Chile power auction reforms could redefine 'regulated market'

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Tuesday, December 9, 2014

An important aspect of the regulated market power auction reforms under discussion in Chile's senate is a proposed expansion of the definition of "regulated market."

The term refers to energy that is supplied by power distribution companies, whose prices are regulated by the government.

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This is opposed to the free market, in which consumers – usually mining companies or other large industrial clients – negotiate energy prices directly with power generators instead of purchasing from distributors.

Currently, regulated clients are defined as customers who consume 2MW or less, a senate release said, typically meaning residential clients or small businesses.

Regulated clients account for approximately 50% of consumption on Chile's central SIC and northern SING grids, a percentage that the energy ministry would like to see increase.

The auction reforms seek to expand the definition to clients who consume up to 10MW. This is mainly to allow mid-sized businesses the choice of purchasing on the regulated market, which is less prone to price fluctuations than the free market.

The bill would expand the role of the national energy commission (CNE) in designing and administering the auctions, which the statement said has been the most contentious point among legislators.

The legislation, which the lower house approved, is being discussed by the senate's mining and energy committee and has been designated as highly urgent.

The committee will review some 30 suggestions to the bill made by legislators and the executive branch before putting the reforms to a final vote.