Costa Rica wants the extra cost of generating electricity during El Niño to reach consumers gradually, spread over three years of power bills rather than arriving as a sudden rate jump. A directive from the Ministry of Environment and Energy (Minae), published Friday in the official gazette La Gaceta, proposes recovering through electricity tariffs, over the next 36 months, the extraordinary generation costs that the Costa Rican Electricity Institute (ICE) will incur because of El Niño.
The ministry expects the phenomenon to bring less rain, greater water stress and lower flows into hydroelectric reservoirs through 2026 and 2027. To keep the grid reliable, ICE will need to burn more fuel, buy more energy and take other measures, which the directive describes as an extraordinary and temporary increase in generation costs.
Recovering those costs over a short period could cause abrupt swings in electricity rates, according to the directive, which is why it proposes diluting them over a longer horizon. The text states that tariff stability does not mean leaving rates unchanged, but ensuring that any adjustment reflects costs that are necessary, efficient and properly demonstrated.
Minae instructed ICE to provide the Public Services Regulatory Authority (Aresep), which sets electricity rates, with the information needed to analyze a gradual recovery of the extra costs. No estimate of the effect on household or business bills had been made public as of Friday afternoon.
The proposal shows how exposed Costa Rica’s electricity system is to drought. Hydroelectric plants produce roughly 70% of our power and when reservoirs drop, ICE turns to thermal plants running on imported fuel and to energy bought on the regional market. The last strong El Niño showed what that shift can cost. Aresep reported that in the first half of 2023 Costa Rica generated more thermal power than in 2017 through 2022 combined.
Its quarterly update of the Variable Generation Cost, the component of ICE’s rates that covers fuel and energy imports, meant an increase of 14.43% that year, and the regulator later identified El Niño as the main cause of the higher electricity rates approved for 2024.Earlier this year, Regulator General Eric Bogantes said Aresep anticipated a possible increase in 2027 because of fuel spending, which enters rates through that same variable cost. For 2026, by contrast, the regulator had calculated the component as negative, reflecting lower thermal generation and higher electricity exports.
ICE executive president Marco Acuña has warned that El Niño deepens the system’s dependence on thermal generation just as fuel prices have begun to rise. The institute has been arranging the rental of thermal plants valued at about $415 million to cover the gap. The directive does not set new rates on its own. Any adjustment would come through Aresep’s review of the figures ICE submits, and until then the size of the impact and when it would first appear on monthly bills remain unknown.
