BTN News: The Colombian Ministry of Finance has recently submitted the National Budget for 2025 to Congress, with a staggering total of 523 trillion pesos. Despite this seemingly substantial figure, there remains a significant shortfall in funds needed to cover the electricity subsidies provided to Colombian households. The Colombian Association of Electric Energy Distributors (Asocodis) has raised alarms, revealing that the 3.4 trillion pesos allocated in this budget are far from sufficient to cover the necessary subsidies for the upcoming year. This budget, they claim, would only stretch until mid-June 2025, leaving a gap of approximately 700 billion pesos to cover the remaining months of the year.
This financial predicament is compounded by the fact that the government has yet to secure all the resources needed to pay for these subsidies in 2024. Asocodis estimates that by July 31, 2024, the government will owe companies a staggering 930 billion pesos in subsidies that have been advanced to users. This deficit arises because these subsidies are initially covered by the companies with their own funds, and later reimbursed by the Ministry of Mines and Energy, often months after the quarterly payments are due.
These subsidies are crucial for many Colombian families, especially those in lower-income brackets. They fund 60% of the subsistence consumption for households in the first income stratum, 50% for those in the second stratum, and 15% for families in the third stratum. The government’s failure to ensure these payments has left companies in a precarious financial position, exacerbated by recent liquidity issues stemming from the “tariff option” (opción tarifaria) scheme. This situation could have severe repercussions not only for the energy companies but also for the millions of Colombians who rely on these subsidies to manage their electricity bills.
As of now, the government has not yet introduced the necessary legislation in Congress for the nation to assume the debt arising from the tariff option. This delay is further straining the finances of energy companies, which are already grappling with the government’s failure to approve payments due to a budget shortfall of 20 trillion pesos. Even if the government manages to pay the 930 billion pesos owed, a significant deficit of 1.3 trillion pesos will still remain to cover the subsidies from August to December 2024.
When this shortfall is combined with the projected deficit for 2025, there is a total of approximately 2 trillion pesos missing to ensure the continuation of electricity subsidies for the country’s most vulnerable families. The executive director of Asocodis, José Camilo Manzur, has highlighted the gravity of this situation, pointing out that the ongoing liquidity issues are severely hampering the ability of companies to manage these funds. The failure to present the necessary legislation in Congress to assume the tariff option debt only worsens this problem, threatening to drive up electricity bills for consumers and stalling essential investments needed to maintain and improve service quality.
Despite a promise made by President Gustavo Petro in May to have the nation assume 2.7 trillion pesos of the tariff option debt, this has yet to materialize due to the lack of legislative action. The absence of these funds forces companies to rely on short-term credit solutions, such as loans from Findeter, which have so far provided 500 billion pesos. However, this represents only 18.5% of the debt associated with the tariff option that the government has committed to covering.
Without a concrete solution, energy companies will continue to struggle with liquidity issues, and the cost may ultimately be passed on to consumers in the form of higher electricity bills. Moreover, the lack of funds could force companies to reduce investments in critical infrastructure and service improvements, further exacerbating the challenges faced by the Colombian energy sector.
While some energy companies have announced tariff reductions for July 2024, these decreases are primarily due to market conditions, such as the end of the El Niño phenomenon and lower restriction costs, rather than any government intervention. Until the necessary legislative measures are taken and the promised funds are secured, the outlook for Colombia’s electricity subsidies—and the millions of families who depend on them—remains uncertain.