Oil and Gas Alert – July 2021

Resolution Nº 659-2008-OS/CD that adopted the current version of the Rule “Procedure for the Elaboration of Tariff Studies on Regulated Aspects of Natural Gas Distribution” was amended

Through Resolution N° 178-2021-OS/CD (“Resolution“), published on July 15, 2021, in the Official Gazette “El Peruano”, the “Procedure for the Elaboration of Tariff Studies on Regulated Aspects of Natural Gas Distribution”, adopted by Resolution Nº 659-2008-OS/CD (“Procedure“) was amended. This, in order to align its provisions and criteria to the recent amendments made to the Sole Ordered Text of the Regulation of Natural Gas Distribution by Pipeline Network, adopted by Supreme Decree Nº 040-2008-EM (“Distribution Regulation“), and to the terms applicable to the distribution concessions granted in recent years.

The following are the most relevant amendments:

• With regard to the Five-Year Investment Plan, it was specified that it must incorporate all viable requests submitted by Housing Associations, Residents’ Associations and other interested parties, during the regulatory period in force, which have not been implemented. Excluded applications must be supported.
• It was also specified that: (i) the Five-Year Investment Plan must be updated when, in a year of the tariff period, investments greater than 20% of the accumulated foreseen investments in networks are projected, for the attention of Residential Consumers; and (ii) from the second tariff review, the Five-Year Investment Plan shall consider for the first year of execution the investments proposed for the fifth year of the previous plan that have not been executed. The investments that shall not be executed must be supported.
• Regarding the Right of Connection, it was specified that, in the case of customers with consumption of less than 300 m3/month, it must consider the savings generated by using the same Connection Pipe for two or more Connections.
• The Concessionaire must evaluate in its Market Diagnosis the following criteria: i) Socioeconomic status, ii) Family Budget, iii) cost of the connection and the Internal Installation, iv) Valuation of Natural Gas, v) acceptance of Financing schemes and vi) other relevant schemes.
• With regard to the Network Usage Factor, it was specified that new networks must reach at least a Penetration Factor of 30% at the end of the second year of service.
• The concept “Commercialization Costs” may include the costs of commercial losses as long as they are duly identified and the effect on the Concessionaire’s income is proven.
• For the determination of the tariff structure, the annuities of the New Replacement Value of the Distribution System that must be incorporated in the regulation period must be determined, which shall be adapted to the demand and recovered in a maximum period of 30 years.
• In relation to the tariff design, it was stipulated that, although the tariffs of all categories must be competitive, priority must be given to savings in the special categories of public institutions and NGV. It was also stipulated that the tariff for residential consumers may not be lower than the savings obtained in previous regulatory processes.
• It was specified that if a service connection is requested that does not have a regulated maximum limit, the concessionaire must meet the request by applying the most economical cost that is closest to the typical regulated configurations and inform OSINERGMIN about the new types of service connections that need to be regulated to avoid affecting or paralyzing the connection of residential consumers.
• Regarding the Promotion Mechanism, it was established that the zones proposed by the Concessionaire to access the benefit must be determined considering the basis of the Stratified Plan developed by INEI or according to the provisions issued by MINEM, and also, the Promotion Expenses shall be allocated to non-residential consumers.

Any questions on this matter may be answered by Doctors Jorge Pérez-Taiman (jpereztaiman@estudiorodrigo.com), Carolina Noriega (cnoriega@estudiorodrigo.com), Piero Scarafone (pscarafone@estudiorodrigo.com) and/or Talía Hormaeche (thormaeche@estudiorodrigo.com).