Draft Bill amending the General Law on Electrical Services regarding energy transition advances in legislative proceedings

On November 8, 2024, the Energy and Mining Committee of the Chamber of Deputies issued a report on this Draft Bill, processed under Bulletin No. 16.078-08 (“Energy Transition Bill”). Initially, the legislative initiative promoted by the Executive proposed 50 amendments to the articles of the General Law on Electrical Services (“LGSE”) along with nine transitional provisions. However, the version currently under discussion in the Chamber of Deputies consists of only ten amendments to the LGSE and five transitional provisions.

On July 9, 2024, the Energy Transition Bill was approved by the Senate and forwarded to the Chamber of Deputies for the second constitutional procedure.

The origins of the Energy Transition Bill date back to July 10, 2023, when the Executive submitted a legislative initiative structured around three primary objectives: i) Strengthening the electric transmission segment and positioning it concretely as an enabler of the energy transition; ii) Facilitating greater investments in renewable and clean energy; and iii) Incorporating the principles and mandates of the Framework Law on Climate Change into the General Law on Electrical Services.

CONTENT OF THE ENERGY TRANSITION BILL

The amendments introduced to the Energy Transition Bill following its general discussion in the Senate were primarily aimed at addressing urgent matters not covered by Law No. 21,472 on electricity tariff stabilization.¹ 

Consequently, the current Energy Transition Bill under discussion focuses on four main areas: 

1. AMENDMENT TO ARTICLE 95 OF THE LGSE: New Role of Expansion Works Owners and the National Electric Coordinator in the Bidding Process 

To address the poor performance observed in recent bidding processes for expansion works, the Energy Transition Bill proposes assigning owners of these works the responsibility for supervising their proper execution. Meanwhile, the National Electric Coordinator will assume a supervisory role to safeguard competition within the bidding process.

2. AMENDMENT TO ARTICLES 96 AND 99 OF THE LGSE: Mechanisms for Reviewing the Investment Value of Expansion Works

Based on the Energy Transition Bill’s findings, a significant number of contracts for expansion works remain unexecuted due to the current regulation on Investment Value failing to reflect the actual costs of construction and execution.

To address this, the Bill introduces two review mechanisms for the Investment Value of expansion works overseen by the National Energy Commission:

i. A permanent review mechanism applicable in cases of early termination of the contract; and
ii. A transitional mechanism for expansion works awarded prior to the enactment of this legislative initiative, allowing, for instance, an increase of up to 20% in the awarded Investment Value for technical reasons. 

3. INCORPORATION OF ARTICLE 91 BIS INTO THE LGSE: Mechanism for the Development of Necessary and Urgent Works for the Electrical System

The Energy Transition Bill aims to establish a mechanism for the development of works essential for the electrical system, which, due to their urgency, must be excluded from the Expansion Plan outlined in Article 91 of the LGSE.

This mechanism includes a regulated procedure to identify works meeting the criteria of necessity and urgency, requiring initial approval from the National Electric Coordinator, the National Energy Commission, and the Ministry of Energy. Additionally, the new provisions will establish maximum value thresholds for the works, including an additional amount allocated to projects in the Ñuble Region during the first five years of the Bill’s implementation.

4. AMENDMENT TO THE ZONAL TRANSMISSION SYSTEM: Enabling Small Distributed Generation Units (PMGD) to Propose Works for the Zonal Network

One of the Energy Transition Bill’s objectives is to implement measures allowing PMGD to promote adaptations to the zonal network, facilitating their development according to these units’ requirements. To this end, the legislative initiative enables PMGDs to propose works, provided they meet the applicable guarantee requirements and contribute to financing the zonal transmission system.

---

¹ See the statement by Minister Pardow during the session of the Senate Energy and Mining Committee held on March 13, 2024. Link

CONTACT

Juan Tagle
Partner
jtagle@prieto.cl

Agustín Martorell
Partner
amartorell@prieto.cl

Nicolás Yuraszeck
Partner
nyuraszeck@prieto.cl

Romina Tobar
Counsel
rtobar@prieto.cl

Andrea Von Chrismar
Counsel
avonchrismar@prieto.cl

Diego Canto
Associate
dcanto@prieto.cl

Constanza Moreno
Associate
cmoreno@prieto.cl

The information contained in this alert has been prepared for informational purposes only and does not constitute legal advice*.