After the National Assembly modified the Law for the Promotion of Electricity Generation with Renewable Sources and its reforms, clean energy generators will be able to negotiate the lowering of current prices and in exchange they will receive five additional years of tax exemption.
The initiative, urgently submitted by President Daniel Ortega, exposes the voluntary negotiation process being carried out with electricity generators from renewable sources for the benefit of the Nicaraguan population and the country's economic sectors, the National Assembly reported.
The authorities announced that a 3% reduction in the price of electricity will be applied as from July 1st, a reduction that would be not enough in the current context of tariff increases.
The Government informs that as of July 1st of this year 2020, Nicaraguan families will enjoy a 3% reduction in electricity rates, which in addition to benefiting the users of the energy service, contributes to guarantee the technical and economic stability of the Electricity Sector, says an official statement.
In a context of health emergencies and falling oil prices, Nicaraguan businessmen are asking the government to take advantage of market conditions and reduce electricity rates by 15 to 20%.
For the Superior Council of Private Enterprise (Cosep), the advantage of buying and storing oil derivatives for electricity generation as soon as possible should be evaluated, and thus taking advantage of the historical lows in the prices of these products.
Arguing that there is a risk that energy transactions in the region will become more expensive, Guatemalan businessmen are asking the outgoing government to refrain from approving or signing reforms to the Central American Electricity Market Framework Treaty.
Because on January 10 the discussion is programmed within the Director Council of the Regional Electric Market of Central America (CDMER), the subscription of the Third Protocol, which would reform the Framework Treaty of the Electric Market, the private sector of Guatemala has issued an alarm before any change in the regulations, since it could cause increases in the prices of energy transactions or generate negative effects in the Guatemalan market and its interconnection with Mexico.
In the country, the business sector expects an increase in operating costs in the coming months, as a result of the expected increase in the price of electricity in the short term.
The non-tax exemption of equipment that generates solar energy, together with the gaps in its regulation, are some of the factors that make investments more expensive in Nicaragua.
In Nicaragua, companies involved in the production of bread are facing several difficulties because of the increase in their operating costs, which derive from the rise in taxes and electricity tariffs.
The beginning of the year has been difficult for most of the productive sectors of the country and bakers are not exempt from this reality. On February 27, 2019, the amendment to the Tax Agreement Law was approved, which consisted of raising from 1% to 2% the income tax for medium sized companies with higher incomes. Another of the measures contemplated by the reform was to raise the income tax of large taxpayers from 1% to 3%.
Since June 1, there has been a 3% increase in the average selling price to the final consumer in the country, going from the cost per megawatt of $219.8 reported in March to $226.5 from this month.
The increase was officialized in La Gaceta on June 18 and the new price per megawatt is applied to each tier that makes up the tariff sheet, which includes residential, commercial, industrial and irrigation tariffs.
The new price sheet that has been in force since January establishes that consumers with residential, commercial or industrial tariffs will pay 3.28% more than in 2018.
Arguing that generation and distribution prices increased because of the "behavior of fuel prices," along with inflation reported by the local economy, the Nicaraguan Energy Institute (INE) decided to increase the electricity price.
In 2016, the average cost of 1 kWh in Central America was 13.48 cents, while in Costa Rica, it was 18.47 cents.
A report from the CEPAL indicates that in 2016, the average cost of one kilowatt hour (kWh) in Central America was 13.48 cents, while in Costa Rica it was 18.47 cents; 37% more for industrial consumption of 100,000 kWh.In El Salvador and Guatemala, it was 11.03 and 11.54 cents respectively. In Panama, 10.92 cents.
The plan to reduce subsidies on electricity tariffs could be executed within four years, between 2018 and 2022, and in coordination with the business sector.
The Ortega administration's plan is to start with revision of the current subsidy schemes and develop a strategy to reduce them gradually.
Bayardo Arce Castaño, adviser of Economic and Financial Affairs at the Presidency, explained: "...The IDB is going to lend us $65 million to make progress in the regulation of the electricity sector.The idea is that this reorganization take place between 2018 and 2022.It is not that tomorrow or the first of January of 2018 the subsidy will be removed or the rate lowered or raised, it is not like that.This is a four-year affair. "
A 2% increase in electric energy rates has been announced, and an assurance that it will be the only increase during the present year, 2017.
An article on Elnuevodiario.com.ni reports that Óscar Mojica, president of the Nicaraguan Institute of Energy (INE), justified the increase as being due to the international price of bunker fuel.Mojica also stressed that "...
The approved law states that 25.2% of the savings caused by the reduced oil bill will be used to repay the debt of the electricity sector.
From a statement from the National Assembly of Nicaragua:
Deputies to the National Assembly approved this December 13, an amendment to the Law on Variation of the Consumer Electricity Rate, Law 898, which states in Article 4 that of the savings in the electricity tariff due to slumps in the price of bunker fuel, 55.5% will be allocated towards reducing energy rates for residential consumers consuming more than 150 kwh per month.
Average prices for buying and selling on the spot market, quantities by contract and by spot price, amounts of predispatched MWh per hour, per day or for specific periods.
The regulator, Energía de la Autoridad Reguladora de los Servicios Públicos de Costa Rica (ARESEP), has published a comprehensive online information system for the Costa Rican electricity market, with a section dedicated to the Regional Electricity Market.
The Nicaraguan Energy Institute has confirmed that the reduction in the tariff schedule has the support of employers, despite a further decrease being expected.
The president of the Nicaraguan Energy Institute (INE), David Castillo, told Elnuevodiario.com.ni that this reduction in energy comes on top of another 10% which was approved in April 2015. It was also noted that if the oil price continues to fall, further reductions will be analyzed every three months.