The main objective of Edesur is the distribution and com-mercialization of electricity in the southern area of Buenos Aires. This includes two-thirds parts of the city of Buenos
Aires’ area and twelve districts of Buenos Aires province, covering 3,309 km2, for a period of 95 years starting from August 31, 1992.
This period includes an initial term of 15 years and eight additional periods of 10 years each. On February 5, 2007, the National Electricity Regulatory Entity (ENRE) resolved to extend the initial period for five additional years, from the completion of the Integral Tariff Review (RTI) process.
Later, on January 27, 2016, the Resolution MINEM N° 7/2016 was enacted, which instructed ENRE, among other things, to: perform an adjustment to the VAD in the tariff charts of the Company, on behalf of the RTI (Integral Fees Renegotiation) and the framework of the Transitory Tariff Regime established in the Agreement Act and to carry our every act needed to proceed the RTI, which should come into force before December 31, 2016. The process and schedule for the RTI was established through Resolution ENRE 55 as of April 5, 2016.
Within the framework of the RTI process, on October 28, 2016 the public hearing was held to inform and hear the opinions with regards to the tariffs proposals that the distribution companies Edesur and Edenor presented to the ENRE according to Resolution ENRE N° 55/2016.
On December 30, 2016, the ENRE enacted Resolution N° 626, approving the document denominated Final Public Hearing Resolution with the purpose to inform and answer the opinions made in relation to the Tariffs Proposal presented previously by the companies with regards to the definition of tariffs to be applied, and to transfer the considerations of the Subsecretary of Tariffs Policy Coordination of the Ministry of Energy and Mining of the Nation, those subjects planned that are not under the responsibility of such entity.
On February 1, 2017 the Integral Tariff Review came into force, thus ending the process of renegotiation of the concession contract, and reestablishing the full validity of the Concession Contract, the Tariff Regime and the Quality of Service, which were renegotiated base don the principles established by Law 24,065.
This milestone is critical for the company, because it means the complete restoration of conditions of certainty and sus-tainability of the business, and also defines conditions and basic criteria (formation of capital base and calculation of WACC) for future tariff revisions throughout the conces-sion period.
Its worth mentioning that along the tariff cycle of the RTI term, established between February 1, 2017 and January 31, 2022, the quality of service regime will increase its requirements according to the expectation of the development of investments and operational improvements that EDESUR proposed in the context of RTI. Therefore, the quality guidelines will be more demanding and the cost of energy not delivered will increase throughout the period, reaching the values established recently in the last semester of the cycle.
It should be noted that SAIDI (one of the indexes of service quality) has improved in 2018 in relation to 2017, with a reduction of 4.5 hours, reaching 25.18 hours –according to Enel criteria-.
The concession contract establishes for Edesur the obligation to supply energy according to the demand of the owners or inhabitants of the properties within its concession area, it also demands the company to comply with certain quality standards related to the electricity supplied, to comply with operational requirements concerning the maintenance of distribution assets and to bill clients on the basis of effective measurements.
In December 2017 the Ministry of Energy and Mining (MINEM) presented its proposal and criteria for the treatment of regulatory liabilities. The first measure was, through the Note issued on December 30, 2017, that the Ministry informed that CAMMESA took possession of the debt registered by EDESUR with this company for the purchase of energy, for a period of 90 days pending to formalize the aforementioned agreement. EDESUR is working on the latter to comply with the agreed deadlines. During 2018, the company continued working in the agreement, and the final resolution regarding these matters was subject to the change of jurisdiction.
On December 4, 2018 Law 27,469 was enacted, which approves the Fiscal Consensus signed on September 13, 2018 between the Nation and the majority of the Provinces. This agreement mandates “electricity distribution companies Empresa Distribuidora Norte SA (Edenor) and Empresa Distribuidora Sur SA (Edesur) to become part of the jurisdiction of the Province of Buenos Aires and the Ciudad Autónoma de Buenos Aires (CABA), in line with the elec-tricity distribution companies in the other jurisdictions”.
In the same vein, Law 27,467 of General Budget for Ex-penses and Resources of National Administration for 2019, published also on December 4, 2018, established on article 124, to instruct the National Executive Power to “foster those acts needed for the transfer of jurisdiction of energy distribution companies Empresa Distribuidora Norte S.A. (Edenor) and Empresa Distribuidora Sur S.A. (Edesur) from Province of Buenos Aires to Ciudad Autónoma de Buenos Aires” from January 1, 2019, and “once this becomes effective, the National Entity for Electricity Regulation (ENRE in its Spanish acronym) created through article 54 of Law 24,065 will keep its functions and faculties in all matters not related to energy distribution public service”.
At the time of this report, the transfer of jurisdiction (which requires the approval of both companies) has not yet materialized. According to the conversations held with the authorities in the three jurisdictions, this transfer would be made without any changes in the Concession Contract, and after solving important pending topics for both companies (regulatory assets and liabilities, Framework Agreement and social tariff cap).
In 2018, Edesur delivered energy service to 2,529,953 clients. Of the total, 88% are residential customers, 11% commercial, 1% industrial and others 0.04%. Energy sales reached to 17,548 GWh, including distribution services (tolls) to large users, at similar levels than the previous year. Sales distribution was: 48% for the residential sector, 8% for the commercial sector, 24% for the industrial sector and 20% others.
During 2018, the annual mobile loss rate (technical and non technical) reached 14.25%, meaning deterioration in relation to 2017 (12.04%). This result was achieved in a scenario of stable demand (+0.2% 2018 vs. 2017) and an important growth of thefts related to higher tariffs.