Colombia - Economic growth : problems and prospects (Vol. 8 of 12) : Power and telecommunications

RETURN TO REPORTS DESK JFfL C p 'RESTRICTED REPRT DE @ITHI Report No. WH-ZOOa ONE WEEK This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION ECONOMIC GROWTH OF COLOMBIA: PROBLEMS AND PROSPECTS (in XII Volumes) VOLUME VIII POWER AND TELECOMMUNICATIONS November 1, 1970 South America Department  (Certificate Market Selling Rate of Exchange) End s968 1 US$ 16.91 Pesos 1 Peso = US$O.059L3 End 1969 1 US3$ = 17.90 Pesos 1 Peso = US$0.05586 End-M;arch 1970 1 US$ = 18.20 Pesos 1 Peso = US$0.005494  POWER AND TELECOMMIUNICATIONS Table of Contents Page PART A. POWER I. INTRODUCTION 1 II. THE PUBLIC SECTOR 3 Generation and Transmission 3 The Electric Service 5 Organization and Development of the Sector 8 Financial Situation 11 III. CONSTRUCTION AND INVESTMENT PROGRAMS 13 IV. PLANNING 15 V. GENERAL COMMENTS 17 ANNEX 1. Table 1. GENERATING PLANTS UNDER CONSTRUCTION Table 2. MAJOR TRANSMISSION LINES UNDER CONSTRUCTION Table 3. GENERATING PLANTS PLANNED Table 4. MAJOR TRANSMISSION LINES PLANNED Table 5. EXTERNAL FINANCING OBTAINED SINCE JANUARY L, 1969 Table 6. PUBLIC POWER SECTOR INVESTMENT PROGRAM ANNEX 2. Map 1 Map 2 ANNEX 3. Figure 1 Figure 2 ANNEX 4. Preinvestment Program - Study Data Sheets (1-14) PART B. TELECOMJINICATIONS I. INTRODUCTION 18 II. THE SECTOR - DELINEATION OF ROLES 19 The Role of Government 19 Policy-Making 19 Licensing 19 Regulation 20 III. PRESENT FACILITIES 21 General 21 Local Telephone Services 22 Long-Distance Services 23  Page IV. FUTURE EXPANSION PLANS 24 Local Services 24 Long Distance Services 25 V. REORGANIZATION OF THE SECTOR 26 VI. CONCLUSIONS 28 ANNEX 1. Providing Local Telephone Service (Automatic Exchanges) ANNEX 2. List of Centers with Automatic Local Telephone Service ANNEX 3. Local Tariffs in Selected Cities (Colombian Pesos)  PART A POWER   I. INTRODUCTION 1. Colombia occupies a territory of 1,139,000 km2, crossed on the western part by a molumtain system with three north-south cordilleras, ranging up to 5%000 m in altitude, which di-vide the country into three main geographic regions: Costa Atlantica (northern), Andina (central and western) and Llanos Orientales (eastern). Near 99 percent of the popula- tion live in the Costa Atlantica and Andina regions, which comprise about 40 percent of the area of the country and are divided politically into Departamentos and the Distrito Especial de Bogota. The rural population represents about 43 percent of the total. The Llanos Orientales region has an extremely low population density and minimum economic development, with practically no electrification. The electric sector is therefore geographic- ally located in the northern, central and western regions of the country, which are endowed with remarkable complementary resources for power genera- tion: important hydroelectric potential in the extensive central mountain system, with different hydraulic regimes in the Amazonas-Orinoco, Atlantic and Pacific river basins: oil in the north and southwest; natural gas in the north; and coal in sevreral parts of the cordilleras. 2. In 1969 the public utilities generated a total of 7,100 GWh and at the end of the year had a total installed generating capacity of 1,870 MW; about 75 percent of the generation was of hydro origin, 15 percent was generated in steam thermal plants and 10 percent in gas-turbine and diesel plants. In addition to the public service, 250 MW were installed in industrial facilities which generated 1,000 GWh. The location, type and size of the principal existing generating plants and transmission lines in the country are shown in Mao 1, which also shows those under construc- tion, planned and under inlvestigation. The evolution in the last 25 years of the total installed generating capacity and annual generation by the country's public utilities is shown in Figures 1 and 2. The development of the Colombian electric sector in recent years has been remarkable: in the last 12 years the energy demand has itnereased at an avcrerage rate of approximately 11 percent per year, which is expected to be at least main- tained in the next decade. In spite of this, the average per capita annual consumption in 1969 was about o00 kWh, below the Latin America average in 1968 of approximately )47L kWh. 3. The levels of electric development and consumption are substan- tially different between regions, and even more so between urban and rural areas. The average per capita annual consumption in some Departamentos is Df the order of 03 khx, but in others does not reach 100C kWh. While in -the 30 cities of more than 30,000 inhabitants the average consumption in 1969 was about 600 kWh, about 30 percent of the country's population (70 -percent of the ruiral population) did not hLave any electric service at all. rhe following table is illustrative of the differences between regions; it indicates the percentage shares of each electric region of the country's total generation and installed capacity in 1968, as compared with the respective percentage shares in the area and population:  -2- Installed Electric Region /a Area Population Generation Capacity Antioquia (Medellin) 7.9 15.3 28.9 28.3 Central (Bogota) 10.6 30.4 28.3 33.2 Occidental (Cali) 8.8 17.3 18.1 17.5 Norte (Cartagena, Barranquilla) 10.5 18.8 13.3 12.1 CaLdas (Manizales) 0.9 8.2 7.3 5.0 Nordeste (Barrancabermeja- Bucaramanga) 6.2 8.7 3.8 3.6 Rest of the Country: Los Llanos and San Andres 55.1 1.3 0.3 0.3 /a See para. 16 for the definition of each electric region. Main population centers in the regions are indicated in brackets.  II. THE PUBLIC SECTOR Generation and Transmission 4. The public service is practically wholly supplied at present by the following four entities: (a) Empresa de Energia Electrica de Bogota (EEEB), a municipal utility for electrical service only, which supplies energy to Bogota and the Departamento de Cundinamarca, directly and bulk supply to departmental rural distributing agencies and subsidiaries of ICEL. At the end of 1969, the total installed capacity of EEEB's own plants was 440 MW, of which 85 MW were thermal and the rest hydro. (b) ETrpresas Publicas de Medellin (EPM), a municipal utility providing electricity, water/sewerage and telecommunication services, which supplies electric energy to Medellin and the Departamento de Antioquia, directly and by bulk supply to the rural distributing subsidiary of ICEL. The total installed capacity in EPM's plants at the end of 1969 was 450 MW, all of them hydro. (c) Corporacion Autonoma Regional del Cauca (CVC), a multi- puirpose, autonomous, nationally-chartered regional entity for the development of the Cauca Valley, which supplies energy to the Departamento de Valle, mainly by bulk suoply to Empresas Municipales de Cali (EMCALI) and to other rural distributing agencies, subsidiaries of ICEL and CVC. CYTC is the major owner of Central Hidroelectrica del Rio Anchicaya Limitada (CHIDRAL), a local agency for generation only, which is also owned by EMCALI. At the end of 1969, the total installed capacity in CVC/CHIDRAL's plants was 270 MW, of which 76 were thermal and the rest hydro. (d) Instituto Colombiano de Energia Electrica (ICEL), a National Government Institute, formerly called Electraguas, which through 15 departmental and 13 minor subsidiaries supplies electric energy to the rest of the northern, central and western regions of the country. At the end of 1969, the total installed capacity in ICEL's subsidiaries was 684 MW, 330 MW in thermal plants and the rest hydro. One of the major subsidiaries of ICEL is Central Hidroelectrica de Caldas (CHEC), which serves an area of Departamentos de Caldas, Quindio and Risaralda around Manizales, in Central Colombia, and has at present a total installed capacity of 200 MW in hydro plants. 5. The extensive geography of the country and its rugged mountain chains have isolated the various regional centers, which traditionally have developed separately their own customs, regional institutions and economic resources, and also their own electric systems. Furthermore, the parochial  - 4 - attitude prevailing in the various regional electric systems sometimes has caused uneconomic development of the country's power sector. This has been more noticeable in recent years, when the need to supply higher and rapidly increasing demands has shown the advantages of the integra- tion and joint planning of the sector to permit the development of larger and more economic projects and a better utilization of the country's energy resources. The Departamento Nacional de Planeacion (Planeacion) has been promoting actively for a number of years the coordinated organiza- tion and expansion of the sector, and in 1967 important steps towards this end were initiated by the establishment, with the Government's support, of Interconexion Electrica S.A. (ISA) and the Corporacion Electrica de la Costa Atlantica (CORELCA). 6. ISA, a stock corporation sponsored and owned in four equal parts by EEEB, EPM, CVC/CHIDRAL and ICEL/CHEC, was formed in September 1967 for the interconnection of the sponsors' electric systems and for the planning, construction, ownership and operation of new power generating plants in the interconnected system. In 1968, ISA undertook its first project, a 535 km 230 kV transmission network to interconnect the systems of EEEB, CHEC, EPM and CVC/CHIDRAL, which is presently under construction with financing from the I.B.R.D. and supplier countries; its completion is expected by mid-1971. :SA's interconnection network has made possible the first joint planning in Colombia of a long-range, large-size power generation program at supra- regional scale. ISA and Planeacion carried out several studies, using computer models, to determine the most suitable and economic schedule of new generating plant construction in the interconnected system to meet its forecast demand up to 1980. In accordance with the results of the studies, ISA and its sponsors agreed to the construction of two major hydroelectric plants, as follows: (a) Alto Anchicaya (340 MW) in the area of Cali, to be built by CVC/CHIDRAL to start operation in 1974; and (b) Chivor (first stage, of 500 MW) in the area of Bogota, the first generating plant to be built, owned and operated by ISA, to start operation in mid-1975. Both projects are presently under construction, Alto Anchicaya with financ- ing from Canada and the Inter-American Development Bank (IDB), and Chivor with IBRD's financing expected to be complemented by bilateral financing from major equipment suppliers' countries. ISA, its sponsors and Planeacion will be continuing and updating the studies to schedule new additions to generating capacity, which it is foreseen will be required in the inter- connected system in the present decade. Various possibilities are being considered, particularly thermal units for short-term construction, and the second stage (280 MW) of Guatape Project in the area of Medellin for longer-term operation, not before 1977/78. 7. CORELCA, an autonomous regional agency, was established in December 1967 for the planning, construction and operation of new power generating plants and transmission lines in the northern region, which in- cludes seven Departamentos, from Cordoba to La Guajira, and is not con- sidered yet integrable in ISA's system because of the distances involved.  - 5 - CORELCA is in the process of being organized to assume its responsibilities, which in the interim have been assigned to ICEL. There is urgent need to install additional generating capacity and interconnect individual systems in the area of the Atlantic Coast. A program towards this end has been undertaken, which includes initially the construction by CORELCA of a 132 NW thermal plant in Barranquilla (Termonorte I) and the transmission lines .Barranquilla-Sabanalarga-Cartagena (230 kV) and Barranquilla-Santa Marta (115 kV); the construction of these projects, which are scheduled for comple- tion by early 1972, was started in early 1970 with financing from supplier countries. More recently, in order to supply industrial consumers, particularly -,he expanding Soda Plant, CORELCA-ICEL undertook the emergency construction of a 19 MW gas-turbine unit in Cartagena to start operation by mid-1971. CORELCA's longer-term plan includes the construction of three 100 MW thermal umits -- two of them in Cartagena (1974 and 1978) and the other one in B3arranquilla (1976)--, and of the transmission lines Cartagena-Sincelejo 1230 kV, 1972), Sabanalarga-Fundacion-Santa Marta (230 kV, 1975), Fundacion- V'alledupar (115 kV, 1975) and Santa Marta-Riohacha (230 kV, 1976). It is planned to study and undertake the interconnection of CORELCA and ISA systems in coordination with the actual developments in both systems in the next f'ew years. I'he Electric Service 6. The areas of the country presently served by EES,B EPM, CVC/CHIDRAL and the 15 departmental subsidiaries of ICEL are shown on Map 2. The urban and industrial areas of Bogota, Medellin and Cali, the three principal cities of the country, are thus served by autonomous agencies. The service in rural areas is provided by ICEL subsidiaries, except for the areas around Bogota and Medellin and the important rural area served by CVC. In some population centers, electricity is provided by municipal undertakings which in many instances rely upon ICEL systems for bulk supply. The principal cities, particularly Bogota and Medellin, have enjoyed the benefits of sophisticated planning by the utilities serving themn whereas the development of other parts of the country has at times been haphazard and uncoordinated. Although in the past the planning and efforts for the development of the sector have been concentrated much more in generation and transmission than in distribution, the expansion has not been sufficient to meet the demand in some important areas of the country, which at times have experienced power shortages. In many areas the distribution systems present serious deficiencies, and rural electrification is indeed scarce. This situation of the public sector in the past underlies the comparatively extended practice by industrial consumers of electricity of installing their generating facilities, which as mentioned above aggregate at present to a total of 250 MW. 9. The annual peak loads and gross generations in the period 1965-69 for the three major electric systems in the country were as follows:  -6- System 1965 1966 1967 1968 1969 EEEB Peak Load (MW) 243.4 267.7 315.1 350.1 422.8 Gross Generation (GWh) 1,085.2 1,218.6 1,383.6 1,629.7 1,920.6 EPM Peak Load (MW) 267.0 289.0 309.8 327.0 349.5 Gross Generation (GWh) 1,373.3 1,478.4 i,579.0 1,698.4 1,829.1 CVC/CHIDRAL Peak Load (MW) 164.3 n.a. 196.0 211.0 n.a. Gross Generation (GWh) 825.4 n.a. n.a. 1,033.9 911.3 /a /a In addition, about 170 GWh were supplied in 1969 to CVC/CHIDRAL system from EEEB (43 GWh) and other systems. The composition of the energy sales in the three systems in 1969 was: Total Sales Composition (%) System GWh Residential Industrial Commercial Ot EEEB 1,600 32 32 17 19 EPM 1,330 48 31 8 13 CVC 912 36 42 12 10 10. Examination of historical data reveals wide fluctuation in growth rates, reflecting economic problems of the country which depressed market growth in some years and brought about financial difficulties in the sector contributing to shortages of power. However, remarkable stability has been manifested in later years, as above data on EEEB and EPM systems show, and a more orderly development in the future is expected. The unavail- ability of data for the CVC/CHIDRAL system shown above corresponds to periods with power shortages in the system. The overall annual rates of growth experienced by the three systems in the last decade have been approximately 12 percent in generation and peak load for EEEB and CVC/CHIDRAL systems, and 10 percent in generation and 9.3 percent in peak load for EPM system. No significant trend towards a change in the pattern of electric consumption has been manifested in the last five years in the public sector. Industrial consumption served by the utilities has been maintained in those years at an average level for the country of about only 24 percent of the total public service consumption. This is a reflection of the extended practice by large industrial consumers of installing their own generating facilities (para. 8), particularly in areas not served by EEEB, EPM and CVC. Serious power short- ages were experienced during 1969 in four areas of the country, indicated below; some emergency actions have been taken to correct them temporarily, while long-range solutions presently under way can be put in service.  11. Call and Cauca Valley: CVC system presented important genera- tion deficits during 1969 aggravated by unfavorable hydraulic conditions, and the help received from CHEC was not sufficient to prevent serious power shortages. The 115 kV line Ibague-Zarzal (see Map 1), in operation since September 1969, is being intensively used to supply surplus energy from EEEB to CVC, thus helping to solve temporarily the problem. The situation will remain crit;ical until the operation, scheduled for mid-1971, of ISA's interconnection network with sufficient capacity for the necessary transfers from EEEB, EPM and CHEC. CVC system itself will present generation deficits until the operation of Alto Anchicaya, scheduled for 1974. 12. Atlantic Coast: This area has experienced chronic deficits of generation and corresponding power shortages in recent years. An emergency program of installation of gas-turbine units in Barranquilla, Cartagena and Chinu presently under way will help to solve the problem temporarily, for 1970 and 1971. The situation will not be definitely improved until the completion, scheduled for 1972, of the 132 MW steam plant in Barranquilla and the transmission lines Barranquilla-Cartagena and Barranquilla-Santa Marta. Additional thermal units and transmission lines are planned to meet the demand in the area from 1974 (para. 7). 13. Northeast: A delay in the start-up of a new 25 MW steam plant in Barrancabermeja (Termobarranca), initially scheduled for September 1969, caused power shortages in the area of Bucaramanga. This is illustrative of the deficient situation of the electric service in the area of the Departa- mentos de Santander, Norte de Santander and Boyaca, where lack of coordination between their electric systems, of small size and isolated from each other, has caused inadequate planning and development of the sector. It is expected that the operation since early 1970 of Termobarranca, together with an addi- tional 15 MW gas-turbine plant under construction in Bucaramanga scheduled to start operation by mid-1970, will permit to meet the demand in Santander until about 1972, when the 230 kV lines Paipa-Bucaramanga and Bucaramanga- Cucuta are scheduled to start operation (see Map 1). These lines are the first development towards the much-needed electric integration of the North- east's power systems and with ISA's system (future 230 kV lines Guatape- Barranbermeja and Chivor-Paipa). The integration of a Northeast integrated sys- tem with ISAts interconnected system appears as the most feasible and economic longer-term solu-tion to assure satisfactory electric service in the region, and with a view -towards the future interconnection with Venezuela (230 kV lines Bucaramanga-Cucuta-Zulia-Venezuela). 14. Departamento de Narino: Serious power shortages were experi- enced during 1969 in the area of Pasto because of a delay of about one year in the start-up of Rio Mayo Hydro Plant (21 MW), in operation since early 1970. A new 24 MW hydro plant (Florida II) under construction near Popayan and the 115 kV line Popayan-Cali are scheduled to start operation by end- 1L972 and 1971, respectively. No problems are foreseen to meet the demand in Narino system during the next few years.  - 8 - Organization and Development of the Sector 15. One of the major problems of the sector is the existing jurisdictional desintegratiorn of the electric service, which is provided by numerous entities. These entities are in many cases too small, have financial difficulties, service areas of uneconomic market size and in- sufficiently connected with other areas, and are therefore unable to provide satisfactory service. A Government's decree of December 1968 reorganized ICEL, until then called Electraguas, and defined its functions, which include, among other responsibilities, the specific one of carrying out; a plan to re-structure the electric service by regional integration. According to Planeacion's studies, the new structure is to be based on the grouping of the regional and local electric systems into six zones covering all the Departamentos. The regional zones were tentatively defined on the basis that each one should. have appropriate geogr aphic limits and be large enough to perrmit its integrated electric development and become financially self-sufficient. The responsibility for coordination of supply within each zone will rely upon a basic system in the zone, to which the local distri- bution systems will be conrnected by regional transmission lines. The basic zorLal systems will be interconnected by high voltage transmission lines to form a national network, which will permit the realization of econormies of scale through the planning, construction and operation of large generating plants. 16A. The six regional electric zones presently contemplated and their re-pective basic systems (in brackets) are: Central (EEEB), Caldas (CHEC), Gccidental (CVC/CHIDRhAL), Antioquia (EPM), Norte (CORELCA) and Nordeste (basic system not established yet). The areas covered by these zones are shoTrn on Map 2. Four of the basic systems will be interconnected from 1971 by ISA?s net work, which will form the keystone for the development of the national network. It is expected that ISATs network will soon be expanded to interconnect from 1973 the basic system presently under gestation in the Nordeste. The interconnection with CORELCA is planned for further in the future, because of the distances involved. The construction of Chivor will help to consolidate the establishment of ISA as the agency responsible for the planning, construction and operation of interconnection and generation facilities on a national scale. ICEL is working towards the institutional and physical integration of the electric service within the zones; much work remains to be done in this field, still in incipient state. 17. TLVo parallel studies are at present being performed by the same consultants dealing with the expansion and interconnection of the Nordeste: (a) a study for ICEL, which includes analysis of the electric market and projections of power demand in the Northeast region, and identification and evaluation of prospective generation and transmission projects and alterna- tive programs of construction to meet the demand up to 1977; and (b) a study for ISA to determine the technical and economic feasibility of the 230 kV interconnection line Guatape-Barrancabermeja. These studies are expected to provide the bases for a comprehensive analysis of the Nordeste and. ISA systems, to be jointly performed by Planeacion, ISA and ICEL using their com)uter models, to determine the most economic schedule of projects to carry out the integration of the systems and at the same time meeting the forecast demands in both systems and in the integrated ISA-Nordeste system.  - 9 - Preliminary conclusions of those studies indicate that additional thermal generation capacity and 230 kV transmission lines will be required to accomplish this. They indicate a prospective schedule of new projects, which would include the construction of three 66 MW steam units -- two of them in Paipa and. Barrancabermeja, ICEL/Nordeste, and the other one in :Uipaquira, EEEB -- to start operation in 1973/74, and of the 230 kV lines Barrancabermeja-Bucaramanga-Cucuta (ICEL/Nordeste, for 19'72), Guatape- B3arrancabermeja (ISA, for 1973) and Chivor-Paipa (ISA, for 1974). The actual schedule of project construction to be undertaken will be deter- rmined from the analysis by Planeacion/ISA/ICEL. i8. The future interconnection of -the CORELCA system with the inte- grated ISA-Nordeste system (see para. 7) will have to be planned in coordi- nation with the developments taking place and planned in those systems. In addition to the power projects under construction and planned mentioned in preceding paragraphs, there are other prospective developments, particularly new power supplies to large industrial consumers (see para. 23), which are likely to influence the schedule and nature of projects to carry out the interconnection. It is expected that by 1972 many of the developments pre- sently planned and foreseen in both systems will have been defined; it will then be possible to undertake a technical and economic feaLsibility study of prospective alternative projects for the interconnection of ISA and CORELCA systems. It seems advisable to plan this preinvestment study, which would provide the bases for a subsequent comprehensive analysis by CORELCA/ISA, using computer models, to determine the most economic schedule of construc- tion of transmission and generation projects to carry out the electric integration of both systems. 19. As mentioned in paragraph 8, priority has been given in the past to the development of generation and transmission facilities, and until recently, only isolated, non-coordinated efforts were devoted to the development of local distribution and rural electrification, which in many areas are acutely deficient, to the point that about six million people in thte country do not have electric service. ICEL undertook in 1969 a plan to improve and expancd in a first stage subtransmission (facilities at 13.2 kV aid 33 kV) and urban distribution (service to cities and population centers of more than 1,500 inhabitants); and in a second stage, rural electrifica- tion, practically non-existing at present except in coffee-growing areas, i,&ere some successful developments have been carried out in cooperation w:ith the Federacion Nacional de Cafeteros (FEDECAFE). 2(1. In mid-1969, ICEL with Planeacion's support and FONADE's financing, retained consultants to (a) prepare a comprehensive national p-Larn which will identify subtransmission and urban distribution projects, establish priorities, estimate financial requirements, etc.; and (b) draw up codes and standards for distributions systems, facilities and equipments. Part (a) of the consultants? study is at present well advanced. The program unider preparation of construction of subtransmission and urban distribution projects is based on a planned investment of US $40 million equivalent in the period 1971-74; the Government intends to request the IDB to participate  - 10 - in financing of this program, and an IDB's loan of about US $25 million is expected. It is foreseen that the program will include, among others, projects to improve the service in Cartagena, Santa Marta, Sincelejo, Monteria, Valledupar, Riohacha, Bucaramanga, Villavicencio, Pie de Monte (Meta), Quibdo, lbague, Neiva, Popayan and Pasto. 21. Part (b) of -the study is also in progress, and it is planned to apply the resultant codes and standards to the projects in the program. The standardization of types and sizes of equipments and materials, in conjunction with the schedule of procurement for the construction program, will facilitate greater participation in the supplies by local manufacturers. They may need some adjustments in their present capacities and programs of production to be able to participate substantially in the program, as it is desirable and expected. The Colombian manufacturing industry is qualified to supply to the electric sector equipments and materials for subtransmission and distribution, in particular transformers up to 33 kV, cables, insulators, conduits and fittings, poles, steel towers, minor switchgear and control boards, lighting fixtures, etc. Practically all of these local manufactures include foreign components or materials in various degrees, and their prices are usually higher than those of foreign supplies for public utilities, which are exempt of import duties. The quality of local manufactures has not always been satisfactory; lack of appropriate quality control of fabri- cation has been generally experienced. The work in progress by INCOTEC to establish quality standards of fabrication should be intensified and accelerated, in order to assure the reliability of national supplies to the subtrarnsmission and distribution program. 22. Rural electrif-ication in Colombia presents special difficulties, because of the difficult topography of the country and the wide dispersion of its rural population (centers of up to 1,500 inhabitants). As indicated in para.3, about 70 percent of the country's rural population does not have electric service. There is a growing consciousness in the country of the need to improve this situation; this atmosphere has culminated in the organization by ICEL and SEEB of the first "Congreso de Electrificacion Rural Colombiano" (I CERCO), to take place in Bogota in July, 1970. It seems that the solutions to the problem would have -to be worked out through close coordination between the electric agencies, particularly ICEL, and agricultural entities such as INCORA, FEDECAFE, Banco Cafetero, Caja de Credito Agrario, Banco Ganiadero, etc. Because of the magnitude and complex- ity of the problem, it is recommended that a comprehensive preinvestment study on rural electrification on a national scale be undertaken as soon as possible. The purpose of this study would be to prepare and evaluate alter- native programs of rural electrification projects in priority areas and corresponding investment plans, which would serve as the basis for deciding and determining the possible undertaking of a development plan of rural electrification. ICEL's study on sub-transmission and urban distribution, as well as the prospective resultant project construction programs, deal in fact with fields electrically interrelated, and would have to be coordinated with each other. ICEL is the agency to naturally assume also the primary responsibility for the rural electrification study.  - 11 - 23. The progress being achieved by the public sector, particularly in ISA's interconnected system, in assuring the reliability of the electric service obviously underlies the present intention of important industrial consumers of electricity to use the public supply, instead of installing their own generating facilities as it has been the practice in the past. Such are the cases of Siderurgica de Paz del Rio in Belencito and ECOPETROL Refinery in Barrancabermeja, both in the 1Nordeste, which plan important expansions in coming years, with corresponding increases in power demand to be served by the public sector. The power consumption in Paz del Rio and ECOPETROL will increase, according to their forecasts, from about 200 GWh (peak load 31 MW) and 260 GWh (peak load 42 MW) consumed in 1969, to about 360 GWh (peak load 75 MW) and 440 GWh (peak load 70 MW) in 1973, respectively. An expansion of Siderurgica del Pacifico in Cali will increase by 2 GWh/month the demand from EMCALI in 1971. EPM is in the process of entering into an agreement with Hanna Mining Company to supply electric power to the Cerro- Matoso Nickel Plant, planned to be built in Monte Libano (Cordoba), with a peak demand of 65 MW, 90 percent load factor and strict requirements for very high reliability of supply. The construction term of the Nickel Plant is three years, but no firm decision to build it has yet been reached. This new approach will be very beneficial for the public sector, because of the base-load nature of industrial demand, and for the industries themselves, which will thus be freed from the complexities and higher costs usually associated with the small, isolated plants. The benefits of course, will materialize only if the public sector is able to comply economically with its commitments, and for this a continuing process of planning and expansion is required. There is no doubt that this can be accomplished in the systems integrated in ISA, which is already applying long-term, updated planning on a large scale for those commitments. All this emphasizes the need and urgency of carrying out the integration of the Nordeste and its interconnection with ISA system (paras. 13, 16 and 17). Financial Situation 24. At present, only EEEB and EPM are financially self-sufficient to carry out their operations and construction investments; external financing -for foreign exchange costs of their main projects has been available to them. 'ISA was created by its sponsors to achieve joint objectives of coordinated planning, construction and operation which would have been difficult to r.-ealize without the intermediary of a commonly-owned corporation. In parti- cular, the sponsors have agreed to make available to ISA funds for expansion wihich they would have been unable to lend to, or invest in, other sponsors for the same purpose. Thus, ISA is wholly dependent upon the sponsors, which must contribute to ISA's operating expenses and construction investments. ISA has obtained external financing for the foreign exchange cost of its two projects. CVC/CHIDRAL, ICEL and its subsidiaries, on the other hand, have needed in the past, and still do, substantial budgetary contributions and credits to cover part of their expenditures and investments, as well as to service external credits and loans. These agencies have in the past peren- nially experienced difficult financial circumstances, due in part to their failure to make timely application for tariff increases, and subsequent delays by the Government in granting them.  - 12 - 25. The establishment and implementation of a comprehensive, rational public utility tariff policy in Colombia has been needed for many years. Until recently, tariff adjustments have been granted on an ad hoc basis, and sometimes they have been too small and too late. In December 1978, the Government instituted the Junta Nacional de Tarifas de Servicios Publicos (Junta), as part of Planeacion, to regulate public utility tariffs, appro- priately structuring and adjusting them to cover operating expenditures and provide a reasonable return on revalued assets to permit orderly financing of expansion. The preparation by the utilities and the study and processing by the Junta of tariff adjustment applications have been organized by the use of comprehensive data forms and computer programs which permit fast and complete evaluation of alternative structures and levels of adjustment. The Junta thereby has been able to process a good part of the backlog of applications by power agencies. Much work is at the same time being done by Planeacion and ICEL, in close coordination, to bring about national uni- formity in accounting, reporting, valuation techniques, etc. Since the beginning of 1970, a new accounting plan prepared by ICEL is being used by all its subsidiaries and affiliates. The plan is coordinated with the data forms used by the Junta for the processing of tariff adjustment applications. Planeacion and ICEL have been helping those utilities to initiate the use of the new techniques, particularly with regard to the collection of statis- tical data and the preparation of tariff adjustment applications. Planeacion is at present considering the revision of the basic structure of tariffs, but no information on this is yet available. The problem to be resolved by all these activities is important. The National Government's budgetary subsidies to service ICEL's debt have increased from Ps 45 million in 1968 to Ps 73 million in 1969 and are programmed at Ps 120 million for 1970. These subsidies represent a drain on resources, which curtails the Govern- ment's capacity to finance new investments.  III. CONSTRUCTION AND INVE3TMEDIT PROGRAMS 26. As it can be inferred from preceding paragraphs, an impressive, but necessary process of expansion of power generation and transmission facilities is underway throughout the country. In 1969, 6 new generating plants, aggregating a total of 200 PW, and 270 km of 115 kV lines were put in service. The size, schedule, cost estimate and status of external fi- nancing of the generating plant and major transmission line projects present- ly under construction and planned are indicated in Annex 1, Table 1 to 4. The location of these projects is shown in TMap 1. According to this program, ll new plants or extensions to existing ones aggregating a total of 1,624 NW, and 1,51i5 kan of 230 kV and 115 kV lines are under construction for completion during 1970-75. Additionally, 7 plants aggregating a total of 778 MW and 1,160 km of 230 kV and 115 kV lines are planned for start of construction during 1970-1976. Following is a surmmary of the total cost estimates and external financial requirements for these projects; the investrment and financing planned for ICEL's program of subtransmission and urban distribution projects (see para. 18) is also included. External Financing Cost Estimate US$ million Foreign Dxchange Total Additional US$ million COL$ million Obtained Required Generating Plants: under construction 232.0 6,096 204.7 28.1 planned 77.1 2,070 - 77.1 Transmission Lines: under construction 37.2 913 26.3 10.9 planned 26.9 619 - 2609 Subtransmission and Urban Distribu-tion Program (planned) undefined 800 - 25.0 TOTAL 373.2, plus 10,498 231.0 168.0 amount undefined 27. Of the total external financing obtained for above construction program, the credits and loans obtained since January 1, 1969, as listed in Table 5, amounts to a total of US$140.9 million equivalent. The amounts of additional external financing required for each project and their scheduled periods of construction are indicated in Tables 1 to 4. The new projects for external financing during 1970-72 and the amounts required as indicated in those tables are as follows:  - 14 - External Financing Obtained Add. Required Year US$ million US$ million Required CGeneration Plants Chivor I - Hlydro (ISA) 52.3 22.8 1971/72 Paipa Thermal (ICEL/Nordeste) - 7.4 1971/72 (x) Zipaquira Thermal (EE&B) - 7.L 1971/72 (*) Barrancabermeja Thermal (ICaL/Nordeste) - 7.6 1571/72 (*) Cartagena Termonorte I (CORELCA) - 10.5 1972 Transmission Lines Bucaramanga-Cucuta (ICEL) - 1.0 1970 (*) Bucaramanga-Barrancabermeja (ICEL) - 2.3 1970 (*) Guatape-Barrancabermeja (ISA) - 3.4 1971 (*) Cartagena-Sincelejo (CORELCA) - 7.5 1971 Chivor-Paipa (ISA) - 3.2 1972 (*) (*) Prospective schedule of projects for ISA-11ordeste integration (see para. 17). 28. The program of total investments in the public power sector for the period 1970-72 and the forecast investments for 1973-75 are indicated in Table 6. The expected sources of funds to finance the 1970-72 program are also indicated in Table 6. The program includes the investments to carry out the projects listed inTablesl to 4 and all other investments by the public power entities in the country. 29. TEne present and forecast financial situations of EEEB and EP11 appear satisfactory to carry out, without need for budgetary contributions, their operations and investment programs and also to make the necessary contributions to ISA's investment program. CVC/CIHDRAL will need con- siderable national assistance to meet its investment program and its obligations to ISA; this is due mainly to the need to macke substantial investments in Alto Anchicaya. ICI'L/CHi3C will fulfill its obligations to ISA with appropriations from the national budget. Dhuring 1970-72, ICEL subsidiaries and CORELCA wrill continue to rely heavily on national budgetary contributions and credits to finance their invest,ment prograums, as their internal generation of funds is expected to cover not more than half of the planned local financing. It is expected that this situation lwill be gradually improving as result of progress achieved in the organization and development of the sector and in the implementation of appropriate tariff policies.  IV. PLAMI<T TtG K). The active participation of Planeacion in the sector's planning in later years and the consolidation of ISA's role in planning long-range generation and transmission projects have helped to promote the develop- maent of a remarkable atmosphere among the country's major power agencies to organize and expand their planning activities. Some of them have formed recently new planning departments in their organizations. 31. As indicated in para. 6, ISA's interconnection network has made possible the first joint planning in Colombia of a long-range power generationL program; computer models were used to determine the most suitable and economic schedule of plant construtction in the interconnected system. Planeacion and ISA are continuing and extending the use of these techniques, which permit to simulate, for each alternative program of construction, the operation of reservoirs, plants and transmission lines of the system under study, and calculate the present value of the invest- ments and life-time operating costs associated with each program. To under- takce such analyses, it is necessary that appropriate feasibility and other preinvestrent studies be available; the use of local and foreign consultants by powier agencies to carry out these basic studies is also being extended. It is notable that FONADE's financing of preinvestment studies in the power sector represented in later years about 50 percent of total FONADE's financing. 32. Although a good number of studies have been performed and are presently underway in the power sector, the process of continuing evolution aad development that the sector is undergoing implies the need for additional preinvestment studies and also for a careful prograxmning and definition of -,thleir priorities and scopes. Throughout the review of the sector presented in preceding chapters, specific indication has been made of the need to under- take preinvestment studies on the interconnection of ISA and CORELCA systems (para. 18) and on rural elec-trification on a national scale (para. 22). On the other hand, planning of power generation programs requires that appropriate plant feasibility studies be available to permit the consideration of sufficient alternative construction schedules. In the case of Colombia, whlich has important hydroelectric resources, the availability of studies of prospective hydro developments is specially interesting, and even more considering the prospects for a high rate of grouth of powrer demand in coming years. These studies require long-term surveys and investigations and considerable corresponding expenditures. It is therefore advisable that a good number of hydrolelectric feasibility studies be undertaken, in addition to those already underway. Those considered of higher priority have been included in the preinvestmrnt study program proposed in the next para- graph. -. * A program of 7 new preinvestment studies is reconmended for the powrer sector for the imimdiate future. It is described in detail in the attached Stucy Data Sheets Nose 5-1 to 5-7. A summary is presented belowf:  - 16 - Year to Duration Cost Estimate Study Start (months) (US$ million) 1. Rural Electrification (ICEL) /a 1970 12 0.2 2. Rio Cauca Hydroelectric Poten7Tal (ISA) 1970 36 0.7 3. Chingaza Water Supply/Bogota River Basin Power Development (EEEB/EAAB)/a 1970 12 0.3 4. Rio Patia H3roelectric Potential (ISA) 1971 24 o.6 5. Rio Saldana Hydroelectric Potential (ISA) 1971 12 0.2 6. Rio Guavio Hydroelectric Development (ISA) 1971 20 o.6 7. CORELCA System Interconnection to ISA System (ISA/CORELCA)/a 1972 12 0.3 /a Studies considered of highest priority within the recommended program.  V. GEITERAL COTIENTS 34. From the foregoing review, it is apparent that the Colombian power sector is undergoing a remarkable process of comprehensive organization and developirent, which was actually initiated in 1967, when the concepts of inter-regional cooperation and coordinated planning won acceptance and began to be implemented. This process consists of a number of institu- tional developmenits, studies, plans and projects carried out in recent .,ears, undelwTay or planned. Major institutional and organizational dlevelopments since 1567 have been the establishment of ISA, the institution of the Tunta Nacional de Tarifas, and the start to implement, by the formation of CORELCA and the reorganization of ICEL, the concept of electric service ones and regional integration. Som-e of the projects under construction, particularly ISA's interconnection network and Chivor plant, and the high voltage transmission lines in the North and Northeast, as well as some of the preinvestment studies, in particular ISA's power generation program and ICEL's subtransmission and distribution program, mark also major steps f'orivard in the sector's development. :5. To achieve in the future the necessary continuing progress in the organization and development of the sector along the guidelines and with the general objectives being at present satisfactorily pursued, it seems essential to maintain and improve as required the existing collaboration rnd coordination between Planeacion, ICEL and the operational pow-rer agencies. T'he present institutional arrangements incorporate some duplication of i'unctions by these entities, particularly between ICEL and Planeacion and between ICEL and the autonomous agencies. This has been more noticeable since ISA initiated i-ts activities and since the plan to establish an autonomous basic system in each electric zone has begun to be implemented. T'hese developments may justify a reconsideration of the role of ICEL in the sector. 36. There are at present two important aspects of the sector in which TCEL's efforts could be concentrated and be specially valuable: (a) develop- rnent of subiransmission, distribution and rural electrification; and (b) preparation of CORELCA, CHEC and the new autonlomous agency to be formed in the ITordeste to become fully qualified, institutionally and technically, to assume efficiently their responsibilities as the basic power systems of their respective electric zones. The commndable internal reorganization experienced by ICEL during the last two years and its character of National Institute in control of the Electrificadoras make it specially suitable to undertake with priority these two basic tasks. The operational and institu- tiortal autonomr of those three basic power systems wJill facilitate their institutional integration in ISA in concurrence with the interconnection of their systers. With these integrations, the establishment of ISA as the ,gency responsible for the planning, construction and operation of interconnection and generation facilities on a national scale will have been accomplished. It is foreseen that in concurrence with these developments the institutional and operational participation of ICEL in ISA may have to be reconsidered. 3'7. Another important issue concerns the need to reduce and eventually eLiminate operating subsidies from the national budget as soon as possible.   Table 1. GEIERATTNG PLANTS TJIMDRR CONSTRUCTION Cost Estimate Foreign Financing Installed Scheduled Foreign Total Obtained Additional Requirement Capacity Initial Exch,US$ Col$ US$ US$ MW Cperation million million million Source million Source Colegio II - Hydro (EEEB) 150 1970 7.5 159 7.5 IBRD & Suppl. - Bucaramanga-Turbogas III (ICEL-CORELCA) 15 1970 1.6 30 l.h Suppliers 0.2 Suppliers Barranquilla-Turbogas IV (ICEL-CORELCA) 15 1970 1.6 30 1.4 Suppliers 0.2 Suppliers Chinu-Turbogas III (ICEL- CORELCA) 15 1970 1.6 30 1.4 Suppliers 0.2 Suppliers Barranquilla-Turbogas III (ICEL-CORELCA) 23 1970 2.5 49 2.4 Suppliers 0.1 Suppliers Guatape I-Hydro (EFM) 280 1971 42.0 68o 42.0 IBRD - Canoas-Hydro (EEEB) 50 1971 5.8 200 5.8 IBRD & Suppl. - Cartagena-Turbogas III (ICEL-CORELCA) 19 1971 1.7 35 1.5 Suppliers 0.2 Suppliers Rio Prado - Hydro (ICEL) 51 1972 13.0 400 13.8 IDB & Suppl. - Florida II - Hydro (ICEL) 24 1972 2.4 78 0.9 Suppliers 1.5 Suppliers Barranquilla-Termonorte I (ICEL-CORELCA) 132 1972 16.1 340 13.2 Suppliers 2.9 Suppliers Rio Negro - Hydro (ICEL) 10 1973 - 75 - _ Alto Anchicaya - Hydro (CVC/CHIDRAL) 340 1974 61.1 1,609 61.1 IDB & Canada - Chivor I - Hydro (ISA) 500 1975 75.1 2,381 52.3 IBRD 22.8 Suppliers TOTAL 1,624 232.0 6,096 204.7 28.1 :~~~~~~~~~~~~~~~~~~~~  Table 2. MAJOR TRANSPIESS,ION LINES IJNDER CONSTRUCTION Cost Estimate Foreign Financing Foreign Total Obtained Additional Requirement Voltage Length Scheduled Exch US$ Col$ MT US$ kV km Completion million million million Source million Source Guatape - Medellin (EPM) 230 64 1970 1.0 23 1.0 Suppliers Interconnection Network (ISA) Bogota-Manizales Manizales-Guatape Manizales-Cali 230 535 1971 21.0 503 14.6 IBRD & Supp. 6.4 Suppliers Paipa-Bucaramanga (ICEL) 230 165 1971 1.0 44 0.9 Suppliers 0.1 Suppliers Barranquilla-Sabanalarga- Cartagena (ICEL-CORELCA) 230 120 1972 5.5 121 5.5 Suppliers - Flandes-Prado-Neiva (ICEL) 115 170 1970 2.0 50 2.0 IDB & Supp. - Bogota-Villavicencio (EEEB) 115 75 1970 0.3 9 0.3 Suppliers - Medellin-Bolombolo (ICEL) 115 45 1971 0.4 13 0.4 Suppliers - Medellin-Santa Fe de Antioquia (ICEL) 115 45 1971 0.2 8 0.2 Suppliers - Zipaquira-Chivor (EEEB) 115 96 1971 0.4 10 - 0.4 Suppliers Popayan-Cali (ICEL) 115 120 1971 1.0 37 0.2 Suppliers 0.8 Suppliers Barranquilla-Santa Marta (ICEL-CORELCA) 115 110 1972 4.4 95 1.2 Suppliers 3.2 Suppliers TOTAL - 1,545 37.2 913 26.3 10.9 - -= =_  Table 3. GENFRATING PLANTS PL4T MTT Installed Estimrated Sched le Cost Estimrate Capacity Foreign axch. Total 1iPh4 Initiation Completion US$ million Col$ million Paipa - Thermnal (ICEL/Nordeste) 66 ) ) 7.4 190 Zipaquira - Thermal (EEEB) 66 )1971/72 )1973/74 7.4 190 Barrancabermeja - Thermaal (ICEL/Nordeste) 66 ) ) 7.6 200 Guatape II - Hydro (EPW) 280 1973 1978 26-.0 7h0 Cartagena - Terinonorte (ICEL-CUELELCA) 100 1972 1974 10-5 270 B^3rranquilla - Termonorte II (ICEL-CORELCA) 100 1974 19?6 9.1 240 Cartagenri - Termonorte II (ICEL-CORELCA) 100 197$ 1978 9.1 240 TOTAL 778 -- 77.1 2,070 CD  Table 4. MAJOR TRANSMISSION LINES PLANNTD Estimated Schedule Cost Estimate Voltage Length Foreign Exch. Total kV km Initiation Completion US$ million Col$ million Bucara.manga - Cucuta (ICEL) 230 120 1970 1972 1.0 35 Bucaramanga - Barrancaberneja (ICEL) 230 100 1970 1972 2.3 50 Guatape - Barrancabermeja (ISA) 230 200 1971 1973 3.4 76 Cartag-ena - Sincelejo (CORELCA) 230 150 1971 1973 7.5 165 Chivor - Suba - La Mesa (ISA) 230 180 1971 1974 Part of Chivor I - Hydro Proj. Chivor - Paipa (ISA) 230 110 1972 1974 3.2 73 6abanalarga - Fundacion - Santa Mlarta (CORELCA) 230 170 1973 1975 9.0 200 Frundacion - Valledupar (COHELGA) 115 130 1973 1975 0.5 20 TOTAL -- 1,160 -- -- 26.9 619 -3z  ANNZX I Table 5 Table 5. ErENAL FINANCING OBTAIED) SINCE JANUARY 1, 1969 US$ million Source A. CGenerating Plants Barranquilla-Ternonorte I (ICEL) 13.2 Germany Alto Anchicaya - Hydro (COV/CHIDRAL) 61.1 ID1B and Canada Chivor I - Hydro (ISA) 52.3(1970) IBRD 1 26.6 B. iran3mission Lines Interconnection Network (ISA) 4.6 Several Suppliers' Countries Cuatape-Medellin (EPN) 1.0 Several Suppliers' Countries Paipa-Bucaramanga (ICEL) 0.9 france Barranquilla- Sabanalarga-Cartagena (ICEL-CORELCA) 5.5 Several Suppliers' Countries Bogota-Villavicencio (EEEB) 0.3 Several Suppliers' Countries Itedellin-Bolombolo (ICEL) o.4 France Neziellin-Santa Fe de Antioquia (ICEL) 0.2 France Popayan-Cali (ICEo) O.2 -Vain Barranquilla-Santa Marta (ICEL-CORELCA) 1.2 Several Suppliers' Countries '9.3 TOTAL 1J40.9  Table 6. PUBLIC POWER SECTOR INVESTMENT PROGRAM (Col$ million) ---- - 1970 --- ------- 1971 - -1972 Total Expected Total Expected Total Expected Forecast Invest- Financing Invest- Financing Invest- Financing Total Investments ment Local External ment Local7 External ment Local External 1973 1974 1975 ICEL Subsidiaries and CORELCA 8ho 301 539 576 327 249 532 394 138 651 662 801 ISA, EEEB, EPM and CVC/CHIDRAL 1,314 470 844 1,300 739 561 1,844 1,114 730 1,855 2,205 1,795 Others (Municipalities) 72 69 3 83 83 - 97 97 - 120 135 204 TOTAL 2,226 840 1,386 1,959 1,149 810 2,473 1,605 868 2,626 3,002 2,800 (DX FAE,  ANNEX 2 MAPS 1 and 2   ol ii I - 0C -;'E II I / / ~~~~~r o I 0 //,