Honduras reached a consensus version of its electricity reform that preserves ownership of generation, transmission and distribution assets in the National Electric Energy Company (ENEE) , but maintains the reorganization of the company through subsidiaries and a new architecture to operate the market.
The document, dated August 12, stipulates that any change to the public nature of these assets, property, or shares will require a two-thirds majority in the National Congress, equivalent to 86 votes . Subsidiaries may use, operate, maintain, and expand them, although they will not acquire ownership.
The definition is key for a sector that is also awaiting the 1500 MW tender , the contracting process that will mark a good part of the next generation expansion of Honduras and whose award was projected for 2027. The rules resulting from the reform, the financial situation of the state-owned company and the institutional governance will condition the scenario in which future projects will compete.
The proposal underwent several modifications after the Executive Branch submitted its version to Congress on June 2. The bill was debated in its first and second readings on June 16, the Liberal Party presented a counterproposal on August 11, and the political forces reached a consensus document the following day.
The legislative process significantly altered the asset treatment of ENEE. The initial proposal allowed for the transfer of generation, transmission, and distribution assets to the equity of the new subsidiaries, while the parent company would retain 100% of its shares. The agreed-upon scheme now explicitly separates asset ownership from management.
The Energy Regulatory Commission (CREE) presented, among the advances in the process, the objective of “prohibiting the sale or privatization of ENEE and protecting its strategic assets.” The entity also summarized the criteria that guided the negotiation as “zero favoritism, zero hidden costs, and better service for the subscriber.”
Under the new scheme, subsidiaries will receive exclusive rights over the assigned infrastructure for periods of no less than 30 years , through management agreements that will allow them to operate, maintain, improve and expand the facilities.
These companies will be able to manage the income and economic benefits derived from their activity and will have autonomy over the management of the assets they use. The agreements must also establish responsibilities, investments, insurance, and accounting treatment in accordance with International Financial Reporting Standards.
The regulation adds specific protection for properties, reservoirs, protection strips, facilities and areas of influence of hydroelectric plants , declared public domain assets, unseizable, non-transferable and inalienable, in addition to being included within national security and social interest.
The safeguards were one of the points that unlocked part of the discussion. Sources close to Energía Estratégica indicated that the incorporation of these safeguards is viewed favorably by sectors that support the reform , as they consider it a response to objections regarding a potential privatization.
This same analysis attributes some of the delays to political negotiations between the parliamentary groups , particularly after the Liberal Party presented its counterproposal. The initial expectation was to reach a decision sooner, but internal disagreements prolonged the process of reaching an agreement.
The opposition's perspective, on the other hand, focused on a different issue. Their concern is no longer solely about the ownership of ENEE, but rather about who will have decision-making power within the new institutional framework , particularly regarding the management and the composition of the bodies responsible for leading and overseeing the subsector.
This raises one of the questions that will accompany the implementation: to what extent can the separation of activities increase efficiency and competition without concentrating influence in certain market players ?
New operator and a different balance of power
One of the most far-reaching transformations will be the consolidation of the System and Market Operator (OSM) as an independent entity in charge of the integrated operation of the National Interconnected System and the administration of the electricity market.
Its general management will be in the hands of a Board of Directors of ten members , with two representatives of transmission companies, two of generators —one renewable and one non-renewable—, two of marketing companies, two of distribution companies and two of qualified consumers acting as agents.
Day-to-day management will be the responsibility of an executive director, while staff must be recruited through public merit-based competitions under principles of transparency, equal opportunities and suitability.
The composition of the OSM is precisely one of the objections raised privately during the debate. A source within the subsector warned that the direct presence of private agents on its Board of Directors necessitates paying close attention to oversight mechanisms and guarantees of the firm's neutrality.
The same critical view extended the concern to the future integration of the CREE and pointed out that the effective independence of the regulator will be crucial to prevent the interests of generators, distributors or political forces from conditioning the rules of the market .
The agreed-upon version establishes that the CREE will be composed of three commissioners appointed by the President upon the recommendation of a Nominating Board made up of representatives from the Ministry of Energy, the Honduran Council of Private Enterprise, and the engineering faculties of Honduran universities. Their terms will be six years, and the appointments must be staggered.
The document also provides for functional, budgetary and financial independence for the regulator, along with specific procedures for appointing and removing its authorities.
Sources critically observing the process also indicated that lobbies linked to the electricity companies themselves have a visible role in the discussion , while identifying a lesser presence of universities and social organizations in the public debate.
This interpretation differs from the view that the participation of different segments will allow for the distribution of power and prevent the concentration of decision-making. The test will lie in the governance, oversight, and conflict resolution mechanisms that accompany the new model.
Tejada warns about the opening of distribution
Among the critical voices is former Honduran Energy Secretary Erick Tejada , who questioned both the need to approve new legislation and the consequences that a broad opening of the market could have.
“There is strong public opposition to the reform because it is believed to lead to the privatization of ENEE by forming public limited companies,” Tejada said.
The former official suggested that the structural difficulties of the state-owned company can be addressed through modifications to the existing regulatory framework.
“Our position is that the law is not necessary if the aim is to address the historical and structural problems of the company and the subsector,” he stated.
Among the alternatives he mentioned were regulatory modifications, the General Law of the Electricity Industry and Decree 46-2022, in addition to interventions on debt, delinquency and investments.
The former official also incorporated into his analysis the results previously obtained regarding electricity losses.
“The National Loss Reduction Program had already reduced losses by 4.05% in the last 30 months, and that effort was canceled by the new government,” he stated.
Their main concern points to the moment when greater competition in distribution would occur, while the state-owned company still presents economic imbalances.
Continue reading
“As long as ENEE does not overcome its operating deficit, leaving it without customers in the face of a total opening of the Distribution market would cause greater non-payment to generators and a greater and insurmountable crisis,” Tejada warned.
The agreed version is based, in fact, on a diagnosis that recognizes a chronically deficient financial situation of the ENEE and high levels of technical and non-technical losses , and proposes the separation of functions as one of the tools to improve efficiency, financial sustainability, transparency and quality of service.
Debt remains at the center of the discussion
The financial health of ENEE is one of the main determinants of any market transformation , regardless of the institutional format that is ultimately implemented.
As of March 2026, the debt to private generators reached 17.385 billion lempiras, equivalent at the time to around 655 million dollars , while business actors warned of delays of between four and seven months in payments.
The deterioration of the payment chain directly impacts the bankability of new projects . Reduced revenue predictability increases the perceived risk for banks and investors, raises financial requirements, and can ultimately affect the prices offered in future contracts.
From the Honduran Renewable Energy Association (AHER), Eduardo Bennaton had already defined this scenario as a problem of “country confidence” , due to its ability to influence the decision to keep capital in Honduras or redirect it to other markets.
The reform establishes criteria for distributing contracts, personnel, responsibilities, and liabilities among the units resulting from the reorganization, but the sustainability of the new companies will also require sufficient revenue, payment discipline, and a consistent tariff structure .
The design also includes changes in the treatment of subsidies, which must have an explicit source of public funding to prevent one category of consumers from absorbing costs corresponding to another .
The financial issue connects Tejada's criticisms with a concern that also appears in the private sector, although from different perspectives: without resolving the payment chain and credit risk, the institutional reorganization will have a limited scope to revive investments.
The 1500 MW increases the pressure on the reform
The transformation coincides with the tender for 1500 MW , designed to incorporate new renewable generation, thermal capacity and storage with the aim of supporting the growth in demand and strengthening the reliability of the system.
The process acquired a direct relationship with the reform because future participants will need to know who will assume the purchase obligations, what guarantees will back the contracts, how the dispatch will work, and what the rules will be that apply to the new electricity companies .
The Honduran Association of Electric Power Producers (AHPPE) has been linking the competitiveness of the bidding process to the resolution of this regulatory and financial issue. The organization maintains that legal certainty and clear rules will be necessary to reduce risks and attract competitive bids.
The tender was projected for an award in 2027 , after the timetable was shifted as the country made progress in reviewing its electricity framework.
The outcome of the reform will directly impact participants' cost of capital. A heightened perception of contractual, regulatory, or payment risk may be reflected in bids, while a more predictable system would broaden the scope for competition among developers.
The process will also have to be coordinated with the system's firm capacity and flexibility needs. The incorporation of variable renewables will require that the new expansion include storage, backup power, and networks capable of integrating larger volumes of generation .
Renewables, storage and self-consumption are gaining ground
The agreed version incorporates specific provisions for renewable generation, storage, self-consumption and demand response , extending the scope of the reform beyond the reorganization of ENEE.
Generation and storage systems will be able to participate on equal terms in the market. Network rules and tariffs must also not discriminate against batteries or discourage self-generation, self-consumption, or demand response.
Energy storage systems participating in the market may withdraw electricity for recharging without this operation being considered final consumption and subject to the charges and tariffs applicable to supplying end consumers. Subsequent injection of electricity must comply with the technical, commercial, and operational conditions established by the regulations.
The treatment is especially relevant for hybrid projects and batteries, because greater solar and wind penetration will increase the need for flexibility to shift generation between different times and provide complementary services .
The text also includes a specific incentive for the residential market. Honduran families will be able to purchase solar panels, inverters, batteries, and other equipment necessary for solar systems in homes without paying sales tax, customs duties, and other applicable taxes.
The requirements, capacity limits, and control mechanisms will need to be defined later through regulations, so the scale of the benefit will depend on the conditions established during implementation.
Subsidiaries with autonomy and ten years of exemption
The reorganization also incorporates a specific tax regime for the companies that arise from the separation of ENEE's activities .
The subsidiaries will be exempt from Income Tax for ten years from the date the spin-off becomes fully effective. Exemptions are also provided for tariffs, fees, taxes, and levies related to their incorporation, capitalization, and certain transfers resulting from the modernization process.
The parent company ENEE will retain 100% of the shares and will act as owner and custodian of the state assets, while the new companies must have operational, technical and administrative autonomy.
This configuration introduces one of the central challenges of the next stage: combining business independence with fully state ownership and maintaining coordinated planning between generation, transmission, and distribution .
Future corporate governance rules will be crucial in establishing responsibilities, reducing conflicts of interest, and defining the relationship between the parent company, its subsidiaries, the CREE, and the OSM.
A more secure reform, but with open questions
The agreement reached on August 12 brought positions closer together on one of the most sensitive issues in the process: the fate of ENEE's assets. The assets will remain under the parent company, and any alteration of their public status will require 86 votes in Congress.
The differences now focus on other design components: the governance of the OSM and the CREE, the autonomy of the subsidiaries, market opening, the financial recovery of the state-owned company, and the ability to prevent certain actors from concentrating influence over the subsector .
The agreed text attempts to combine two objectives that marked the negotiation: preserving public ownership of the strategic infrastructure and moving towards an organization with separate functions, greater competition and new possibilities for private participation .
For those supporting the reform, the modifications introduced in Congress offer sufficient safeguards to move forward with the change. Critics, however, continue to question the effective oversight of institutions and the advisability of expanding competition while the National Electric Energy Company (ENEE) maintains an operating deficit.
The next stage will shift that discussion from the legal text to its implementation. The structure of the institutions, the regulations, and the financial restructuring will determine whether the new system manages to improve operations without creating additional imbalances.
With the contracting of 1500 MW still pending, the result will also have a direct consequence for developers and financiers: defining the level of certainty with which Honduras will face its next cycle of investments in generation, renewables and storage.