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On October 27, 2024, the Electricity Regulation and Control Agency (“ARCONEL”), issued Regulation No. 006/24, establishing the “Regulatory Framework for Participation in Distributed Generation by Companies Interested in Energy Generation Activities” (the “Regulation”).

Below are the most relevant points:

1. Purpose

The Regulation defines the technical and commercial requirements for private sector companies and foreign state-owned enterprises to establish, operate, and manage new distributed generation plants (“CGD”) for selling energy to distribution and commercialization companies (“Distributors”).

Interested companies are responsible for identifying generation projects.

The maximum capacity and accumulated energy for projects under this Regulation will be governed by policies and guidelines issued by the Ministry of Energy and Mines (“MEM”) according to the country’s needs.

1. CGD conditions

• Nominal capacity equal to or greater than 100 kW and up to ten 10 MW.
• Synchronous connection to an electricity transmission or distribution network.
• Use of a primary source of non-conventional renewable energy.

1. Procedure

Companies wishing to install and operate a CGD must:

1. Obtain a Preliminary Connection Feasibility Certificate from the Distributor, confirming the initial feasibility of connecting the CGD to its network.
2. Obtain a Qualification Certificate from MEM, granting the applicant exclusive rights to meet the project’s requirements.
3. Obtain a Definitive Connection Feasibility Certificate from the Distributor, confirming final connection feasibility.
4. Obtain a Concession Contract from MEM, which is the enabling title for project development.
5. Sign Regulated Contracts with Distributors for the sale of energy produced by the CGD.

1. Levelized costs of the energy produced.

The levelized costs of energy (“CNE”) are rates at which energy produced by CGDs will be compensated, based on the technology used:

Technology CNE (¢USD/kWh) Biomass 11,864 Wind 8,488 Hydroelectric 7,589 Solar Photovoltaic 8,144 Biogas 12,360 Geothermal 11,140

CGDs with nominal power between 1 MW and 10 MW will receive preferential dispatch.

This Regulation does not apply to: (i) distributed generation projects in the Galápagos; (ii) self-generation plants; (iii) distributed generation systems for self-supply of regulated and unregulated consumers; (iv) emergency generator sets; and (v) generation plants that were constructed or in operation before October 27, 2024.

 

Carlos Torres, Senior Associate at CorralRosales
ctorres@corralrosales.com
+593 2 2567676

Mario Fernández, Associate at CorralRosales
mfernandez@corralrosales.com
+593 2 2544144 

On November 5, 2024, the Official Gazette No. 676 published the Regulation for the Utilization of Associated Gas, hereinafter referred to as “the Regulation”, which was issued by the Board of the Hydrocarbon Regulation and Control Agency through Resolution No. ARCH-003/2024 on September 25, 2024.

The Regulation aims to establish both the actions and technical parameters required to implement projects for the Utilization of Associated Gas, the gradual elimination of routine flaring, and the elimination of outdoor burning of Associated Gas using flares. It will apply nationwide to all oil exploration and extraction activities that produce Associated Gas, conducted by public or private, national or foreign companies, consortia, and associations, referred to as Subjects of Control.

To optimize the utilization of Associated Gas, Subjects of Control must submit an Associated Gas Utilization Plan, hereinafter “the Plan,” which can be used for self-consumption within the Subjects of Control’s contract area. The Plan aims to quantify the volume of associated gas usage and flaring during the exploration and extraction stages of hydrocarbons. Subjects of Control will request annual authorization for the use and flaring of associated gas from the relevant ministry within 30 days from the start of production tests on the first exploration well. The Plan must include the following information:

1. Description of projects for associated gas optimization.
2. Designs and project infrastructure plans.
3. Schedule for the implementation of associated gas utilization projects.
4. Measurement of gas flow produced and flared from wells in production.
5. Methodology for estimating planned volume.

All Subjects of Control are required to submit an annual report on the integrity and operational safety of the systems for the safe disposal of relief gases in an environmentally friendly manner, referred to as “Teas.” For Subjects of Control to operate Teas, the Plan must include the following:

1. Number of Teas, categorized by platforms.
2. Geographic coordinates of Teas.
3. Designs, plans, and specifications of Teas.
4. Annual monitoring plan approved by the environmental authority.
5. Inspection and maintenance program for Teas.

The deadline to replace flares with Teas is set for 2030. If the maximum capacity for Associated Gas Utilization cannot be reached by 2030, the Subjects of Control must provide technical justification and update the Plan.

Subjects of Control must measure the following volumes of Associated Gas:

• Produced.
• Designated for routine, non-routine, and gas safety flaring.
• Used in the Subjects of Control’s gas utilization projects.

Once the maximum associated gas utilization capacity is reached according to the block operated by the Subjects of Control, they will not be allowed to flare Associated Gas except in authorized volumes.

Within 90 days of the Regulation’s entry into force, the Ministry of Energy and Mines will define contractual models for the industrialization and/or commercialization of surplus Associated Gas.

The first five-year plan for Associated Gas Utilization will come into effect upon the authorization for Associated Gas Use and Flaring in 2025.

 

Rafael Serrano, Partner at CorralRosales
rserrano@corralrosales.com
+593 2 2544144

Carlos Torres, Associate at CorralRosales
ctorres@corralrosales.com
+593 2 2567676

 

By Resolution NAC-DGERCGC24-00000035, issued on October 30, 2024, the Internal Revenue Service amended the rules regarding the transmission of electronic sales receipts and the issuance of pre-printed receipts.

Previously, taxpayers were required to transmit electronic receipts to the tax administration within a maximum of 72 hours after generation. Under the new amendment, taxpayers may now submit receipts within a period of 4 business days from the date of issuance.

Additionally, as long as the emergency in the electrical sector persists, taxpayers are permitted to issue pre-printed receipts up to a limit of 5% of the total receipts issued in the previous fiscal year. This limit was previously set at 1%.

 

Andrea Moya, Partner at CorralRosales
amoya@corralrosales.com
+593 2 2544144

 

The “Law to Promote Private Initiative in Energy Generation” (the “Law”) was published on October 28, 2024, in Official Gazette Supplement No. 673. The Law aims to encourage private investment in renewable energy generation to help overcome the country’s energy crisis.

Below is a summary of the Law:

1. Transitional generation is defined as “…non-renewable generation technologies with low environmental impact, which allow for a gradual transition of the energy matrix.”

1. Concession contracts may be backed by guarantees to be defined in the regulations of the Law.

1. The collection and payment for regulated demand transactions shall be carried out according to the priority order set by the Energy Regulation and Control Agency (“ARCONEL”). Distributors may establish a trust to ensure compliance with this priority order.

1. Installed assets for self-supply, self-generation, cogeneration, and unconventional renewable energy generation up to 10 MW will not revert to the State.

1. For priority projects listed in the Master Electricity Plan (“PME”), the Ministry of Energy and Mines (“MEM”) will conduct public selection processes.

1. If a renewable or transitional energy project is identified by the private sector, is not included in the PME, and has a capacity of less than 100 MW, it may be developed by the proponent with prior authorization from the MEM. For larger capacities, delegation through a public selection process will be required.

1. Priority and preferential pricing will be given to private projects up to 100 MW that promote the use of clean technologies and unconventional renewable energy with storage capacity and interconnection networks.

1. Only unconventional renewable energy projects up to 10 MW will be granted priority dispatch and preferential pricing.

1. The MEM must include legal stability clauses in all contracts with public or private entities, considering the central and local taxes in effect at the time of contract signing.

1. Private projects with a 10 MW limit, either in the permitting phase or in operation, may request permit reviews or power adjustments, respectively, to comply with the new limits of the Bill.

1. The holder of the concession contract resulting from a PPS may utilize mechanisms to guarantee payment to their financiers or creditors, who may enter into direct agreements with the granting entity to ensure the continuity of the project. Step-in rights in favor of financiers and creditors will be established in the Law’s regulations.

1. Thermoelectric generators must present transition plans to clean technologies, including natural gas use, and develop hybrid projects combining thermal and renewable energy. The State will facilitate the granting of licenses for natural gas imports.

1. Legal entities established in the country may import natural gas for self-consumption in productive processes or to generate electricity.

1. Public and private banks may offer financial products or loans with preferential rates to individuals and legal entities seeking to implement self-supply energy generation systems (“Self-Supply Systems”) using renewable sources.

1. Beneficiaries of Self-Supply Systems may sell any surplus energy generated.

1. Decentralized Autonomous Governments must implement waste management systems, including waste processing for energy generation to be sold to the National Interconnected System.

1. By December 13, 2024, ARCONEL and MEM must issue the necessary regulations for implementing the Law.

1. By November 27, 2024, the Hydrocarbon Regulation and Control Agency and MEM must issue regulations for the importation of natural gas for generation or self-generation projects.

1. By November 27, 2024, distributors must sign regulated contracts with the concessionaires of PME projects with the respective concession contracts.

1. By January 28, 2025, MEM must call for tenders for the exploitation and repowering of identified natural gas fields.

 

Carlos Torres, Senior Associate at CorralRosales
ctorres@corralrosales.com
+593 2 2567676

Mario Fernández, Associate at CorralRosales
mfernandez@corralrosales.com
+593 2 2544144

 

On October 25, 2024, the President of the Republic issued Executive Decree 438, whereby the following was established:

1. To suspend the working day for the public and private sector on October 31, 2024.

1. That the public sector will recover its working day through an additional hour during the subsequent working days.

1. That the private sector may recover its working day in the same way as the public sector.

1. On October 31, 2024, the entities and agencies of the public sector shall guarantee the provision of public services.

In our opinion, the private sector, by mutual agreement between the employer and the employee, may determine how to execute the working day or how to compensate it.

 

Edmundo Ramos, Partner at CorralRosales
eramos@corralrosales.com
+593 2 2544144

On October 25, 2024, the Data Protection Authority (“SPDP”) issued Resolution No. SPDP-SPDP-2024-0013-R, enacting the Regulation on the Submission and Processing of Complaints and Requests for Data Protection (“Regulation”).

The main points are below:

1. Purpose and Scope of the Regulation

The Regulation governs the submission and processing of complaints and requests before the SPDP following the principles of expeditiousness, lawfulness, timeliness, transparency, good faith, objectivity, effectiveness, efficiency, and quality.

This Regulation applies when:

• The exercise of the data subjects’ rights has been violated.
• Data protection principles have been breached.
• The data controller or processor has failed to comply with obligations set forth in the data protection regulatory framework.

1. Complaints and Requests

• Complaint: A mechanism by which an individual or an entity notifies the SPDP of an alleged violation of data protection regulations, such as the improper use of personal data, security breaches, or unlawful practices.
• Request: A petition filed by a data subject to address a specific issue related to processing their personal data, such as a lack of response or improper data handling. The objective is to request that the controller or processor correct their actions, recommend corrective measures, or initiate an administrative sanction procedure.

1. Submission of Complaints and Requests

Complaints and requests may be submitted physically at the SPDP offices or electronically through the channels made available.

1. Complaint Procedure

Once a complaint is submitted, the SPDP may initiate preliminary actions or impose provisional protective measures to safeguard the data subject’s rights. These measures may include:

• Withdrawal of products, documents, or other goods.
• Access limitations or restrictions.
• Removal of individuals.
• Suspension of the processing activity.
• Closure of establishments.

During the preliminary proceedings, the SPDP will:

• Identify the alleged perpetrator(s).
• Establish the specific circumstances of the case.
• Determine relevant contributing factors.
• Assess whether sufficient grounds exist to initiate an administrative procedure.

If necessary, the SPDP may order further investigations, inquiries, audits, or inspections to clarify the facts. The administrative act initiating the preliminary action will be notified to the investigated party in accordance with the Administrative Code (“COA”).

Once the preliminary actions are completed the SPDP will issue an initial report which will be notified to the investigated party. The party will have ten working days from the date of notification to submit its response.

If no response is provided within the given term, the preliminary report will have full legal effect and become the final report, concluding the initial actions.

The SPDP has a maximum of six months from the issuance of the administrative act to decide whether to initiate an administrative sanctioning procedure.

1. Request Procedure

Requests submitted by data subjects must meet the requirements established in the Regulation. If the request is incomplete or unclear, the SPDP will order the petitioner to amend or clarify it within five days of notification. Failure to do so will result in the request being archived.

The SPDP will assess whether the request falls within its jurisdiction and, if necessary, may open a thirty-day evidentiary period during which the data subject and controller may submit additional evidence.

Within twenty days following the conclusion of the evidentiary period, the SPDP will issue a report that may contain:

1. A recommendation on whether or not to initiate an administrative sanction procedure.
2. A recommendation regarding the corrective measures to be implemented.

Corrective measures and administrative sanction procedures will be governed by the provisions of the COA, Data Protection Law, the Regulations to the Data Protection Law, and any other applicable regulations issued by the SPDP.

The Regulation came into effect on October 25, 2024.

 

Rafael Serrano, Partner at CorralRosales
rserrano@corralrosales.com
+593 2 2544144

On October 22, 2024, the Ministry of Labor issued the Ministerial Agreement No. MDT-2024-200, hereinafter the “Agreement”. We highlight the following:

• The Agreement could be applied by employers of the private sector that require a temporary modification of the working day due to the national electric emergency.

• The modification of the working day must be implemented by means of a written mutual agreement between the employer and the employees and must be registered in the SUT system within 30 days after the signing of the agreement.

• The modification of working hours should adjust to the following:
  1. Employees shall be entitled to a rest of 72 continuous hours.
  2. Employees could agree to a working day from 7:00 a.m. to 5:00 p.m. on Mondays, Tuesdays, Wednesdays and Thursdays or a working day from 7:00 a.m. to 5:00 p.m. on Thursdays, Fridays, Saturdays, and Sundays.
  3. Shifts that exceed 40 hours per week shall be paid as overtime.

• The modification of the working hours can be terminated either by agreement of the parties or automatically by the end of the energy crisis.

• The system will be enabled for the registration of the working day modifications within 10 days from the date of the Ministerial Agreement.

 

Edmundo Ramos, Partner at CorralRosales
eramos@corralrosales.com
+593 2 2544144

 

María Victoria Beltrán, Senior Associate at CorralRosales
mbeltran@corralrosales.com
+593 2 2544144

 

The Ministry of Production, Foreign Trade, Investment, and Fisheries has published the Free Trade Zone Investor Kit, which contains the instructions for requesting approval for Free Trade Zone projects and Operator´s qualifications.

Below is a list of the documents that must be submitted in both physical and digital formats:

1. Application form for Free Trade Zone declaration and Operator User qualification, which must include the following documents:

1. 1. Certificates of compliance issued by the Internal Revenue Service, the Ecuadorian Social Security Institute, and the Superintendence of Banks or the Superintendence of Companies, Securities, and Insurance, as applicable.
   2. Documents required for approval as an Operator of a Free Zone Trade:
   1. 1. By-laws of the company which must indicate that its corporate purpose is the execution of Free Trade Zone activities;
      2. Taxpayer Registration Certificate (RUC);
      3. Appointment Document and ID card of the legal representative.
      4. Notarized Sworn statement declaring that the applicant has not previously been an operator or administrator of a free trade zone whose authorization has been revoked due to a sanctioning procedure. and,
      5. Documents that display the financial capacity of the applicant.

       

1. Master Development Plan Report form, which must include:

1. 1. Technical report on the project location, execution timeline, land plans, project layout and design, identification of sustainable development goals (SDG), environmental study or license, and details of potential users and support services.
   2. Economic report that covers social, economic, and productive indicators, generation of economies of scale, socioeconomic aspects, job creation details, financial projections, economic and financial evaluation, and project’s financial structure and capacity.
   3. Market report regarding expected participation in local and international markets, market strategy, and its relation to potential users, business model, potential competition, and a preliminary list of imports.

1. Annex form to the Master Plan, which must include:

1. 1. Operator´s investment schedule;
   2. SDG compliance schedule; and,
   3. Employment generation schedule.

    

1. Request index referencing the location of each document.

The forms and instructions are available at the following URL.

Fernanda Inga, Senior Associate at CorralRosales
finga@corralrosales.com
+593 2 2544144