Supervisory Body of Private Investment in Energy and Mines (Peru)

Organismo Supervisor de la Inversión en Energía y Minería

Country

Location

Regulated area

Peru

Lima

Energy & natural resources

Useful pages on the regulator website

Key individuals

The board of directors is composed of the following members:

  • Jaime R Mendoza Gacon – President
  • Aurelio Ochoa Alencastre – Vice President
  • Cesar Antonio Sanchez Modena
  • Alfredo Juan Carlos Dammert Lira

Regulatory oversight

Law No. 26734 created the Energy Investment Supervisory Agency Body, OSINERG, on 31 December 1996. The Law Transferring Powers of Supervision and Control of Mining Activities (No. 28964) extended the entity’s supervision to mining companies and changed its denomination to OSINERGMIN. In addition, Law No. 27699 created the Complementary Law on Institutional Strengthening of the Energy Investment Supervisory Agency Body.

Law No. 27332 established the Framework Law of the Regulatory Agencies for Private Investment in Public Services. This Law sets out guidelines and rules of general application that have been issued to all regulatory agencies.

Supreme Decree No. 054-2001-PCM approves the General Regulation of the Supervisory Body For Energy Investment (OSINERG). It refers to the following activities:

  • the normative function, which allows the issuing of general dispositions referred to the tariff or regulatory systems or mechanisms for their application, among other things;
  • the regulatory function, which enables the determination of the tariffs on the regulated market regarding bar rates, electricity distribution, guaranteed and complementary transmission systems rates, and the tariffs for transportation of hydrocarbons by ducts, distribution of natural gas through the pipeline network, and others that correspond in accordance with the provisions of the law dispositions;
  • the monitoring and sanctioning functions allow OSINERGMIN to impose sanctions on the entities that carry out activities subject to their competence for non-compliance of the legal, technical obligations and those derived from the concession agreements, and of the regulatory dispositions and norms dictated by OSINERGMIN;
  • the dispute resolution function authorises the competent bodies of OSINERGMIN to solve the conflicts and disputes that, within the scope of its competence, arise between energy companies, between non-regulated clients, and between energy companies and non-regulated clients. Also, OSINERGMIN has the facility to conciliate opposed interests on matters within its competence. For these purposes, OSINERGMIN has conflict resolution bodies. The collegiate body resolves any first instance administrative disputes of OSINERGMIN's competence, and is composed of three members appointed by the board of directors. The Court of Dispute Resolution is responsible for resolving, in the second and final instance, procedures issued between the energy companies, between free users, or between the energy companies and their free users. The Board of Appeals of User Claims admits and resolves, in the second and final administrative instance, the claims of public service users within the scope of OSINERGMIN. Finally, the Energy and Mining Sanctions Appeals Tribunal (TASTEM) resolves, in the second and final administrative instance, appeals lodged in administrative sanctioning procedures, and appeals lodged against coercive fines, corrective measures, precautionary measures and security measures; and
  • the public service complaint resolution function allows OSINERGMIN to solve the claims of public service users within OSINERGMIN’s competence.

Reporting and disclosure obligations

The requirements for the presentation of reports and relevant information will change depending on the sectoral regulations (electricity, hydrocarbons and mining sub-sectors). In this regard, each company will present the corresponding information according to the specific sectoral requirements.

Monetary sanctions and recent behaviour

The audit and sanction function can be initiated by OSINERGMIN or on receipt of a complaint. The imposition of sanctions depends on the sub-sector involved, and will be applied by the electricity supervision manager, liquid hydrocarbons supervision manager, natural gas supervision manager, mining supervision manager or the head of the competent OSINERGMIN regional office.

In the event of failure to comply with the legal, technical obligations, or those derived from concession agreements, or the provisions dictated by OSINERGMIN, this authority will impose sanctions and fines. It falls to OSINERGMIN to determine prompt payment benefits and others that it considers. These sanctions could be appealed to the TASTEM.

OSINERGMIN’s new Regulations of Supervision and Sanctioning of Energy and Mining activities recently came into force. This regulation orders the creation of a Methodological Guide for the calculation and graduation of fines, with the purpose of establishing criteria for the determination of fines to be imposed in a sanctioning procedure.

Non-monetary sanctioning powers and behaviour

Infringements will be administratively sanctioned with partial or total suspension of establishment, facilities and activities, in a definitive or temporary period of time. Regarding the complementary sanctions, OSINERGMIN has the faculty to impose the forfeiture of assets, the temporary internment of vehicles, the work stoppage, the removal of facilities or equipment, or to impose an admonition.

Recent and upcoming developments

On 13 June 2021, the new OSINERGMIN Regulations of supervision and sanctioning of energy and mining activities came into force, establishing the new regulatory regime for the exercise of the supervisory and sanctioning functions of Osinergmin, being mandatory for the bodies of OSINERGMIN, the Supervising Companies and the Supervised Agents, with respect to the following activities:

  • Electricity subsector: (i) generation of electricity, (ii) transmission of electricity, (iii) distribution and commercialisation of electricity, iv) planning, programming and economic dispatch of the National Interconnected Electric System (SEIN), (v) others legally attributed to Osinergmin.
  • Hydrocarbons subsector: (i) exploration, (ii) exploitation and production, (iii) processing, (iv) storage, (v) transportation by pipeline network, (vi) distribution by pipeline network, vii) commercialisation, (viii) other activities legally attributed to Osinergmin.

The main novelties included in this Regulation are the following:

  • Mining sector: (i) exploration, (ii) exploitation, (iii) beneficiation, (iv) mining transportation, (v) storage of ore concentrate.
  • The audit activity must be carried out under a "responsive regulation" approach. Likewise, it is specified that the supervision activity is an integral part of the inspection activity.
  • The competencies of the supervisory authority are differentiated and specified.
  • The "voluntary correction" is considered as an exemption of administrative liability. Likewise, the list of cases in which it did not operate or its application was restricted, as contemplated in the previous Regulation, is eliminated.
  • The different types of exonerating factors of administrative liability applicable to the sanctioning procedure are detailed.
  • The following are added as mitigating factors of administrative liability: (i) acknowledgement of liability, (ii) corrective actions with respect to irremediable infringements, (iii) corrective actions subsequent to the initiation of the sanctioning procedure and (iv) compliance programmes.
  • Recidivism is added as an aggravating factor of administrative liability
  • The application of two types of fines is established: (i) fines with application ranges or ceilings, whose graduation will be made by calculating the Base Fine and applying the corresponding mitigating and aggravating factors; and (ii) fixed fines or fines determined by formulas, whose application is direct.
  • The use of the "electronic file" is enabled for the total or partial processing of administrative sanctioning procedures.

Finally, the General Administrative Procedure Law will be applicable in all matters not regulated in the Regulation.

In addition, the Methodological Guide for the Calculation of the Base Fine was recently published, which establishes the criteria and components to be considered by OSINERGMIN to determine the Base Fine for those fines that have application ranges or ceilings.

Challenges

For the reasons described in the previous section, the most important task for OSINERGMIN in the short term is to ensure that auditing activities comply with the "responsive regulation" approach adopted in the new Regulations of Supervision and Sanctioning of Energy and Mining activities. This new approach will allow OSINERGMIN to use different tools (not only sanctions) to ensure compliance with its obligations under its responsibility, taking into consideration the characteristics of the audited agent (agent that always complies with the regulation, new agent, agent that always fails to comply, among others).

This means that, upon detection of an infringement, the audit authority will, in the first instance, use less intrusive tools such as warnings, admonitions and exhortations to achieve compliance with the law. And in case they do not work, punitive tools will be used, such as the initiation of a sanctioning procedure or the imposition of corrective measures.

Finally, the covid-19 pandemic has taught us how important and necessary it is for the public administration to have virtual means of attention, for the processing of administrative procedures and to continue with user service, among others. For this reason, another challenge that OSINERGMIN will have to face is to continue with the digitalisation of the services it provides and to improve the presentation of its virtual platforms. As a result, it is necessary to provide training to the administrators or users so that they can make proper use of the digital means of service.

Interacting with the regulator

Depending on the matter, energy and mining companies can approach the regulator by writing to the corresponding directorate or section of OSINERGMIN, explaining the substance of its request.

Most of the procedures undertaken by OSINERGMIN are set out in a document titled ‘Single Text of Administrative Procedures’ (TUPA). TUPA states the competent authority that will respond to a given procedure, the length of time it will take, and the means of appeal. The time taken for a decision to be made will depend on the particular procedure. For example, TUPA establishes 30 business days for the approval of a technical report to obtain a concession for a natural gas distribution service by pipeline network. Further, OSINERGMIN must respond within 10 business days to any request for access to the authority’s public information. Regarding sanctioning administrative procedures, the sanctioning body has nine months from the beginning of the procedure to issue the resolution that sanctions or closes the procedure. The various procedures undertaken by OSINERGMIN are subject to positive or negative administrative silence, depending on what is stated in the TUPA.

Notes for foreign investors

Concerning power generation, the Ministry of Energy and Mines (MINEM) can grant definitive concessions, authorisation and concession agreements, depending on the resource it will use to generate electricity. For the construction and operation of transmission lines, and for electricity distribution, a company is granted a definitive concession to execute these activities.

In respect of the hydrocarbons sub-sector, specifically upstream activities, the state underwrites with investors, through Perupetro (which contracts oil and gas companies to work in Peru), licensing contracts to carry out exploration and production activities, and service contracts for the exploitation of hydrocarbons by order of Perupetro. In the case of transporting and distribution of natural gas, concessions are granted either by MINEM or through a public tender held by ProInversión (a private investment promotion agency).

The Geological, Mining and Metallurgical Institute of Peru grants concessions for the development of mining activities. For exploration, exploitations and other activities permitted by these concessions, it is also necessary to have, among other things, an approval of environmental certification and rights of surface lands.

In respect to property tenure, foreigners, whether natural or legal persons, are treated in the same way as Peruvians. However, within 50 kilometres of the borders, foreigners may not acquire or possess, by any means, mines, lands, forests, waters, fuel or energy sources, directly or indirectly, individually or in societies except with express authorisation (ie, a supreme decree by the Council of Ministers that declares it to be of public necessity).

Other regulators it works closely with

Ministerio de Energía y Minas
MINEM
Ministry of Energy and Mines (Peru)

Comité de Operación Económica del Sistema Interconectado Nacional
COES
Committee for the Economic Operation of the National Interconnected System (Peru)

Agencia de Promoción de la Inversión Privada
ProInversión
Private Investment Promotion Agency (Peru)

Servicio Nacional de Certificación Ambiental
SENACE
National Environmental Certification Service (Peru)

Superintendencia Nacional de Fiscalización Laboral
SUNAFIL
National Superintendence of Labour Inspections (Peru)

Organismo de Evaluación y Fiscalización Ambiental
OEFA
Agency for Environmental Assessment and Enforcement (Peru)

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