Colombia energy ministry warns of tariff increases as El Niño phenomenon forces shift to thermal generation

Energy Minister María Nohemí Arboleda told economic committees in Congress on September 9, 2026 that electricity prices must increase because hydroelectric resources can no longer meet national demand. The drought has pushed reservoir levels to lows not seen in decades, forcing operators to activate thermal plants that burn gas and liquid fuels at costs reaching 1,200 pesos per kilowatt-hour while regulated tariffs only recognize 400 pesos. Arboleda stated the ministry will not promise what it cannot deliver, warning that prices will climb if conditions worsen further. She described the current El Niño event as accumulating all problems from previous episodes into a single crisis, aggravated by surging electricity demand.

The government assembled 1.5 trillion pesos this month to support thermal generators’ liquidity, though Arboleda cautioned these funds will not cover the entire El Niño period. For subsequent months, the ministry is promoting bilateral contracts between generators with surplus capacity and those exposed to spot market volatility. When companies lack hedging contracts, they face full spot prices that can exceed 1,000 pesos per kilowatt-hour, creating severe financial stress across the sector.

Gas supply emerged as a critical vulnerability. Arboleda stated Colombia faces a very critical gas situation and is conducting an exhaustive search for new sources regardless of price. The ministry is expanding regasification capacity at the SPEC terminal, which recently added 58 million cubic feet per day of import capacity, while monitoring progress on Pacific coast and Puerto Bahía regasification projects. The government is also evaluating coal-fired generation and reviewing contracts to stabilize power supply.

The ministry announced plans for an emergency auction to identify additional generation resources that can enter the market quickly. Arboleda noted that recent regulatory measures temporarily reduced spot prices from approximately 1,000 pesos to 640 pesos per kilowatt-hour on the first day of implementation, but warned this relief is unsustainable beyond a few months. The auction strategy aims to diversify supply and reduce system vulnerability during the climate event expected to peak between October and December 2026.

Colombia’s 2027 budget allocates 1.434 trillion pesos for electricity subsidies, but the ministry estimates 6.008 trillion pesos will be required, leaving a 4.574 trillion peso deficit. Arboleda confirmed to Congress that funding sources for this shortfall remain undefined and will require coordination with the finance ministry. The subsidy gap compounds pressure on the electricity system already strained by infrastructure deficits projected at 14,387 gigawatt-hours across 2026-2028 due to delayed generation and transmission projects.