Colombia to tax power firms over $1.25bn sector debt
Colombia's outgoing government wants to impose a new levy on electricity companies to cover a $1.25 billion sector debt, raising costs for generators and retailers just as the country enters a critical dry season.
Energy Minister Edwin Palma will ask the finance ministry to include a new tax on electricity generators and retailers in a broader fiscal reform package due before Congress on July 20. The levy is intended to plug a liquidity shortfall in the power sector rather than pass the costs on to household consumers.
Industry figures show retailers faced a liquidity gap of roughly 5.1 trillion pesos, or about $1.25 billion, as of March. The bulk of this burden sits with Air-e, a state-controlled Caribbean-coast utility, which could see its obligations approach 3 trillion pesos by the end of the year.
Much of this deficit traces back to a tariff-smoothing mechanism that previously shielded households from price spikes but left unpaid balances accumulating. Palma argues that consumers should not foot this bill because they already pay a reliability charge of more than 6 trillion pesos annually to generators.
Generators and traders strongly oppose the measure, insisting that liabilities like Air-e's should be absorbed by the national budget. The government counters that public finances are too constrained by mandatory spending on health, pensions, and security to take on the sector's debts.
Loading a sector-specific tax onto the broader reform is the administration's workaround for rigid national budgets. That overarching package aims to raise 22 trillion pesos in 2027, rising toward 37 trillion pesos by 2030, to shore up strained public finances.
For investors, the proposal directly pressures the profitability of the very companies needed to keep the grid stable. Colombia is entering a dry El Niño season with thin spare capacity, a period that demands financially healthy generators willing to invest in reliability.
The political timing compounds the uncertainty for market participants. The outgoing administration of President Gustavo Petro is filing the bill just weeks before leaving office, and the incoming government has campaigned on a platform of lower, simpler taxes.
Furthermore, the outgoing government has a poor track record with fiscal overhauls. A previous Petro-era reform was struck down by the Constitutional Court, and a later attempt was rejected outright by Congress, leaving the ultimate fate of this power tax highly uncertain.
