Privatization of the Power Industry and Sanction of the Regulatory Framework

During 1989, privatisation took place in relation to many of the assets the national government had in the power industry, including the units of generation, transportation, and distribution of energy. At the beginning of the 1990s, the national government called different tendering processes for the selling of the aforementioned assets. In addition to this, several regulations were passed, such as Law No 24,065, its Regulatory Decree 1398/1992, and Resolutions Nos 61/92 and 137/92 (and their complementary ones), issued by the Secretary of Energy, that establish the operation programming procedures, the dispatch of loads and the calculation of prices in the wholesale electricity market (regulations known as “the Procedures”), as well as other provisions issued by the same Secretary and the National Electricity Regulatory Entity (ENRE, after its acronym in Spanish). This legislation, together with Law No 15,336, which had been issued previously, is known as the Regulatory Framework for the Electricity Industry.

Structure of the Energy Industry

Under Law No 24,065, the power industry is divided into three segments: (i) generation, (ii) transportation, and (iii) distribution, with general and specific regulations for each segment, as well as limitations on the right to participate simultaneously in these segments (see 2.4 Law Governing Market Concentration Limits).

Generation

Generation is defined as an activity of general interest, in whose market free competition rules apply. However, the activity is controlled by the national government, due to the incidence it weighs on the general interest. Control over generation activity seeks its correct functioning and, ultimately, guarantees the supply of residential, commercial and industrial users.

Transportation

The transmission of power is a public service, which is provided by certain companies that have signed a concession contract with the national government. In addition to the concessionary carriers, there are independent carriers, companies that are in charge of the operation and maintenance of a transportation line that was built after the privatisation of the industry, and that are not under the responsibility of a concessionary carrier.

Distribution

Distribution of electric power is a public service. Unlike transportation companies, which are all bonded with a concession contract with the national government, distributors can be divided into two groups: (1) EDENOR and EDESUR, which carry out the service in the City of Buenos Aires and in Greater Buenos Aires, and have signed a concession contract with the national government given the interjurisdictional nature of the service; and (2) the provincial distributors, which do not perform an interjurisdictional service and do not sign a concession contract. Provincial governments rule their regime tariff and control the service. However, provincial distributors are also subject to the control of the national government (ENRE and Secretary of Energy) with regard to the purchase of the energy to supply users.

The Generation of Renewable Energies

Generation of electricity from renewable sources is ruled by Laws No 26,190 and No 27,191, which are complemented by Decree No 531/2016, Resolution 281/17 and Provision 1/18 (see 3.3 Programmes for the Development of Alternative Energy Sources).

Ownership in the Energy Industry

Most of the assets in the industry are owned by private capital, with some exceptions because the national government participates in some companies as minority or majority shareholder (see 1.2 Principal State-Owned or Investor-Owned Entities).

Generation

The following are generation companies in which the national government has a majority stockholding.

• Energía Argentina SA (ENARSA): Its sole owner is the national government. Note that the limitations under Law No 24,065 for the participation in more than one segment of the industry do not apply to ENARSA. The company is also active in the oil and gas industry.
• YPF Luz: The national government is indirectly the majority shareholder of the company, through YPF SA. The other shareholder is GE.
• Nucleoeléctrica SA (NASA): Wholly owned by the national government, it is the only company in Argentina dedicated to the generation of energy from a nuclear source.
• Yacyretá.
• Salto Grande.

The main private generation companies are:

• Pampa Energía;
• AES;
• Central Puerto;
• Orazul;
• MSU; and
• in the renewable energy sector, in addition to the aforementioned companies: Genneia, 360 Energy, Latinoamericana de Energía SA, Petroquímica Comodoro Rivadavia SA, JEMSE, Arauco SAPEM, Construcciones Electromecánicas del Oeste SA.

Transmission

All the companies in the transportation segment are the majority property of private capital and, in certain cases, the national government acts as a minority shareholder:

• TRANSENER (national government is an indirect minority shareholder);
• TRANSBA (national government is an indirect minority shareholder);
• TRANSPA;
• DISTROCUYO;
• TRANSNEA;
• TRANSNOA;
• TRANSCOMAHUE;
• Compañía de Transmisión del Mercosur SA (CTM) and Transportadora de Energía SA (TESA); and
• the independent carriers are the property of private capital – the most relevant are YACYLEC, LITSA and LIMSA.

Distribution

The companies with a concession contract with the national government are EDENOR and EDESUR and, in both cases, the national government has minority participation. In addition, there are several distribution companies that operate locally at a provincial level.

There are no foreign investment restrictions or protections in the Argentine power industry, except in the case of construction of new facilities by government-owned companies, in which the supply of local goods may be applicable. Adverse economic conditions in Argentina in recent years have limited foreign investment in the country.

The specific thresholds and conditions for investment approval may vary depending on the sector segment of the industry and the nature of the investment. Argentina needs to renew and expand its energy infrastructure; new projects are envisaged in coming years.

Argentina has legal frameworks in place to protect foreign investments, including in the power industry. These protections include safeguards against seizure, confiscation, and expropriation without proper compensation. Foreign investors have access to domestic courts to resolve disputes, as well as to commercial arbitration. Investment international arbitration is also available in accordance with applicable international treaties.

General

Law No 24,065 (Sections 31 and 32) and Decree 1398/92 (Section 9) include the following limitations for the transfer of shares of carriers and distributors.

• No generator, distributor, high-demand user or company controlled by any of them or controller thereof, may be the owner or majority shareholder of a carrier or its controller.
• Only with the prior authorisation of the ENRE may two or more carriers, or two or more distributors, consolidate in the same business group or merge.
• Only with the prior authorisation of the ENRE may a carrier or distributor buy shares of another carrier or distributor, respectively.
• The holder of a distribution concession may not own generation units.

Generation

Hydroelectric generators with a capacity above 500 kV that use public watercourses must enter into a concession contract with the national government and are subject to the limitations provided therein to transfer the assets. Generators that use thermal and renewable technologies are not subject to restriction to asset transfers, but may not own or be majority shareholders of a carrier or its parent company.

Transmission and Distribution

Transmission and distribution concession contracts generally provide the same restrictions: the transfer of the majority stockholding requires ENRE’s prior approval. The approval process is ruled by ENRE’s Resolutions 548/99 and 499/05. Typically, although not expressly required by law, ENRE may require that the new shareholders comply with certain financial ratios and industry expertise background.

National Secretariat of Energy

The National Secretariat of Energy is the authority overseeing the application of the Regulatory Framework and has power to dictate the provisions that regulate the national dispatch of loads. The Secretariat has dictated the regulations known as Los Procedimientos, which organise the wholesale electricity market.

ENRE

ENRE’s main role is to regulate and supervise the electricity sector to ensure the reliability of the electricity system and the adequacy of supply to meet the demand for electricity. The scope of ENRE’s functions and powers is set forth in Law No 24,065.

CAMMESA

This company has two main functions: (i) it is in charge of electricity dispatch, and (ii) it settles the operations in the wholesale electricity market, making the collections and remitting to each creditor the amounts that correspond to them for the services provided (generation, transmission or distribution). The shareholders of CAMMESA are the national government, and the associations of generators, carries, distributors and big users.

In the last year, there were no important modifications in the Electricity Regulatory Framework. The most important modification was set in the dispatch priority assignment regimen for renewable projects.

One of the main limitations facing the development of renewable sources, in a country that has enormous potential for the development of different types of technologies, is the limited capacity to transport electricity. Currently, this situation is limiting the development of new projects.

The Secretariat of Energy, by Resolution 360/23, amended the dispatch priority assignment regime for renewable projects. CAMMESA may be authorised, on a quarterly basis, to assign dispatch priority with respect to a particular transmission line. With the assignment of priority, it is ensured that projects will be able to sell the energy. Pursuant to the new regulation, CAMMESA may now assign priority to renewable projects.

General elections are near and new policies to encourage investment in energy projects are to be expected. Renewable projects will surely be stimulated. 

Besides that, in the energy sector in Argentina hydrogen projects are increasingly favoured, although none has yet been accomplished. In May 2023, the Secretary of Energy announced that a Hydrogen Law draft is ready to be sent to Congress. The project contemplates blue, green and pink hydrogen, and includes: (i) certification at origin, with the creation of institutions that verify the origin of production, to develop local value chains; and (ii) emission standards monitoring, with tax benefits and a differential regime that rewards green hydrogen over blue. Fiscal stability for 30 years, access to the free exchange market, accelerated amortisation of income tax, financial benefits, incremental and differentiated export duties according to each type of project and other benefits are being considered.

The electricity industry in Argentina has unique aspects that are of great interest to investors, unlike other countries in the region. The generation of electricity from renewable sources is the main attraction for investors. Since 2017, new renewable energy generation projects have been promoted to meet the goal that, by 2025, renewable energy should equate to 20% of total energy consumed.

In order to understand the dimension of the investment possibilities, it should be noted that practically the entire territory of the country presents optimal conditions for the generation of energy from wind and solar sources.

In 2022, of the total energy generated, only 13.9% came from renewable sources. Argentina has to promote investments in this area to meet the legal goal. In addition, as mentioned, a draft Hydrogen bill has been sent to Congress to promote related projects. Several companies are already analysing potential projects.

Along with generation projects, the transportation and distribution systems required heavy investment, considering that the actual capacity is fully taken.

Structure

Generators are involved in the wholesale electricity market (known as MEM under its Spanish acronym), together with the other agents: transporters, distributors and high-demand users.

Two markets coexist in the MEM: (i) a forward market, with volumes, prices and conditions freely agreed between sellers and buyers, and (ii) a spot market, with prices sanctioned hourly based on the economic cost of production, unlike the forward market where the price is freely agreed between the parties.

Forward Market

Since 2013, entry into new contracts in this market has been prohibited, if they involve generation from a conventional source (thermal or hydroelectric). However, contracts in this market are allowed if energy comes from a renewable project.

Spot Market

Prices in the spot market come from the marginal cost of the system (cost of the most inefficient machine that covers the demand) at a certain hour. Based on the demand at each moment and the availability of supply, CAMMESA dispatches the generation equipment that is able to cover the demand and is the most economical. The spot market price of each hour is the cost fixed for the most expensive machine dispatched in that hour.

In addition to the spot price, there is the seasonal price: the cost paid by distributors for the energy they acquire from generators to supply users. Prices are stabilised on a quarterly basis since they are what users pay for the supply of energy. In this way, the distributors know the prices of the energy purchased in the spot market that they transfer to the rate paid by their customers. This modality is known as pass-through since distributors transfer this cost directly to their customers’ rates.

The differences between the spot price, paid to generators by CAMMESA, and the seasonal price, paid by distributors to CAMMESA, are accumulated in the stabilisation fund, which reflects the aforementioned gap and is used by CAMMESA when there are insufficient funds to pay generators from what was raised from distributors when the spot price is higher than the seasonal price.

Argentina is connected to neighbouring countries through various transmission lines. Currently, generators cannot freely enter into contracts in the forward market, with volumes, prices and conditions freely agreed between sellers and buyers, for the export and import of electrical energy. The export and import of electrical energy are currently centralised in CAMMESA. If a generator requests to export electrical energy, it must obtain authorisation from the Secretariat of Energy and CAMMESA.

According to information available on the CAMMESA website, in the 2022 annual report, the supply mix of electricity in Argentina, considering the total installed capacity, is as follows:

• thermal: 58.9%;
• hydroelectric: 25.2%;
• renewable: 11.8%; and
• nuclear: 4.1%.

Considering only renewable energy, the total installed capacity is:

• wind: 62%;
• solar: 23%;
• hydroelectric: 9.5%; and
• biotechnologies: 5.5%.

There are no specific concentration limits regarding the percentage of electricity supply, but there is legislation regarding concentration limits that provides a general framework applicable to several industries. Law No 27,442 on Antitrust provides that economic concentrations whose object or effect is to limit, restrict or distort competition are prohibited, as they may be detrimental to the general economic interest.

On the one hand, it carries out a conduct control on an ex-post basis, to prevent concerted practices and abuses of a dominant position; and, on the other, it carries out a control on M&A transactions, ex-ante, through a system of prior notification. The prior notification system is triggered when an economic operation meets certain requirements. As established by law, the National Competition Authority is in charge of studying the impact of the operation in the relevant market and will decide if it is approved, rejected or conditioned. In any case, the National Competition Authority has not yet been constituted, and its functions are carried out by the National Commission for the Defence of Competition (Comisión Nacional de Defensa de la Competencia, acronym CNDC in Spanish).

If M&A transactions involve regulated activities (eg, utilities such as transmission and distribution of electricity), the pertinent regulatory body, in this case, ENRE, must be consulted and shall issue an opinion on the operation, on the impact on competition in the respective market and on compliance with the regulatory framework. The response is not binding, and, in the absence of a response, it is considered that the regulatory entity does not object to the operation.

Heavy penalties may be imposed on companies that do not comply with antitrust regulations.

Please see 2.4 Law Governing Market Concentration Limits. Anti-competitive conduct and the market surveillance and enforcement process are contemplated in Antitrust Law No 27,442. It establishes the legal framework for the promotion of competition, the prevention of anti-competitive practices, and protection for consumers.

The National Commission for the Defence of Competition has jurisdiction over the entire country. Its powers and scope of authority include conducting investigations, compelling production of records, entry to property and search and seizure, and conducting interviews.

Potential sanctions for anti-competitive behaviour may include fines, injunctions, divestitures and other remedies to compensate harm caused by anti-competitive conduct. The specific penalties and sanctions are determined on a case-by-case basis, taking into account the severity of the behaviour and its impact on competition and consumers.

The CNDC operates in co-ordination with other regulatory authorities, such as the National Securities Commission (Comisión Nacional de Valores) and the ENRE, to ensure comprehensive enforcement of competition regulations in their respective sectors.

Argentina encourages the transition to cleaner energy sources (see 3.3 Programmes for the Development of Alternative Energy Sources). The limits of gaseous emissions into the atmosphere for thermal power generation are set by Resolution 108/2001 of the Secretariat of Energy, according to the different types of fuels used.

In terms of limiting carbon emissions from generators, Argentina has not implemented specific carbon taxes or a nationwide cap-and-trade system yet.

Argentina has approved COP21 of Paris, by Law No 27,270, but it only represents an international commitment to fight climate change – there are no other specific policies regarding the limitation of carbon emissions. In addition to this, in 2019, Argentina passed Law No 27,520 for Adaptation and Mitigation of Global Climate Change, and one year later its regulatory Decree No 1030/2020. This law establishes minimum environmental protection budgets to ensure effective nationwide mitigation and adaptation actions, tools and strategies against climate change.

In the framework of this law, two national plans for adaptation and mitigation to climate change were developed as a public policy instrument. The second plan was recently approved through Resolution No 146/2023 and established long-term measures for the decarbonisation of the energy matrix and analysis of the readjustment of the country’s current carbon tax or other carbon pricing mechanisms and instruments.

Furthermore, in COP27, Argentina presented its Resilient Low Emissions Development Strategy in the Long Term, with the objective of achieving carbon neutrality by 2050.

The supply mix of power in Argentina does not have carbon-based generation, so there are no programmes to encourage or require their early retirement.

Argentina has great potential for the development of alternative energies. The National Legislation on Renewable Energies (Laws 26,190 and 27,191, both regulated by the National Executive Power through Decree No 531/2016, Resolution 281/17 and Provision 1/18), known as the “Renewable Framework”, promotes the use of renewable energy sources and aims to increase their participation in the energy matrix.

The Renewable Framework provides that by the year 2017, 8% of the total consumption of electrical energy should come from renewable sources and that by 2025 it should be 20%. In addition, it provides that large consumers of electrical energy, which are users that consume more than 300 kW/h, must individually comply with these parameters, and for this purpose, they must purchase energy from a renewable source through CAMMESA, self-generate it or purchase it directly from generators by making a power purchase agreement (PPA).

The Renewable Energy Regulatory Framework grants various tax benefits for new generation projects, which include wind, solar and small hydroelectric projects – up to 50 MW of installed power – or biomass.

In order to meet consumption targets for the years 2017 and 2025, the Ministry of Energy carried out the RenovAr Programme, which aimed to acquire electricity from renewable sources from new projects. They were carried out in four rounds with the subscription of more than 200 contracts. In the PPAs, CAMMESA assumed the obligation to acquire electricity at prices fixed in dollars, for a period of 20 years, with guarantees provided by a Trust.

There is also the Mercado a Término de Energías Renovables (known as MATER) where buyers and sellers in Argentina can freely agree on PPAs for the supply of renewable energy. It is a very active market, where more than 1,100 contracts have been signed. The attractiveness of participating in this business is the obligation on users to prove that part of their consumption (by 2025 it should be 20%) comes from generation from renewable sources. The main difficulty facing the development of these projects is the limited capacity of the transportation system, especially in the areas with better conditions, like Patagonia.

The main laws that govern the construction and operation of generation facilities in Argentina include the following.

• Law No 24,065, mainly focusing on the general functioning of the electricity industry, with references to the operation of facilities rather than construction.
• Environmental Impact Assessment Law (Law No 25,675): This law establishes the requirement for conducting environmental impact assessments (EIA) for certain projects, including power generation facilities. It sets out the procedures and criteria for evaluating and mitigating the potential environmental impacts of these projects.
• Provincial Regulations: Each province in Argentina may have its own specific regulations and requirements for the construction and operation of generation facilities within its jurisdiction. These regulations can include permitting processes, environmental standards, land use regulations, and other relevant considerations.
• Grid Connection Regulations: The construction and operation of generation facilities also involve compliance with grid connection regulations, which define the technical requirements and procedures for connecting new power plants to the transmission or distribution grid, which are essentially the Procedures.

The regulatory process for obtaining the approvals necessary to construct and operate a commercial generation facility in Argentina typically involves the following steps.

• Environmental Impact Assessment (EIA): Depending on the size and nature of the project, an Environmental Impact Assessment may be required. The EIA involves a detailed review and assessment of the potential environmental impacts of the proposed facility. It includes the preparation of an Environmental Impact Statement (EIS) that outlines the project’s characteristics, potential impacts and proposed mitigation measures.
• Public participation: Public participation and input are usually an integral part of the regulatory process. The EIA process often includes opportunities for public consultation, allowing interested parties, stakeholders and affected communities to provide feedback and raise concerns related to the project’s environmental aspects.
• Regulatory authority review: The Secretariat of Energy has to provide to each project what is known as the authorisation to act as a wholesale electricity market agent, a process that involves the evaluation of the technical, economic and environmental aspects of the project to determine its compliance with applicable regulations and policies.
• Authorisations and permits: Based on the review process, the regulatory authority grants the necessary authorisations and permits for the construction and operation of the generation facility. This includes permits related to land use, environmental impact, grid connection (by the issuance of a certificate by the ENRE), and other relevant aspects.
• Compliance monitoring: Once the facility is operational, the regulatory authority monitors compliance with the approved plans, permits and environmental commitments to ensure ongoing adherence to regulatory requirements.

Public hearings are not always required by law, but may be conducted as part of the public participation process or if deemed necessary by the regulatory authority. The exact requirements for public hearings may vary depending on the specific circumstances and the applicable provincial regulations.

The terms and conditions imposed within approvals to construct and operate a generation facility in Argentina can vary depending on several factors, including the size and type of the project, its location, and the specific regulations and requirements applicable at the time of approval. However, some typical terms and conditions that may be imposed include the following.

• Technical specifications: The approval may specify the technical requirements and standards that the facility must meet, such as capacity, efficiency, voltage regulation, and grid interconnection parameters.
• Environmental compliance: The approval may include conditions related to environmental protection and mitigation measures. These may involve requirements for monitoring air emissions, noise levels, water usage, waste management, and compliance with applicable environmental regulations.
• Construction and operational timelines: The approval may establish specific timelines for the construction and commissioning of the facility, as well as any milestones or reporting requirements during the operational phase.
• Grid connection and system stability: The approval may include conditions related to the connection of the facility to the transmission or distribution grid, ensuring compliance with grid code requirements, and maintaining system stability.
• Reporting and monitoring: The approval may require regular reporting on the facility’s operational performance, environmental compliance, and other relevant aspects. It may also involve monitoring by the regulatory authority to ensure ongoing adherence to the approved conditions.

The local legislation does not contemplate the possibility of obtaining an amendment or relaxation of a term/condition of approval, but does not prohibit making a presentation to the competent authority in order to obtain one.

The rights to the surface of land for the purpose of constructing and operating a generation facility are typically obtained through negotiation and agreement with the landowners. The proponent of the facility does not have automatic eminent domain, condemnation or expropriation rights to obtain surface access and use.

The process for obtaining rights to the surface of land involves the following steps.

• Negotiation and agreement: The proponent of the generation facility engages in negotiations with the landowners to reach a mutually acceptable agreement for the use of their land. This includes discussions on lease or purchase terms, duration, access rights and compensation.
• Land lease or purchase agreement: Once the parties have reached an agreement, a formal land lease or purchase agreement is executed, documenting the rights and obligations of both parties. The agreement outlines the terms of access, land use and compensation.
• Compensation: The compensation required for obtaining the rights to the surface of land is typically negotiated between the proponent and the landowner. The compensation can take various forms, including one-time payment, annual lease payments, or other agreed-upon arrangements. The compensation is intended to provide fair and reasonable remuneration to the landowner for the use of their land.
• Determination of compensation: The quantum of compensation is determined through negotiations between the proponent and the landowner. It is influenced by factors such as the size and location of the land, its current use, market value, and the expected impact of the generation facility on the land’s value and use. Valuation experts may be involved in assessing the fair market value of the land and assisting in the determination of compensation.

In Argentina, the requirements for decommissioning a generation facility vary depending on the specific circumstances, the type of facility, and the applicable regulations. However, there are general obligations and considerations regarding the decommissioning of generation facilities.

The decommissioning of a generation facility typically involves the safe and environmentally sound removal or retirement of the infrastructure and equipment associated with the facility. The specific requirements may include the following.

• Compliance with environmental regulations: The decommissioning process must comply with applicable environmental regulations and standards. This may involve conducting environmental assessments, obtaining necessary permits, and implementing proper waste management and remediation measures.
• Restoration of site: After decommissioning, there is often a requirement to restore the site to its original or agreed-upon condition. This may involve remediation of any environmental impacts and addressing any potential risks associated with the site.

The principal laws, known as the Regulatory Framework, were referred to in 1.1 Law Governing the Structure and Ownership of the Power Industry.

In addition, environmental matters are regulated by the General Environmental Law No 25,675 and several other specific national and provincial laws, as well as administrative regulations.

ENRE has issued specific regulations that establish environmental criteria related to the public service of electric power transmission. The current requirements were determined by the ENRE through Resolution 558/2022, which establishes the minimum requirements that electric power transmission companies must comply with regarding their environmental management systems for the facilities under their responsibility.

Regulations for Obtaining Approvals

The construction of new transmission lines is primarily regulated by the Regulation for Access to Existing Capacity and Expansion of the Electric Power Transmission System, determined in Annex 16 of the Procedures. Annex 16 states that users or prospective users of the transmission system (generators, distributors or large users) who require access to the existing energy transmission system must submit an application to the corresponding transmission company, whose system will integrate the line to be constructed.

The regulatory standard provides for the construction of new transmission lines under three basic modalities, depending on the characteristics of the project.

• By contract between parties: The user requiring the connection directly enters into a contract with the transmission company that owns the system where the transmission line will be built.
• By public tender: The party interested in having the expansion constructed can request authorisation from the Ministry of Energy to construct a transmission line through a public tender, which will be incorporated into the “System Expansion Plan” prepared by the Ministry of Energy. The selection of the contractor for the construction of the line will be subject to a bidding process, and the bidding documents will contain the terms and conditions governing the contract. The work will be executed by the company that presents the best offer.
• Minor expansions: These are small-scale projects whose cost does not exceed the values specified in the regulations.

Construction of Transmission Lines Under the Public-Private Partnership Regime

In 2017, the National Congress enacted Law No 27,328, which regulates infrastructure projects to be carried out through public-private partnership contracts. For this reason, the Ministry of Energy, through Resolutions No 2/19 and 7/19, incorporated the regime applicable to the construction of transmission lines under Law No 27,328 as Annex 19 of the Procedures. Although no electric power transmission lines have been constructed under this regime yet, it is currently in effect, and there may be projects in the future for the construction of transmission lines with this regime.

Holding Public Hearings

The ENRE must convene a public hearing whenever it resolves issues related to the implementation of expansion works for electrical transmission facilities. The public hearings are one of several to guarantee citizen participation in public decision-making, but they are not the only constitutional alternatives.

The construction of transmission lines is governed through construction, operation, and maintenance contracts (referred to as “COM contracts”).

According to the provisions of Annex 16 of the Procedures, from a regulatory and economic-financial perspective, the project is divided into two clearly differentiated stages: (i) the construction of the line until its commercial enablement to begin transmitting power, and (ii) the stage of operation and maintenance of the constructed facilities, during which the investment for the construction of the line is recovered. This stage is referred to as the “amortisation period” and cannot exceed 15 years.

In the classic scheme of the COM contract, the constructor fully finances the works, which are remunerated in the second stage through the payment of a “canon” that covers the value for the construction of the power transmission facilities and the cost of operation and maintenance of the facilities during the amortisation period.

However, it is worth noting that the authorities may determine other financing modalities for the execution of the project in the bidding documents. These may include the possibility for the constructor to receive advance payments of the canon during the execution period of the works. Once the line is commercially enabled, the constructor concludes their participation in the COM contract, and the concessionaire of the transmission system or a third party can be contracted for the operation and maintenance of the constructed facilities.

Additionally, the constructor must sign a technical licence with the concessionaire carrier of the transmission system to which the line is connected. The technical licence is a contractual document that contains the technical conditions for construction, operation and maintenance, as well as the technical requirements necessary to ensure the required service quality in the electric system. The concessionaire carrier has the duty to supervise the constructor during the different stages of the COM contract and can impose sanctions if the quality parameters established in the licence are not respected.

Argentine legislation introduced the concept of “Administrative Servitude of Power Line” (AEPL) as a right granted by a competent authority to a company or entity responsible for the transmission of electrical energy to use and access certain private or public properties for the purpose of constructing, operating and maintaining electrical transmission lines. The AEPL is established through a legal and regulatory process that involves obtaining permits and authorisations from the relevant authorities. Additionally, conditions and economic compensations are established for the owners of the lands affected by the installation of the transmission lines.

The AEPL is regulated by Law No 19,552, which states in its Section 1 that an AEPL will be granted to the concessionaire of electrical substations, power transmission lines and electricity distributors. This servitude grants the legal right to occupy and use lands where electrical transmission system facilities are installed.

The AEPL affects the land and includes restrictions and limitations on the landowner so that the concessionaire can construct, maintain, repair, supervise and dispose of all the system installations required for energy transmission. Law No 19,552 provides that the National Electricity Regulatory Entity (ENRE), by issuing the corresponding resolution, approves the project and plans of the work to be executed, declares the land’s affectation to the AEPL, and authorises its registration in the corresponding property registry of the area where the land is located.

Once the properties are affected by the AEPL, the owners of those properties must be officially notified of the affectation and the planned route within each affected property or area. The owner of the property affected by the servitude is entitled to compensation, which will be determined in an agreement between the owner and the company holding the AEPL. In the absence of an agreement, Law No 19,552 provides that the compensation will be determined by a judicial court.

In summary, an AEPL is a legal right that allows a company involved in electrical transmission to use private or public lands to install and operate electrical transmission lines, thereby ensuring the supply of energy and the functioning of the electrical system.

Section 1 of Law No 24,065 establishes that the transportation of electrical energy is a public service, subject to a concession granted by the national government, under conditions of monopoly and exclusivity. For this reason, the concession contracts of the companies providing the public service stipulate that the national government grants them exclusivity for the provision of the public service. As defined in the concession contracts, this means that the national government will not grant the service to third parties or provide it itself, either through the existing transportation system or through the facilities constructed to expand the transportation capacity.

Law No 24,065 and the concession contracts only impose on the providers of the public transportation service the obligation to allow “open access” to the transportation system, facilitating it on equal terms to all users of the transportation system interested in connecting to it. This includes generators, who produce the energy, as well as distributors and large users, who consume it.

The tariff regime of the public electricity transportation service is regulated by Law No 24,065 and its regulatory decree (Decree No 1398/1992), as well as by Annex 16 of the Procedures and the respective concession contracts of the companies. Law No 24,065 establishes the principle of “fair and reasonable tariffs” for the public transportation (and distribution) of electrical energy.

The tariff approval processes requires public hearings, that provide the opportunity for consumers, stakeholders and interested parties to express their opinions, concerns and feedback regarding proposed tariff changes or adjustments. However, the ENRE must decide the tariff’s value depending on the economic and technical needs of the public service to guarantee the quality and continuity of the service.

The access request can be submitted by any direct user of the transportation system, including generators needing to transmit the energy they produce, such as large users or distributors intending to consume the generated electrical energy.

The request is submitted to the concessionaire carrier, who must assess the technical possibility of connecting the new user and submit their corresponding report to the ENRE (National Electricity Regulatory Entity). Annex 16 of the Procedures specifies that the regulatory authority has a period of 30 days to determine whether the transport capacity can be expanded.

The only limitation to the general principle of open access is in cases where the power transmission line does not have the capacity to incorporate additional energy for transportation. This is to prevent line saturation and its effect on the quality of the public service.

As we have already mentioned, the generation and transportation of electricity have been subjected to federal jurisdiction by Law No 15,336 and Law No 24,065, while the public service of distribution remains under the jurisdiction of each province, except EDENOR and EDESUR.

Most provinces adhered to the regime established by Law No, 24,065 or enacted their own regulatory framework similar to the national one. The law governing distribution in all its aspects is the Regulatory Framework, already mentioned. EPC and supply contracts and other private agreements related to these facilities are governed by the Civil & Commercial Code.

Section 11 of Law No 24,065 establishes that no energy distribution company may begin the construction and/or operation of facilities of such magnitude without the approval of the ENRE. The first step is to conduct preliminary studies to determine the feasibility and technical aspects of the project. This includes assessing the demand, identifying potential locations for the facilities, and conducting environmental impact assessments.

The companies must submit an application along with all the required documentation, including technical plans, environmental studies, and financial information. The project will undergo technical evaluations by the regulatory authority to ensure compliance with technical standards and grid connection requirements. This involves assessing the capacity, reliability and safety of the proposed distribution facilities.

It is worth highlighting that Section 42 of the National Constitution requires that consumers and users of goods and services have the right, in consumer relationships, to the protection of their health, safety and economic interests, as well as to adequate and truthful information. Therefore, the National Constitution demands that legislation and regulatory bases for public services include provisions to guarantee the necessary participation of consumer and user associations.

For that reason, Law No 24,065 also establishes that a public hearing must be held before authorising the project and including it in the tariff. This involves informing and engaging with the local community to gather their input, address concerns, and ensure transparency in the decision-making process, especially when the construction and operation of electric distribution facilities are included the Investment Plan and are part of the rates and charges that will be applied to customers for the distribution services.

Furthermore, the project may require various permits and environmental approvals from federal provincial and municipal levels. These may include permits related to land use, construction, environmental impact, and any other applicable regulations.

It is important to note that the timelines to obtain all approvals depend on the specific requirements and processes of each project, its location, and any specific regulations or policies in place at the time of the application.

As stated in 6.2 Obtaining Approvals for the Construction and Operation of Electricity Distribution Facilities, companies must submit an application along with all the required documentation, including technical plans, environmental studies and financial information. The project will undergo technical evaluations by the regulatory authority to ensure compliance with technical standards and grid connection requirements. This involves assessing the capacity, reliability and safety of the proposed distribution facilities.

In order to obtain an amendment or relaxation of a term and condition of an approval, which is established by the ENRE, it is necessary to make a presentation, indicating the arguments that justify the petition. If this is expressly rejected, an appeal can be filed at administrative headquarters and, if rejected again, a presentation can be made before a judge in order to obtain the said amendment.

Argentine legislation introduced the concept of Administrative Easement of Power Line (AEPL) as a right granted by a competent authority to a company or entity responsible for the distribution of electrical energy to use and access certain private or public properties for the purpose of constructing, operating and maintaining electrical transmission lines.

The AEPL is established through a legal and regulatory process that involves obtaining permits and authorisations from the relevant authorities. Additionally, conditions and economic compensations are established for the owners of the lands affected by the installations dedicated to the public service of distribution.

The AEPL is regulated by Law No 19,552, which states in Section 1 that an AEPL will be granted to the concessionaire of electrical substations, power transmission lines, and electricity distributors. This servitude grants the legal right to occupy and use lands where electrical transmission system facilities are installed.

The AEPL affects the land and includes restrictions and limitations on the landowner so that the concessionaire can construct, maintain, repair, supervise and dispose of all the system installations required for energy transmission. Law No 19,552 provides that the National Electricity Regulatory Entity (ENRE), by issuing the corresponding resolution, approves the project and plans of the work to be executed, declares the land affected by the AEPL, and authorises its registration in the corresponding property registry of the area where the land is located.

Once properties are affected by the AEPL, the owners of those properties must be officially notified of the affectation and the planned route within each affected property or area. The owner of the property affected by the servitude is entitled to compensation, which will be determined in an agreement between the owner and the company holding the AEPL. In the absence of an agreement, Law No 19,552 provides that the compensation will be determined by a judicial court.

In summary, an AEPL is a legal right that allows a company involved in electrical distribution to use private or public lands to install and operate electrical transmission lines, thereby ensuring the supply of energy and the functioning of the electrical system.

Section 1 of Law No 24,065 establishes that the distribution of electrical energy is a public service, subject to a concession granted by the national government, under conditions of monopoly and exclusivity. For this reason, the concession contracts of EDENOR and EDESUR stipulate that the national government grants them exclusivity for the provision of the public service. As defined in the concession contracts, this means that the national government will not grant the service to third parties or provide it itself, nor any other national, provincial, or municipal authority.

The tariff of the public distribution service under federal jurisdiction is governed by the principles and criteria of Law No 24,065, and the tariff regime provided in the concession contracts. Its Section 40 stipulates that the public service shall be offered at fair and reasonable tariffs that cover reasonable operating costs applicable to the service, taxes, amortisations, and a reasonable return.

Law No 24,065 also provides that tariffs are determined by ENRE and set at a maximum price (price cap system) for a period of five years. Therefore, Section 42 (d) of Law No 24,065 establishes that tariffs shall be subject to periodic adjustments (usually semi-annual) to reflect any changes in the concessionaire’s costs that are beyond their control. Consequently, the regulatory framework requires that the tariff must cover all the costs incurred by the distribution company and the purchases of energy in the wholesale market to provide the public service.

In conclusion, the tariffs must provide the companies with income that allows them to cover all operating costs, pay taxes, amortise assets, comply with the Investment Plan, and generate a profitability similar to other comparable or comparable risk activities, in relation to the level of efficiency in the provision of the service.

If tariff adjustments are not approved for reasons of public or social interest, the national government and ENRE must implement measures to maintain the income equivalence with the tariff concepts in order to comply with the tariff principles and provide a quality service to users. However, unfortunately, this has not happened on several occasions since the early 2000s. Therefore, when authorities approve tariffs that are lower than those legally and contractually required, companies have the right to appeal the resolutions approving insufficient tariffs.

According to Law No 24,065, ENRE resolutions may be appealed, at the company’s choice, in administrative proceedings before ENRE or the Secretariat of Energy, or directly in judicial proceedings by filing a direct appeal before the Court of Appeals.