Regarding the Reliability Charge

By Amylkar D. Acosta M

The debate surrounding the Reliability Charge should not be reduced to how much the mechanism costs, but rather to what it guarantees in terms of reliability and firmness, how it is remunerated, and what signals it offers to encourage investment in the capacity that Colombia will need.

First things first: Colombia needs sufficient, firm, and available energy under critical hydrological conditions.

This objective should guide any adjustment or reform of the Reliability Charge. The discussion about its cost, its distribution among technologies, and its effects on tariffs is legitimate and necessary; however, it would lose its way if it ended up weakening the backstop that prevents a drought from turning into rationing.

The Energy and Gas Regulatory Commission (CREG), established by the Electricity Law (143 of 1994), which I drafted, designed and implemented the reliability charge in 2006 through Resolution 071, exercising its regulatory authority. This replaced the capacity charge originally established by CREG Resolutions 001 of 1996 and 116 of the same year, which regulated its calculation.

According to XM, a subsidiary of ISA that operates the National Interconnected System (SIN), the reliability charge “is a remuneration scheme that makes investment in the necessary electricity generation resources viable, ensuring the efficient supply of energy demand during critical supply conditions, through long-term signals and the stabilization of generator revenues.”

The Reliability Charge, then, is a type of insurance, whereby the generating company receives compensation in exchange for its commitment to guarantee a firm energy supply (OEF). This commitment becomes mandatory during each hour in which the wholesale energy price exceeds the so-called scarcity price.

Based on this, the company receiving this allocation is obligated not only to invest in the respective plant but also to assume its maintenance, thus ensuring its availability when required to support the system.

Currently, this compensation is approximately $84 per kWh and represents approximately 8 percentage points of the 39 percentage points that constitute the specific weight of the generation charge (G) in the tariff formula (CU = G + T + C + D + PR + R).

In any case, the allocation of the Reliability Charge is done through auctions, and the companies to which it was awarded have that acquired right until 2027 and 2028. Therefore, before proceeding with any changes or its eventual elimination, extreme caution must be exercised to ensure that whatever decision is made does not jeopardize the reliability and stability of the National Interconnected System (SIN) and does not impede the expansion of generation capacity that the system desperately needs.

We must be very careful in this matter.

The Petro administration questioned the Reliability Charge mechanism and placed it at the center of the debate. In August 2025, before the Fifth Committee of the Senate, the Minister of Mines and Energy, Edwin Palma, stated that users had paid $92 trillion pesos for this charge since 2006 and presented six reform proposals aimed at «modernizing the scheme.»

These proposals include prioritizing new clean energy sources, differentiating remuneration based on the technology and age of the plants, concentrating payments on resources capable of responding during shortages, limiting the participation period, introducing adjustments gradually, and separating the reliability variable from the tariff formula.

This approach addresses real concerns. It doesn’t seem reasonable that a fully amortized plant should receive, without further evaluation, the same treatment as a new installation that needs to recoup a considerable investment.

Nor would it be reasonable to remunerate a backup resource that, at a critical moment, cannot deliver the committed energy.

Transparency is also essential: if the charge represents approximately 10% of the unit cost of the service, the user must be able to identify what they are paying for and what they are receiving in return.

However, the tariff debate cannot be limited to the cumulative figure. Presenting the total paid over almost two decades without relating it to the backup capacity, the obligations assumed, the periods of scarcity addressed, and the induced investments offers a partial and biased picture.

The relevant question is not only how much the charge has cost, but whether the current design achieves adequate reliability at the lowest possible cost and with a balanced allocation of risks.

Furthermore, it is pertinent to establish what the counterpart to that remuneration has been.

Indeed, during that same period (2006–2026), private sector investment in the Reliability Charge was on the order of $113 trillion, a figure higher than that assumed by users.

This also made it possible to expand installed capacity by 11,078 MW, more than 50% of the total installed capacity.

Furthermore, by 2025, generators’ revenue from the Reliability Charge only represented 21.5%, a figure I consider reasonable.

The first priority, then, is to ensure that the country does not experience blackouts. Based on that principle, it is appropriate to review how much is paid, to whom, for how long, and in exchange for what performance.

A serious reform should not choose between fair tariffs and energy security; this is a false dilemma: it must design a mechanism that makes both compatible.

In any case, preserving the two principles established by Law 142 of 1994: the financial sufficiency of companies and the cost efficiency of energy service provision.

That is the true challenge of the reliability charge.