The organic law on energy competitiveness, whose goal is “to promote economic and energy solutions for overcoming the energy crisis, optimizing the management of public resources”, and which was adopted by the National Assembly in the second debate on January 10, brings positive news about investments and environmental protection issues, although some sectors are already criticizing him, since he included tax issues, which they believe would be constitutional.

Juan José del Valle, executive director of J3M, who participated in the debate on the law as a delegate of solar energy companies, sees at least three positive points in the law.

The first is the creation of a National Energy Efficiency Fund, which proposes to fund companies or people who can install efficient equipment in their homes and businesses. For Del Valle, this fund will be fed by taxes, but it can also be fed by multilateral funds.

He also considers it positive that the calculation of the price of electricity is changed so that the investment cost of the generator is included in it. Explain that this will reveal costs, since the 9 cents charged now is not a true cost. The actual cost, according to the Energy Regulatory Agency, is 15 cents. This will, therefore, enable the entry of private investments interested in the sale of energy in the future.

This issue appears in Article 18 of the law, which amends Article 56 of the current law. The new article states that “the cost of public and strategic electric power service will include costs related to the phases of production, transmission, distribution and marketing, as well as general public lighting, which will be regulated by the Agency for Regulation and Control. Competent”. But it also indicated that these costs correspond to, among other factors, the “annuity of assets in use.” It is also stated in the same article that the costs will be determined on the basis of the conditions established in the regulated contracts.

For Del Valle, it is important that citizens become aware that there must be an increase in rates, that high subsidies must be reduced and that these subsidies should be directed only to the poorest families. With adequate tariff collection, the state could even have the funds to build new plants and thus guarantee that there will be no more blackouts in the future.

The provision of the law corrected the punishment given to those who had solar energy in homes, schools and sports centers, because they were forced to have a separate meter and pay a series of additional fees. This has now been removed. However, Del Valle regrets that this provision for companies has not been repealed.

For the expert, there are points that have not been resolved in the law, such as the issue of the trust, which has been blocked for several years. This is, for example, the case of the photovoltaic project in El Arom, which is not realized due to a lack of trust.

On the other hand, Fernando Salinas, an energy expert, assures that it is positive that the law opens up the possibility of private investment in the sector of production, transmission, distribution and public lighting.

“The part that is not so positive: there are no incentives for hydropower, which is renewable in large projects, and no incentives for energy that pollutes the environment less, such as natural gas and nuclear energy. Some of us experts used force,” he comments.

The issue of energy storage remains in the preparation of the law. This is done with pumped hydroelectric power stations or large storage electric batteries or with green hydrogen. This topic is not included in the law.

Meanwhile, regarding the fairness of the rates, he assures that it is positive because it will be more attractive for private companies to be able to participate in this market with investments; However, this is not good news for the consumer who will have to pay more in the future. Understand that the consumer will pay the actual costs.

The main advantages of the law

According to the Ministry of Energy, these are some of the advantages that the new law brings:

But, in addition, the new Law on Energy Efficiency introduces reforms that were not considered in the original project, and which concern tax issues. This prompted warnings from various sectors, regarding them as illegal and inconvenient.

One of them is found in the first transitional provision, which states that taxpayers who fully or partially pay tax obligations arising from taxes whose management and collection is the responsibility of the Tax Administration (PRI), and which arose until December 31, 2023, they will enjoy a 100% exemption from interest, penalties and additional fees, with respect to the paid-up capital. For this purpose, the payment must be made by July 31, 2024.

Another transitional provision, the third one, has worried the financial sector because it removes the exemption from paying foreign exchange outflow tax (ISD) when canceling foreign loans. For the Association of Private Banks of Ecuador (Assobanca), this provision violates constitutional norms, but it will also affect the delivery of credit to vulnerable sectors, as it will make them more expensive and prevent their flow into the country.

Among the reform provisions, the document adopted by the plenary session also replaces and adds paragraphs in the Tax Regime Law, among which are: