New project bill 573 proposes to change energy sector rules in Panama

The Executive Branch recently presented to the National Assembly a project bill that would change the main rules of the game in the energy sector in Panama since 1997.

The main changes may be summarized as follows:

  • In order to increase their efficiency and avoid over-contracting of their supply, generation companies will no longer be required to bid for the sale and purchase of energy and/or power.

  • Vertical restrictions to generation companies in the control of distribution companies in increased from 25% to 40% of the national consumption of energy and/or power. Also, generators are not permitted to service more than 25% of the total energy of Big Customers (Grandes Clientes) of the whole market.

  • Special RFPs for contracting energy and/or power for technology are not required. Investors should base decisions on risk-analysis, existing information and long-term energy policies.

  • The intervention of energy companies is further regulated to define the effects of said intervention and provide uniformity to protective measures similar to those applied in restructuring procedures.

  • A new concept of "sales agent" (comercializador) is introduced. This agent may buy and sell energy without being a generator, self-generator, co-generator or distributor. This concept is proposed to dynamize competition in the market.CO2 emissions of generation plants are penalized in bid processes to promote new and renewable sources of energy.

  • The State-owned transmission entity (ETESA) will no longer be responsible to convene bid processes for distribution companies (2 years waiting period for this measure).

  • State-owned entities must compete in equal conditions with private companies.

These changes, if passed, will have a major impact in the current legal regime applicable to existing and potential energy investors. An open and broad discussion with all parties involved (concessionaires, consumers and regulators) is urgent and necessary for the transparency and legal stability of investments in the years to come.

Ivette E. Martínez S. - - 31 Oct 2017