Opening electricity retailing to competition rests on a simple premise: customers can choose who sells them electricity, and retailers compete to serve them. But that freedom also creates a risk: what happens if the retailer chosen by a customer goes bankrupt, is removed from the market, or is otherwise unable to continue providing service? Conversely, what happens when no retailer is willing to serve a particular customer?

The Supplier of Last Resort — Prestador de Última Instancia (PUI) in Colombian regulation — is designed to address these situations. Names vary across jurisdictions — for example, Supplier of Last Resort (SoLR) in Great Britain and Retailer of Last Resort (RoLR) in Australia — but the common function is to provide a safety net that preserves continuity of supply when the ordinary workings of the market leave a customer without a supplier.

In Colombia, the origins of the PUI framework can be traced at least to studies on retail market liberalization prepared for CREG in the mid-2000s. Yet it was not until 2026, with CREG Resolution 101 121, that general criteria were established for its selection, operation and remuneration. The resolution initially assigns the role to the retailer integrated with the distribution network operator and requires the Retail Advisory Committee (CAC, Spanish acronym) to design and propose to CREG a competitive mechanism for selecting and operating the PUI.

The PUI as an institution in liberalized electricity markets

The PUI becomes particularly relevant when competition is introduced into electricity retailing. In that setting, the exit of a retailer is a possible market outcome; the regulatory challenge is to allow that exit without leaving its customers without an essential service.

In Great Britain, Ofgem (Office of Gas and Electricity Markets) uses the Supplier of Last Resort mechanism. When a supplier fails, the regulator’s priority is to maintain continuity of supply and avoid wider adverse effects on the market; its 2016 guidance sets out the process and criteria for selecting the supplier that takes over the affected customers.

Australia uses the term Retailer of Last Resort. The scheme under the National Energy Retail Law allows customers of a failed retailer to be transferred in an orderly manner to other retailers without interruption of supply. The Australian Energy Market Commission’s 2021 review also warned that a large-scale event could create significant costs and financial demands for recipient retailers and for market resilience.

In the European Union, Directive (EU) 2024/1711 introduced an express definition of supplier of last resort: the supplier designated to take over the customers of another supplier that has ceased operations. The Directive requires Member States to have a regime that ensures, at least for household customers, continuity of supply and that designation takes place through a fair, transparent and non-discriminatory procedure.

Regulatory literature, however, shows that last-resort supply, default supply and social protection are not equivalent problems. NERA Economic Consulting, in a 2005 study prepared for CREG, distinguished among last-resort tariffs — for customers who lose their retailer — default tariffs — for customers who are able to choose but remain passive — and social tariffs — for vulnerable consumers who may be unable to find a supplier. Although last-resort and default tariffs overlap in many countries, their design principles differ because they address different needs.

ERGEG’s 2009 review found a similar pattern, albeit with overlap across countries: the default supplier was used mainly where customers did not choose a supplier or could not find one, while the supplier of last resort operated primarily when a supplier failed and, in some cases, when a customer could not find a supplier. Designation arrangements ranged from assignment to the incumbent, to participation by multiple eligible suppliers, to competitive selection procedures.

There is therefore no universal PUI design. Regulation must answer at least five questions: what event triggers the mechanism; who takes over the customers; for how long; how the energy required to serve unplanned demand is procured; and how the costs and risks assumed are remunerated. These choices can also affect competition. Tschamler noted as early as 2000 that the right to provide default service should not simply be treated as an inherited right of the incumbent, but could instead be competitively assigned.

Who is the “last resort” under Colombia’s public utilities framework?

Before examining the regulatory development of the PUI, a prior legal question needs to be addressed: if the Constitution and Law 142 of 1994 assign responsibilities to the State and territorial authorities to ensure the provision of public utilities, are the municipality, department or Nation not, in fact, the “last resort”? The answer requires a distinction between the public responsibility to ensure service provision and the specific regulatory function of the PUI within the electricity market.

Article 365 of the Constitution provides that public utilities are inherent to the social purpose of the State and that the State is responsible for ensuring their efficient provision to all inhabitants. At the same time, it allows services to be provided by the State, directly or indirectly, by organized communities or by private parties, while regulation, control and oversight remain State responsibilities. In Judgment C-150 of 2003, the Constitutional Court explained that regulation is a form of State intervention aimed, among other purposes, at correcting market failures and promoting conditions for competition and efficient service provision.

Law 142 develops this allocation of responsibilities. Article 5.1 assigns municipalities the responsibility to ensure that residential public utilities, including electricity, are provided efficiently to their inhabitants. Direct municipal provision is exceptional: Article 6 provides, among other circumstances, for the absence of bidders following the invitations required by law. Articles 7 and 8 assign functions to departments and the Nation; the latter may provide the service directly where departments and municipalities lack sufficient capacity.

CREG has referred to this framework when addressing the selection of service providers where no companies are interested. In Opinion 5184 of 2024, concerning individual solar photovoltaic systems in Non-Interconnected Zones, it recalled the rules in Articles 6 and 8 of Law 142 and the possibility of direct provision by public entities in the circumstances set out there.

Within that framework, the municipality is not, in the technical sense, the PUI regulated for the electricity market. The public responsibility to ensure service provision is one thing; the regulatory mechanism that determines which retailer will take over customers left without a supplier is another.

The Regulatory Impact Assessment prepared in 2025 for CREG, under a consultancy commissioned by the Inter-American Development Bank (IDB), helps connect these two levels. In examining retailer failure, it states that the State must establish a replacement when the market does not resolve the situation on its own, and links that intervention to the principle of subsidiarity. The regulatory response, however, is not to turn the State automatically into a retailer, but to organize a mechanism that ensures a provider is available for the contingency.

Read together, these rules support an understanding of the PUI as one of the instruments through which the State seeks to preserve continuity without directly providing the service. The line is clear when a particular retailer fails; it is less clear when no retailer is willing to serve certain customers, a situation that approaches the lack-of-supply problem contemplated in Law 142.

The development of the PUI in Colombia

The framework predates 2026. NERA’s 2005 study, prepared for CREG in the context of a possible deepening of retail competition, already examined the Comercializador de Última Instancia (Supplier of Last Resort) as a response to retailer insolvency or disappearance and distinguished that function from default supply and social protection mechanisms.

Two years later, CREG Document 044 of 2007 identified three functions for what it then called the Proveedor de Última Instancia (Provider of Last Resort): serving passive customers during the transition to a liberalized market; ensuring continuity when a retailer fails; and ensuring access for customers whom no retailer wishes to serve. The document also distinguished the expected duration of these functions: service following retailer failure is temporary, while the absence of willing suppliers may require a more lasting solution.

CREG Document 117 of 2010 revisited those analyses in preparing the Electricity Retailing Rules. CREG Resolution 156 of 2011 introduced the first regulatory definition of the PUI as the agent selected to carry out retailing when the supplier chosen by the customer is unable to provide service for the reasons established in the regulations.

The regulatory framework nevertheless remained incomplete. CREG Resolutions 156 and 157 of 2011 established transitional rules under which, in specified cases involving a retailer’s removal from the market or cancellation of commercial boundaries, customers would be served by the retailer integrated with the distribution network operator to which they were connected, until the PUI regulations were adopted and implemented.

At ASOCODIS’s 2023 Distribution Conference, Fernando Barrera specifically addressed the PUI in his presentation on electricity retailing in the energy transition. The presentation considers differentiated treatment for customers who do not choose a retailer, vulnerable customers, and customers affected by their retailer’s bankruptcy. In an initial stage, he proposed assigning the PUI role to the distribution-retailer; during the transition, that assignment would remain for customers who do not choose a retailer, while service associated with retailer bankruptcy and vulnerable customers would evolve toward competitive mechanisms. He also proposed energy procurement mechanisms designed to limit demand risk, using Pague lo Demandado (Pay-as-Demanded) contracts complemented, in the initial stages, by purchases on the spot market.

That same year, Decree 929 of 2023 added Article 2.2.3.2.2.9 to Decree 1073 of 2015 and required CREG to regulate the PUI scheme. Its guidelines included considering competitive selection mechanisms, differentiated treatment of receivables risk associated with Special Areas, and incentives for efficient management.

The mandate in Decree 929 led to the draft regulation submitted for consultation and, subsequently, to CREG Resolution 101 121, issued on July 30, 2026.

CREG Resolution 101 121 of 2026

Resolution 101 121 (Article 3) retains the PUI definition adopted in 2011: the agent selected to carry out retailing when the supplier chosen by the customer is unable to provide service for the reasons established in regulation. Its purpose is to ensure continuity of service and perform the functions of a retailer.

The resolution establishes seven triggering events: removal of the retailer from the Wholesale Energy Market for non-compliance; cancellation of a commercial boundary in the case provided for in Resolution 157 of 2011; the retailer entering liquidation; temporary or permanent suspension of its activities ordered by the Superintendency of Public Utilities (SSPD, Spanish acronym); application of the supply limitation procedure twice in the same calendar year; customers in Special Areas who receive no offers from retailers other than the retailer integrated with the distribution network operator; and termination of a non-regulated customer’s contract where the customer neither chooses nor is able to secure another retailer.

These triggers confirm that Colombia’s PUI addresses different regulatory problems. Some respond to retailer failure or exit; the Special Areas trigger responds to lack of supply; and termination of a non-regulated customer’s contract may involve either failure to choose or inability to find another supplier. This is an analytical classification: the resolution brings all these situations under a single mechanism.

Implementation is phased. Until the competitive mechanism is adopted and implemented, the PUI is the Retailer Integrated with the Distribution Network Operator (CIOR, Spanish acronym) in each retail market area. When a trigger occurs, the Commercial Exchange System Administrator (ASIC, Spanish acronym) cancels the commercial boundary represented by the former retailer and registers the new boundary in the PUI’s name. The customer has two calendar months from the notice issued by the PUI to choose another retailer, with no minimum-stay requirement; during that period, the customer is served as a regulated customer. If no choice is made, the customer remains with the PUI under the ordinary minimum-stay rules.

For Special Areas, the resolution links transitional remuneration to the receivables risk already recognized under CREG Resolution 180 of 2014. The PUI cost uses as a parameter the current receivables-risk premium for serving customers in Special Areas (RCAE, Spanish acronym) in the relevant market and is charged to regulated customers served by Retailers Not Integrated with the Distribution Network Operator (CNIORs, Spanish acronym), which must transfer the amounts collected to the CIOR acting as PUI. Put simply, the mechanism is intended to ensure that the receivables cost associated with those customers does not fall solely on the CIOR performing the PUI role: CNIORs collect the corresponding component from their regulated customers and transfer it to the CIOR. At the same time, the resolution prevents double recovery by providing that the component corresponding to the cost already collected by the CIOR is set at zero until CREG updates the retailing methodology. This component should not be confused with the receivables-risk premium for traditional customers (RCT, Spanish acronym), which applies to all retailers, including CNIORs.

The resolution also addresses the risk of suddenly receiving demand that was not anticipated in the retailer’s procurement strategy. If demand transferred under triggers other than the Special Areas trigger exceeds, in a calendar month, 10% of the regulated demand served by the CIOR in the relevant retail market area, the CIOR may directly negotiate and enter into Pague lo Contratado (Pay-as-Contracted) contracts or Pague lo Contratado Condicionado a la Energía Disponible para venta en bolsa (PCED; Pay-as-Contracted Subject to Energy Available for Sale on the Spot Market) contracts. Negotiation, execution, registration and commencement of these contracts may take place within a maximum period of three months, and the contracts may have a maximum term of twelve months, with no extension.

Taken together, the scheme seeks to address continuity of service, customer reassignment, energy procurement, receivables risk and financial sufficiency.

Stage two: a competitive mechanism for selecting the PUI

Resolution 101 121 does not settle the institutional design. Article 8 requires CAC, within no more than twelve months from the resolution’s entry into force, to design and propose to CREG a competitive mechanism for selecting and operating the PUI.

The proposal must take account of the tariff criteria in Law 142, minimize the impact on customers without compromising the PUI’s financial sufficiency, preserve the temporary nature of the mechanism, ensure the availability of information needed to serve transferred customers, design energy procurement mechanisms, and establish indicators to monitor liberalization so that CREG can determine or activate the competitive mechanism for each trigger. CREG will assess CAC’s proposal and, if it considers it appropriate, adopt it by resolution.

The central issue was already present in the earliest studies: retailer failure, absence of customer choice and absence of supply are not necessarily the same problem. The competitive mechanism will need to determine to what extent they can be addressed through common rules on selection, remuneration and duration, and when differentiated treatment is required.

Ultimately, the PUI does not displace the State’s constitutional and statutory responsibility to ensure the provision of public utilities. It is a regulatory instrument designed to ensure that, when the ordinary workings of the market are insufficient, a retailer is available to keep the customer within the system. The relationship between that mechanism and the residual responsibilities set out in Articles 5 to 8 of Law 142 will remain relevant as the final competitive framework is designed.