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| This is an informative document and does not replace the regulation issued by the CREG. |
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| General Characteristics of the Wholesale Electricity Market |
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The MEM is composed of systems of information interchange between generation and commercialization companies operating in the SIN. These systems are designed to enable the market participants to make energy transactions of short-term and long-term nature.
In this market, all the electric energy required by end-users connected to the SIN, whose demand is represented by commercialization companies, and all the supply offered by generators, whose plants or generation units are connected to the SIN, are traded.
The designated participants of the MEM are generation and commercialization companies. The generation companies are required to participate in the MEM with all their generation plants or units with capacities equivalent to or exceeding 20MW connected to the SIN. All these electricity produced should be dispatched centrally by the CND. All commercialization companies, which deal with final users connected to the SIN, are obliged to make their energy transactions through the MEM.
The transactions in the MEM are carried out under the following modalities::
| i) |
transactions in the Energy Spot Market; |
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bilateral financial contracts; and |
| iii) |
Auctions to allocate the Firm Energy Obligations (Obligaciones de Energía Firme or OEF) under the Reliability Charge scheme, which replaced the Capacity Charge scheme [ * ]. This new pricing mechanism will be discussed in more detail in the following sections. |
All generation companies in the MEM can freely participate in any or all of the above mentioned transactions under conditions of equality.
The framework and the rules for operation and participation have remained stable since the introduction of the MEM, undergoing only the necessary modifications to further promote market competition and efficiency.
Since the initial implementation of the Capacity Charge scheme in 1996, it was determined that its validity will be for a period of ten years ending on November 30, 2006. After this date expired and following extensive studies, proposals and discussions with the industry and other interested parties, which lasted for a period of two years, the Capacity Charge was replaced with the actual Reliability Charge beginning December 1, 2006.
Transactions of the MEM
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The Capacity Charge was the previous managed remuneration mechanism of the MEM for the generation capacity, which guaranteed a fixed annual income per megawatt installed. This scheme paid on average a total of US$500 million annually to those generation companies that made available their generation resources. |
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