRICE EVOLUTION
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Outstanding VariablesOutstanding Variables
Wem Average Monomial Prices48.76
35.74
31.7829.73
28.56
25.25 24.3826.13
27.63
23.35
28.92
10.8
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
$/M
Wh
Competitiveness of the market and efficiency of generation units provoked a fall in spot prices of about 40% 48.8 $/MWh1992 to 28.5$/MWh2002
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Dic 2001 => political crisis with deep recession in economy led to the fall of the government; social instability
Austral summer 2002 New transition governmentDebt default; end of the fixed
exchange rate (1$=1u$S) and devaluationeconomic emergency law => pesification of economyProfound economic crisis; inflation
Macroeconomic Changes
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Since July 2002 => conditions begin to stabilize; relative normalization of the behaviour of economy
May 2003 => new elected government
Macroeconomic Changes
0
0.5
1
1.5
2
2.5
3
3.5
4
Dic
-00
Feb
-01
Abr
-01
Jun-
01
Ago
-01
Oct
-01
Dic
-01
Feb
-02
Abr
-02
Jun-
02
Ago
-02
Oct
-02
Dic
-02
Feb
-03
Abr
-03
Jun-
03
Sep
-03
u$s/
MW
h$/u$s
Evolution of exchange rate=>
Increase of industrial demand due to greater competitiveness to export and import substitutionJan02-oct03 Exchange rate => 200%Inflation => about 50%
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Tariffs to end consumers => social impossibility to increase tariffs due to economic crisis and people impoverishment
Pesification of natural gas, energy and capacity prices on the WEM
Increase of imported fuel and maintenance costs
Uncertainty related with exchange rate evolution and expected performance of the generation units
Electricity Sector Scenario
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Keep tariffs at the initial level, absorbing the difference with the stabilization fund
Cover variable costs (fuel, operation and maintenance) of each generator, permitting costs declarations each fortnight
Maintain short term marginal cost system, with a cap price of 120 $/MWh
Modify capacity payments, turning them independent of actual dispatch and include base payment for almost every thermal plant available, and increasing it from 10 to 12 $/MWh
Remunerate new reserves (competitive bids) against commitment to fulfill them, to ensure fuel (gas or liquid) and MW availability
Create a spot market in advance, similar to a contract, through competitive bids, to diminish volatility and risks. Decision based on minimum cost (+risk) criteria
Electricity Sector – Regulatory Decisions
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Results – Prices & Fund
Spot Price (Generators collect) vs Seasonal Price (Distributors pay)and Stabilization Fund Evolution
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
Sep-02 Oct-02 Nov-02 Dic-02 Ene-03 Feb-03 Mar-03 Abr-03 May-03 Jun-03 Jul-03 Ago-03 Sep-03
$/M
Wh
-250
-200
-150
-100
-50
0
50
100
150
200
250
M$
Spot Price Generators Seasonal Price Distributors Stabilization fund
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Transition was managed, allowing to operate the system in good supply conditions
Higher marginal spot prices due to increase of maintenance and liquid fuel costs, with a cap price of 120 $/MWh. Differences between variable costs and maximum charged as uplift costs
Spot market in advance, allowing to hedge, from mar to oct-03, about 40% of the spot market to an energy price of 24,4 $/MWh. The average real price resulted 3 $/MWh higher => savings => about 60M$.
Generation availability performance similar as historical and new reserves fulfilled adequately
Stabilization fund exhausted since jul-03. Debt of the fund with generators of abut 280 M$ (1-2 months of payment). Priority of payment to cover variable costs (thermal units receive more money than hydro plants)
Regulatory Decisions - Results
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Increase of tariffs required to gradually normalize situation. Gas increase pending, when adopted it will imply an additional increase to the WEM
The whole situation seems very difficult to handle politically
Demand increase and exports to Brasil, along with default of the stabilization fund may lead to a significant increase of the deficit of supply risk
Medium and long term viability and the lack of new investments in generation is then one of the major concerns, until the regulatory framework may be adapted and political solutions adopted.
Expectations - Concerns
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From CAMMESA’s point of view
Be flexible enough to implement changes on rules and keep on running the system and the Market, in a delicate environment.
Study and analyse scenarios to identify and anticipate risks, in order to help in the search of solutions.
Next steps
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Quality, Technology & Transparency
For an Electrical Market without frontiers
¡Thanks for your attention!
Colombia, October 2003
Doubts => [email protected] More info => www.cammesa.com.ar