Energy contracts renegotiation between Honduras and its generators

By: Janine Paz

As part of the energy reform in Honduras initiated by the current government, the renegotiation processes of the Power Supply Agreements (PPAs) that the National Electric Energy Company (ENEE) has signed with the different generators around the country began in May 2022. This process was carried out hand in hand with the private sector, including the participation of the heads of the Ministry of Energy, the Ministry of Finance and a representative of the Honduran Council of Private Enterprise (COHEP). The initiative behind the renegotiation of the contracts is the result of the power granted to ENEE through the “Special Law to Guarantee the Electric Energy Service as a Public Good of National Security and a Human Right of Economic and Social Nature” approved and published in the official gazette La Gaceta through Decree 46-2022 of May 16, 2022.

This Law, in its Article 1, establishes that the State of Honduras declares that the electric energy service is a public good of national security and also a human right of economic and social nature, therefore, it must be safeguarded as such. The State guarantees the provision of the electric energy service to the entire population and exercises its control through ENEE and operating as a regulatory entity the Comisión Reguladora de Energía Eléctrica (CREE). It also indicates the power of ENEE to renegotiate the contracts and prices at which the State, through ENEE, acquires all supplies of hydro, solar and thermal power plants.

During the renegotiation process, it was verified that the generating companies had an integrated and uninterrupted provision of energy sales to ENEE. As a result, to date, 16 energy contracts have been renegotiated with 14 companies, 55% of the contracts were considered to have higher prices, representing a saving of approximately one billion lempiras per year for the country, according to state authorities.

The renegotiation agreement entails, among other things, the reduction of tariffs and greater efficiency for ENEE in terms of distribution, commercialization and transmission of energy to the entire population. Currently, several discussions are being developed for the approval of regulations that will bring benefits for the energy sector and for the State. All this with the purpose of restructuring and encouraging this sector and the subjects involved.