The Electric Social Compensation Fund (FOSE) promotes profitable RE private investment in off-grid power in rural towns, through subsidies, as part of a social inclusion policy.
The FOSE (legislated through Law No. 27510 of 2001) intends to promote electricity access to all residential customers whose consumption is lower than 100 kWh per month and to promote private investment in rural electrification systems under 20 MW.
It operates as a cross-subsidy, in which the consumer only pays 20% of the actual tariff (which is based on the cost of generation). The electricity tariff for the end user is subsidised by charging a special tax on electricity bills of people whose consumption is higher than 100 kWh/month.
The FOSE can be used to reward the private investor in two ways:
- A private enterprise invests in equipment and a FOSE subsidy covers the monthly investment amortisation and operating costs.
- The State acquires equipment and assigns it for use and a FOSE subsidy covers only the investor’s operating costs.