Since Bolivia's official exchange rate stopped being fixed at the end of June, the dollar has been moving, and with it part of the costs of the electricity sector, which imports equipment and holds investments denominated in foreign currency. Supreme Decree No. 5750 adjusts the formulas that pass those costs through to maximum prices and tariffs. According to the presidential spokesman, the formulas used to take the exchange rate on a single day, the 25th of each month. From now on they will use the average official exchange rate (TCO) of the Central Bank of Bolivia (BCB) between the 25th of two months earlier and the 25th of the previous month, and, for revaluing foreign-currency assets, the average over the previous 365 days.
The decree sets no percentage increase and no new amounts for households or businesses. What changes is the way the dollar enters the calculation. It still does, because part of each price is linked to it, but more gradually and with a lag, since the average closes on the 25th of the month before it applies. For anyone planning energy costs, that means a tariff that will move month by month with the exchange rate and inflation, without abrupt jumps from one day to the next.
What changes in the formulas
The decree rewrites four articles of the Price and Tariff Regulations (RPT), approved by Supreme Decree No. 26094 of 2001, which together cover the whole electricity chain. Article 21 governs the node prices for capacity and energy and the cold reserve charge, which pay for generation. Article 34 deals with tolls for using the transmission grid and Article 35 with the investment and operating costs of the Trunk Interconnection System (STI). Article 55 sets the indexation of distribution base tariffs, the part that reaches consumers' bills directly.
The formulas share a common logic. The share of cost corresponding to imported equipment is updated with the exchange rate and the tariff rate on that equipment, and the rest with the consumer price index (CPI) published by the National Statistics Institute (INE). For energy, the fuel price of generating units carries its own weight. The weights that divide these shares are calculated by the National Load Dispatch Committee (CNDC) in each pricing study, and the current ones remain in force until it calculates new ones.
A close reading reveals some nuances. Only the dollar is averaged; the fuel price is still taken on the 25th of the previous month. The CPI used is that of the second month before, and if it has not yet been published, the last known increase is applied. Node prices, tolls and base tariffs are indexed monthly, with bases set for the periods starting in May and November, while the costs of the trunk system are updated every six months.
Assets and firm capacity
The decree also amends two other pieces of the regulatory framework. In tariff studies, the share of assets financed in foreign currency will be updated each year with the average TCO over the previous 365 days, and the rest with the annual change in the CPI, in proportions set by the Electricity and Nuclear Technology Supervisory Authority (AETN). For companies with dollar investments, the revaluation of their asset base will still follow the exchange rate, but in smoothed form.
It also amends Article 61 of the Electricity Market Operation Regulations. Every November the CNDC will recalculate the firm capacity for each six-month period using the demand and peak capacity actually recorded in the wholesale electricity market, and will resettle transactions. Any surplus will be shared between thermal units without firm capacity or cold reserve, at a unit price capped at the node capacity price, and distributors and non-regulated consumers. Any shortfall will be covered by the latter in proportion to their share of peak demand. During scheduled unavailability, a generating unit will not be paid for firm capacity.
Application and next steps
The new formulas apply from the decree's publication and bind the AETN, market participants and the CNDC. The CNDC has up to five business days to adapt Operating Rule No. 9 and up to fifteen for the other operating rules whose formulas involve the exchange rate, all of which the AETN must approve by administrative resolution. The AETN, for its part, must adapt the rest of the regulatory framework that relies on indexation formulas. The change is a regulatory reform made within Electricity Law No. 1604, which gives the regulator responsibility for applying pricing procedures and approving maximum prices and tariffs.
What it means for businesses
The government has said the decree will not raise tariffs, while the analyst Jaime Bravo has warned of increases that are hard to estimate for now. Both readings fit the text. The decree sets no amount, but its formulas pass changes in the exchange rate and inflation through to prices and tariffs, so the effect on bills will depend on how both move.
Energy-intensive companies should project electricity costs using the monthly average exchange rate and review supply, construction or service contracts whose prices are indexed to the electricity tariff. Generators and non-regulated consumers should prepare for the November resettlement, and investors in generation and transmission for a steadier revaluation of their assets. The operating rules the CNDC submits in the coming days, and their approval by the AETN, will show how the new rules work in practice.
