Monitoring Systemic Risk in Colombia’s Wholesale Energy Market During the 2023–2024 El Niño event

Colombian regulation, regulated consumers must be shielded from spot‑price volatility, which causes that volatility to be deferred over time or even lost due to inefficiencies in the retailer’s contracting practices. Additionally, during the COVID‑19 pandemic a mechanism was implemented allowing retailers to defer customers’ electricity bills until monthly retail costs declined; nevertheless, market participants continued to pay their full wholesale market obligations. These circumstances resulted in a cash‑flow imbalance for the companies, that could precipitate systemic stress in the sector if firms are unable to meet their wholesale market obligations or honour their bilateral energy purchase commitments. The proposed methodology integrates each market participant’s position to spot electricity prices (and contractual commitments) and key market and financial variables to quantify their financial vulnerability during the 2023–2024 El Niño event. Applying this methodology, three clusters of companies with distinct sensitivities to market stress were identified, one of which exhibited pronounced vulnerability. Scenario simulations generated actionable signals for regulators, such as expanded contracting rules, prioritization and expedited disbursement of subsidies, acceleration of recovery mechanisms for deferred retail receivables owed to market participants, and provision of financing sources for retailing companies.