In development of Law 1715 of 2014, "By means of which regulates the integration of non-conventional renewable energies to the National Energy System", on March 23rd, 2018 the Ministry of Mines and Energy (the "Ministry") enacted decree 0570 "Whereby the Regulatory Decree of the Mining and Energy Administrative Sector, 1073 of 2015, is added, in relation to public policy guidelines for the long-term contracting of power generation projects and other provisions are dictated." (the “Decree”). 

With the purpose of setting out and to implement a mechanism of long-term contracts for the power generation projects in Colombia, as a complement to the existing mechanisms in the Wholesale Energy Market – MEM, such as the spot market and bilateral contracts, the Ministry has decided to add a new section (Section 7 of Chapter VIII of Title III) to the Regulatory Decree of the Administrative Sector of Mines and Energy (Decree 1073 of 2015). This section, related to the Promotion, Development and Use of Non-Conventional Energy Sources (FNCE), sets forth the public policy guidelines of the new mechanism of long-term contracts, as follows: 

- The long-term contracting mechanism shall be implemented according to the following objectives (the “Objectives”): 

(i) Diversify the risk to strengthen the resilience of the power generation matrix due to variability and climate changes.

(ii) Promote competition and increase efficiency in price generation through long-term contracting of new or existing generation projects. 

(iii) Mitigate climate change effects through renewable energy resources available, thus managing future energy demand risks. 

(iv) Promote sustainable economic development and strengthening of regional energy security. 

(v) Reduce emissions of Greenhouse Gases (GEI as for its acronym in Spanish) from the electricity generation sector, within the framework of the commitments acquired by Colombia at the United Nations Climate Change Conference in Paris (COP21). 

- The long-term contracting mechanism will only apply to the agents of the Wholesale Energy Market. 

- The long-term contracting mechanism should involve at least the following aspects: 

(i) Competitive allocation scheme 

(ii) Compliance assessment criteria for the Objectives  

(iii) Definition, volume and term of the product that will be assigned 

(iv) Periodicity and progress of its application 

(v) Scheme of guarantees and responsibilities of the participants 

(vi) Entity responsible for its implementation 

Before July 31st, 2018, the Energy and Gas Regulatory Commission (CREG as for its acronym in Spanish) will be responsible for establishing the scheme to transfer the energy purchase costs to the final user's tariff, resulting from the application of the long-term contracting mechanism. 

The Ministry, CREG, the Energy and Mining Planning Unit (UPME as for its acronym in Spanish) and other competent entities will have a maximum of 12 months to update all the regulatory power framework, to foster the planning, connection, operation, measuring and integration of the power generation projects developed as a result of the application of the long-term contracting mechanism.