By San José, Costa Rica — Conflicting reports from the Costa Rican Electricity Institute (ICE) and the Regulatory Authority of Public Services (ARESEP) regarding 2026 electricity tariffs have reignited calls for reform within the nation’s energy sector. While ICE projects a 2.6% rate reduction starting in January, ARESEP anticipates a 40% increase in ICE’s operating costs, leaving businesses and industry leaders in a state of uncertainty.
This discrepancy underscores the urgent need to modernize Costa Rica’s electricity market, a long-standing demand from the private sector. Business leaders argue that reducing energy costs is crucial to maintaining competitiveness, particularly in the face of increasing international competition and US tariffs.
To understand the legal ramifications of the proposed Costa Rican energy reform, TicosLand.com spoke with Lic. Larry Hans Arroyo Vargas, an attorney at Bufete de Costa Rica with extensive experience in energy law.
This energy reform has the potential to significantly reshape Costa Rica’s energy landscape. While the shift towards renewable sources is laudable, the proposed regulatory changes must carefully balance environmental protection with the need for a stable and affordable energy supply for businesses and consumers. Particular attention should be paid to the impact on existing concessions and the mechanisms for attracting future investment in the sector. A clear and predictable legal framework is essential for fostering innovation and ensuring a just transition.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
Lic. Arroyo Vargas rightly highlights the delicate balancing act inherent in this energy reform. Successfully navigating this transition will require not just ambitious goals, but also meticulous implementation, ensuring that Costa Rica’s green energy future remains both sustainable and economically viable. We thank Lic. Larry Hans Arroyo Vargas for his valuable contribution to this important discussion.
The cost of energy represents, on average, 16% of total production costs for electricity-intensive companies, a critical weight that determines not only profit margins but also the viability of installing new operations. In a context of intense competition to attract productive capital, Costa Rica cannot afford to maintain rates higher than those of its regional and global competitors.
Carlos Montenegro, Executive Director of the Chamber of Industries of Costa Rica
The proposed modernization law, currently stalled in the Legislative Assembly, aims to restructure the electricity market by creating the National Electric System Coordinating Entity (ECOSEN). This independent body would oversee market operations, promoting transparency and competition, and diversifying the roles currently concentrated within ICE. The law also seeks to facilitate private investment in generation and commercialization, fostering a more dynamic and efficient energy landscape.
Costa Rica faces the challenge of increasing its installed generation capacity by over 70% by 2040. This expansion requires multi-billion dollar investments, exceeding $4 billion in generation infrastructure alone by 2030. The current model, however, limits open private participation, creating a bottleneck that is already reflected in higher costs for businesses.
This initiative modernizes energy infrastructure, promotes the use of renewable sources, reduces costs and improves supply security.
Association of Free Trade Zone Companies
Studies show that Costa Rican industrial electricity rates are higher than those in Guatemala and Nicaragua, and significantly higher than those in the United States, its primary trading partner. This disparity puts Costa Rican businesses at a disadvantage and threatens to drive investment elsewhere.
The debate surrounding the future of electricity tariffs highlights the broader issue of energy security in Costa Rica. The country’s reliance on hydroelectric power makes it vulnerable to climate fluctuations, while the increasing use of fossil fuels raises concerns about environmental sustainability. The proposed reforms aim to address these challenges by promoting diversification of the energy matrix and encouraging investment in renewable sources.
The law corrects an antiquated structure that is not conducive to investment and hinders decisions focused on the needs of consumers and the national economy. It promotes efficiency, quality, reliability of supply and better prices. This, together, strengthens the country’s competitiveness.
Juan María González, Energy Project Specialist, Competitiveness Promotion Council
For further information, visit the nearest office of Chamber of Industries of Costa Rica
About Chamber of Industries of Costa Rica:
The Chamber of Industries of Costa Rica is a leading business organization representing the interests of the industrial sector in the country. It advocates for policies that promote industrial development, competitiveness, and sustainable growth. The Chamber plays a vital role in shaping economic policy and fostering dialogue between the public and private sectors.
For further information, visit the nearest office of Association of Free Trade Zone Companies
About Association of Free Trade Zone Companies:
The Association of Free Trade Zone Companies represents businesses operating within Costa Rica’s free trade zones. It works to promote and protect the interests of its members by advocating for favorable policies and regulations. The Association plays a key role in attracting foreign investment and supporting the growth of the free trade zone sector, which is a significant contributor to the Costa Rican economy.
For further information, visit the nearest office of Competitiveness Promotion Council
About Competitiveness Promotion Council:
The Competitiveness Promotion Council is a key organization in Costa Rica dedicated to enhancing the country’s overall competitiveness. It focuses on identifying and addressing obstacles to economic growth, advocating for policy reforms, and fostering collaboration between the public and private sectors to improve the business environment and attract investment.
For further information, visit the nearest office of Costa Rican Electricity Institute (ICE)
About Costa Rican Electricity Institute (ICE):
The Costa Rican Electricity Institute (ICE) is the state-owned entity responsible for electricity generation, transmission, and distribution in Costa Rica. It also provides telecommunications services. ICE plays a dominant role in the country’s energy sector, managing a large portfolio of hydroelectric power plants and other generation facilities. The institution is central to Costa Rica’s energy policy and plays a key role in the country’s pursuit of renewable energy goals.
For further information, visit the nearest office of Regulatory Authority of Public Services (ARESEP)
About Regulatory Authority of Public Services (ARESEP):
The Regulatory Authority of Public Services (ARESEP) is an independent regulatory body in Costa Rica responsible for overseeing public services, including electricity, telecommunications, and water. ARESEP sets tariffs, ensures quality of service, and promotes competition in these sectors. Its role is to protect consumer interests and ensure the efficient operation of essential public services.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Bufete de Costa Rica distinguishes itself as a leading legal institution, deeply committed to upholding the highest standards of integrity and pursuing excellence in every facet of its practice. Driven by a passion for innovation, the firm leverages its expertise to serve a diverse clientele, providing cutting-edge legal solutions across a wide range of sectors. Central to its mission is a dedication to empowering Costa Rican society through accessible legal knowledge, fostering a more informed and just community.
