The law regulates the generation, transmission, distribution and commercialization of energy activities aiming for the rational and efficient use of resources. The law liberalises El Salvador's electricity market and provides the legal framework for the electric system. It establishes auctions/tenders as the preferred mechanism for allocating concessions for power projects.
In these cases, the project will be awarded to the lowest price bidder unless the following happens after the auction:
- A hydropower developer offers to build at 90% of the winning bid.
- A geothermal developer offers to build at 85% of the winning bid.
The law states that for geothermal and hydropower projects under 5 MW, there is a more streamlined process that is regulated by the SIGET (General Superintendence of Electricity and Telecommunications).