Article 35 of Law 1955 of 2019 establishes that the Ministry of Finance and Public Credit ("Ministry of Finance") and the Ministry of Mines and Energy ("Ministry of Mines") shall establish the methodology for calculating the price of liquid fuels and biofuels, as well as the rates and margins associated with the remuneration of the entire supply chain, including transportation, logistics, marketing, and distribution of such fuels that are part of the regulated market.

Additionally, the aforementioned article provides that the Ministry of Finance can determine the mechanism for stabilizing the prices of regulated fuels to the consumers, to mitigate, in the national market, the impact of fluctuations in fuel prices in international markets.

Furthermore, Article 244 of the National Development Plan 2022 - 2026 amended Article 35 of Law 1955 of 2019, adding that the Ministry of Finance and Ministry of Mines can establish differential stabilization mechanisms for the components of the reference prices for the sale of regulated fuels considering principles of efficiency and progressiveness.

Therefore, MinHacienda and MinEnergia have published the draft decree titled "By which Decree 1068 of 2015 is supplemented regarding the differential price stabilization mechanism of Regular Motor Gasoline (RMG) and Automotive Diesel Oil (ADO) for large consumers, and Decree 1073 of 2015 is amended regarding the control and surveillance of this mechanism" (the "Project"). This draft decree states that the producer‘s income for regular motor gasoline and ADO-Diesel for large consumers (entities consuming more than 20,000 gallons monthly average for exclusive use in their activities) and final consumers with an average annual consumption exceeding 20,000 gallons per month regardless of their consumption by installation or delivery point, must be at least the international parity price. Hence, the fuel acquired by these consumers will not be stabilized or subsidized but must be purchased at the international price.

According to the technical concept outlined in the Project and in line with the principles of efficiency and progressiveness, it is deemed necessary to establish a differential mechanism for additional large consumers and final consumers whose average annual consumption exceeds 20,000 gallons per month, regardless of their consumption by installation or delivery point. This approach will allow to use those economical public resources in public investment or social expenditure.
 

In any case, large consumers corresponding to electric power generating companies located in Non-Interconnected Zones (ZNI) are exempted from this differential mechanism, because an increase in the cost of diesel needed for providing the public service of electricity would result in an overall increase in the cost of this service and therefore, have a negative impact on the living conditions of vulnerable population living in these areas of the country.
 

Likewise, the systems providing mass passenger land transportation services directly to the urban population are also exempted from the differential mechanism to maintain stability in this activity.
 

Additionally, MinHacienda and MinEnergia will be responsible for establishing the procedure to determine the international parity price to be used as producer income within the established differential mechanism.
 

Finally, it is proposed to add to the functions of MinEnergia set forth in Article 2.2.1.1.2.2.1.3. of Decree 1073 of 2015, the control and surveillance of the differential price stabilization mechanisms for liquid fuels and biofuels.
 

The Project will be open for comments until December 11, 2023. To review it, please access the following link: Draft Decree