Chile lawmakers back power auction reforms

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Friday, October 17, 2014

The mining and energy committee of Chile's lower house endorsed an executive bill to reform regulated client power auctions.

Drafted by the energy ministry, the legislation expands the role of the national energy commission (CNE) in overseeing the auctions, with the ultimate goal of keeping consumer electricity prices from rising.

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Almost half of the energy sold in Chile is auctioned to distributors, which purchase output from generators through long-term PPAs. President Michelle Bachelet's energy agenda aims to reduce the prices at these auctions 20% by 2018.

Auction prices averaged US$130/MWh in 2012 and 2013 combined, up from about US$70/MWh in 2006, according to BNamericas' September Electric Power Intelligence Series report.

The most recent round held by Chile's distributors was declared null and void, due to a lack of interest by generators and a failure to meet pricing conditions.

The legislation creates shorter and more flexible auction blocks to allow the inclusion of non-conventional renewable energy (NCRE) producers. The lower house at large will now debate the bill.

In the meantime, the country's distributors will remain in charge of administering auctions. The next round is scheduled for December, and will for the first time include NCRE-friendly blocks like the ones outlined in the legislation.

The committee added to the bill a mechanism regulating generators' transition from supplying free clients to supplying distributors.

During the first four years after the bill's signing, generators with a capacity between 2MW and 5MW would be allowed to make the switch. After the fourth year, generators up to 10MW could follow suit.

BNamericas will host its 11th Southern Cone Energy Summit in Lima, Peru, on November 12-13. Click here to download the agenda.