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5.3. Connection costs

In general terms, connection costs related to transmission equipment, substation, protection, control and measurement systems must be considered as part of a generation project. This equipment is necessary to safely inject energy from the power plant into the electric system, respecting the minimum technical requirements established in the regulations and standards (time periods, minimum design standards of the installations, security standards and service quality, operation and monitoring of installations). These costs form part of the project and the amounts depend on each specific project.

In addition, in the case of connections to distribution networks, the regulations envisage possible connection costs that are outlined in the following section.

Both PMGDs and projects under the Netbilling Law must pay connection costs to access the distribution networks.

The text that regulates this matter with regard to PMGD is DFL N°4 of 2007 in its article 149, which states in its sixth paragraph that all additional works that are necessary to allow the injection of power to the networks of distribution are borne by the owners of the means of generation. Specifically, the above article states that the following:

“Concessionaries of the public electricity distribution service, as well as those companies that possess electricity distribution lines that make use of public, national assets, shall allow connection to their distribution installations by generators whose capacity surplus supplied to the electric system does not exceed 9.000 kilowatts, notwithstanding compliance with current security and service quality requirements. The additional works needed to enable the injection of that capacity surplus shall be carried out by the owners of the respective distribution system and their costs will be charged to the generator owners, in accordance with the regulations. To calculate these costs, the additional costs in adjacent zones of the injection point will be taken into consideration as well as the cost savings in the rest of the distribution network, in accordance with the procedures defined in the rules. The value of these additional installations will not be considered as part of the new replacement value of the respective distribution company”

The distribution company must show, through the Connection Criteria Report (ICC) [50] that the PMGD produces additional costs to its savings to the network and must propose alternatives for payment of these costs. The ICC must have a study of the impact of PMGD on distribution networks. For this, the distribution company must estimate the present value of the investment, operation and maintenance cost without considering the PMGD (this for a period of time equal to the useful life of the PMGD). Then, you must perform the same calculation considering the existence of the PMGD. In this way, the cost of connection will correspond to the sum of the effects produced by PMGD injections in the present value of the investment, operation and maintenance of the distribution company.

It should be noted that the costs and savings reported in the connection costs report should be based on the criteria and evaluation periods established for model companies in the calculation of the Added Value of Distribution (VAD), considering the expected injections of the PMGD. Also, the value of the additional facilities required for the PMGD connection is not considered part of the new replacement value of the corresponding distribution company.

The costs of connecting the projects under the Netbilling Law are solved by the owners of the generation systems. However, these costs should, in general, be considerably less than the connection costs of a PMGD.

In the event that additional works are required for the connection, the distributing company must indicate in detail those additional works and/or adaptations technically necessary for a correct connection of the generation equipment to the distribution network. The valorization of the works must be calculated considering the requirements necessary to maintain the standards of security and quality of supply in the current norm. In the preparation of reports, the distributing company, whatever its condition, must at all times consider the necessary requirements to maintain the standards of quality of supply in its network.

This calculation should consider the values of each of the components of the additional works and/or adjustments, associated assembly costs, and the surcharges established in the procedure for determining the New Value of Replacement (VNR) of the distribution facilities, established by the Superintendency.

Likewise, if the fitting connection of the splice is required, the costs associated with its extension and replacement shall be borne by the owner of the generation equipment.

The current regulations do not include connection costs to the transmission systems. The costs attributable to a generation project are established in the charges that it must pay for the use of the transmission systems [51]. However, the transmission facilities necessary to connect the generation project to the system are the responsibility and cost of the owners of the generation projects themselves. In addition, it should be mentioned that the Coordinator defines a set of technical requirements necessary for the integration of new generation sources, which may result in expansions of transmission systems, which, if considered as necessary works of expansion, will be financed by all users (see Section 2.4.2.2 to review the payment principles of the transmission network). In the case of Dedicated Transmission Systems, their extensions are negotiated between the owner and the user.