The Energetic Gordian Knot

The energy sector is one of the most serious bottlenecks Uruguay is facing. Our country cannot sustain significant growth rates with the current capacity of energy production. Not only because it is already inadequate, but because there will be no major new investments if the country is not capable of ensuring a flow of abundant energy at reasonable price. What is offering Uruguay to the investor, nowadays? An energy saving plan?

As in the telecommunications sector, for too long the country has been hostage to corporate interests associated with the monopolies held by ANCAP (legal since the 2003 referendum) and UTE (illegal).

First of all, these monopolies have transformed private interests strategies into national ones. The corporatist strategies became the actual energy policies, revealing the accumulation of political power these bureaucracies have reached (defying not only the institutional republican order but the very legal system, as in the case of UTE).

Secondly, these monopolies have hindered innovation and experimentation in the field of energy production, leaving the country prisoner of methods repeatedly proven as inadequate and expensive.

Thus, in these three years of left-wing government (sort of...) interconnection with Brazil has not been solved, they keep on insisting with small diesel/gas generation plants at prohibitive prices, while the generation by private parties, which is explicitey authorized by the Law of the Electricity Sector Regulatory Framework (theorically in “effect” since 1997), still has to become into effect, because UTE does not apply it —despite official announcements— and insists on not handing the electric energy dispatch to a currently useless agency: the Administration of the Electric Energy Market (one of UTE directors suggested not doing it ever). UTE only opened bids for purchasing small amounts of energy from private parties. Those bids ended up with no offers (no one is willing to invest just for selling a few KWs to UTE).

Uruguay cannot stand anymore this state of affairs. Because, contrary to the “conventional wisdom” spread with true success by the combination of these corporate interests and outdated ideological views, the perpetuation of these monopolies has only deepened the ties of dependency of Uruguay, compromising seriously our sovereignty.

In addition, it is risking economic growth, as insecurity in the supply of energy is a factor —one of many this administration has put in place— that might discourage major investments in the productive field.

Current Minister Lepra is leaving his position and is gonna be replaced with Daniel Martínez, current CEO of ANCAP. Can we expect, then, a dramatic twist in an area that demands it with urge? We doubt it.

Martínez not only comes from one of the companies responsible for Uruguay's energetic ruin. He is inextricably committed to the alliance with PDVSA, an opaque bussines of unknown profits. Besides that, back in the 80's, Daniel Martínez was the president of ANCAP's workers union, that is, one of the sectors who profit the most from the monopolistic nature of ANCAP.

What Uruguay needs right now is (at least) to comply with the 1997 law: 1) transfer of the Electricity Charges Dispatch from UTE to the Administration of the Electric Market and 2) at the same time, fixing the royalties for the usage of UTE's electrical network by private companies, so as they can freely sell the energy generated by them at their own risk.

Additionally, other things should be done. But if those mentioned above are hard to materialize, these ones are almost “unthinkable” in the current political scenario: 1) the effective demonopolization of the importation and distribution of fuel; 2) additionally, getting a bussines partner for ANCAP via an international and open bid, so as the company can face competition in reasonabe terms; 3) repealing article 27 of the Law of the Electricity Sector Regulatory Framework, which forbids the nuclear energy in Uruguay, thus allowing the feasibilty studies needed to project the construction of a nuclear plant (after all, it is the cheapest and most environmental-friendly source of energy); 4) granting greater autonomy to URSEA (the regulatory unit of services of water and energy supply) with a new institutional position; 5) breaking up UTE in —at least— two different companies: a power generation company, in competition with private suppliers, and a transmission and distribution company, which might remain as a monopoly in principle. The reason for this break up is pretty obvious: if UTE remains as a single company, its generation sector will be competing with private generators for selling power to its monopsomic transmission and distribution sector. That absurd scenario would encourage unfair practices and abuses of dominant position.

Once again: the very least the government could do is to comply with the regulations already in place or, otherwise, come up with an alternative, such as a new regulatory framework or repealing the entire law and going back to the legal monopoly (a sweet dream for UTE's bureaucracy).

Cutting this Gordian knot is something we simply cannot afford to delay.