2 April 2003 - Bolivia's electric power regulator is preparing to tender a contract for a consulting firm to evaluate electric power law modifications, which aim to attract more private sector investment.

According to a news report from Business News Americas, a spokesperson for the regulator said the proposal is still in its very early stages, and that recent newspaper reports were misleading. Jose Salazar, head of wholesale market operations at the regulator, was reported to have stated that the new plans would be discussed with existing market players, and the changes would be approved within six months.

The superintendence wants to guarantee the long-term viability of the sector as well as to ensure sufficient returns are paid on investments and that prices and services to consumers are adequate, Salazar said, quoted by La Prensa.

The government has already decided to convert dollar-linked energy and water contracts to be linked instead to a local inflation unit (Unidad de Fomento a la Vivienda, or UFV), which is based on the National Statistics Institute's (INE) consumer price index (IPC), basic services vice minister Jose Barragan said. The measure was effective from Tuesday this week, he said, quoted by local newspapers.

The measure is designed to reduce the volatility of prices, he said. Energy and water prices will now rise in line with the cost of living, rather than tracking the much-higher depreciation of the Bolivian boliviano against the US dollar, he explained.

Meanwhile, newspaper reports said electric power prices would likely remain at current levels across the country, despite a significant drop in the wholesale price of power due to current overcapacity. Demand has dropped off due to the economic recession, which has lasted for just over two years.

The regulator spokesperson again stated that the official figures would only be available towards the end of this month.

The regulator reviews regulated rates every six months for the national interconnected system (SIN), which covers the departments of La Paz, Cochabamba, Santa Cruz, Oruro, Sucre and Potosí. Generators make offers to the national system operator (CNDC), which pro-rates the power purchases based on the lowest prices.

For the six months from May to November 2003 power generators will declare the lowest prices since privatization in 1995, according to the reports. In 1995, generation prices were around US$160/MWh, while in March this year the average price was US$52/MWh, according to the newspapers.

Generators are expected to lose US$7mn during these six months, as generation costs are estimated to average US$80/MWh.

The government uses the difference between the generators' prices and the end consumer price to boost the so-called compensation fund, which is used to stabilize prices once they start to rise again.

There are eight generators in Bolivia, three of which were state-owned companies taken over by private sector investors after privatization (Corani, Valle Hermoso and Guaracachi) and five are new entrants (Bulo Bulo, Sinergia, Cobee, Hidrobol and Eresa).