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As expected, a conclusive definitive report of the gas market study in Chile revealed this Wednesday the National Economic Prosecutor’s Office (FNE), reiterating the need to carry out a series of reforms to increase competition in this market and refuting the criticism received by part of the companies in the sector.
“After a year of work, today we are delivering unpublished and very complete information on the gas market, which allows us to affirm, with property, that it is necessary and urgent to implement regulatory and legal changes that promote greater competition both in the liquefied gas business as well as the natural gas business, “said the National Economic Prosecutor, Ricardo Riesco, in a statement.
As explained by the leader of the FNE, with the recommendations that are being presented, “the State has an easy and fast regulatory path to lower the price of a product of the greatest relevance to families, such as gas.”
The final recommendations, which were sent to the Chilean Ministry of Energy yesterday, aim to perfect the system’s structure and optimize competition and efficiency in both the liquefied petroleum gas (LPG) and natural gas (NG) markets.
After more than a year of analysis, on October 7 the FNE presented the preliminary report of the gas market study in Chile, where it analyzed the period 2010-2020 specifically in the LPG and NG segments, confirming the hypothesis raised at the beginning as to the fact that “the gas market in Chile is not working properly from a competitive perspective.”
In this regard, he suggested three recommendations to the government, which includes a bill that – according to the Ministry of Energy confirmed last week – is ready and is about to be entered into Congress.
In the opinion of the agency, if its proposals materialize, in the case of liquefied gas, the savings can reach 181 million dollars a year, which is equivalent to 15% of the price of each balloon or cylinder that is marketed in our country. Meanwhile, in the case of natural gas, a saving of between 78 million dollars and 87 million dollars is estimated for Metrogas customers, which translates into a reduction of between 13% and 20% in their monthly bills for this fuel.
With the presentation of the preliminary study, a public consultation process was opened, which ended on November 4 with information from 10 market players.
The responses of the FNE
In the LPG segment, the criticisms of the study are fundamentally divided into four groups: lack of rigor of the FNE in relevant cases, such as the margin; negative effect of the FNE’s proposals on service quality and distribution security; unconstitutionality of the recommendations of the FNE; and incompatibility of the recommendations of the FNE with certain agreements entered into by wholesalers to provide discounts to the population.
Some questions indicate that the FNE would not have correctly calculated the margin of the wholesale LPG distributors, leaving out a series of costs. In fact, the companies suggest that the correct thing to do would have been to use accounting margins such as EBIT or EBITDA in the study.
However, the FNE calculated the margin according to the information provided by the same companies and detailed the way in which it was calculated, being used essentially to demonstrate how the sustained increase in the margin over time, in real terms, is inconsistent with a market. competitive.
Another group of criticisms identified by the FNE focuses on the fact that the agency’s recommendations would prevent incumbents from entering into agreements that grant discounts to the population for the purchase of LPG in the future. Although promotions that alleviate the pocket of households are always welcome, the FNE said that the market will not need this type of “vouchers” or “vouchers” for the price of LPG to decrease, but that this will occur due to the effects of a higher competence.
Natural gas market
In the NG market, the main criticism of the study is that the FNE’s recommendation that the profitability of all distribution companies be calculated considering the entire vertically integrated economic group, would translate into an increase in costs and therefore, the price of natural gas for Metrogas customers.
The FNE dismissed this criticism as unfounded. Indeed, the recommendation of the FNE, in and of itself, does not lead to an increase in the cost of either the costs or the price of the NG distributed by Metrogas to the detriment of its customers, which could only occur as a consequence of autonomous decisions inherent to the Metrogas and / or its vertically integrated company that supplies it with GN.
