Chilean senators supportive of power auction reforms

Friday, November 21, 2014

The debate over legislation reforming the rules for regulated market power auctions continued in Chile's senate, with legislators generally expressing approval for the bill.

Under the bill, the state's national energy commission (CNE) would assume a greater role in designing and administering the auctions, in which distributors purchase output from generators through long-term power purchase agreements.

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The CNE currently plays a supervisory role in the process, with private distribution companies largely running the show.

The current design has led to a lack of interest in auctions on the part of generators, leading to limited generation supply and skyrocketing electricity costs, legislators said, according to a senate release.

"Today we pay 20% more than in 2010," energy committee head Alejandro Guillier said.

Social opposition to power projects and drawn-out approval processes have contributed as well, according to senator Jaime Orpis.

The need for more competition on Chile's central SIC and northern SING grids was a recurring theme.

"The SIC has three companies [Endesa, Colbún and AES Gener] that represent 76% of generation," senator Antonio Horvath said, citing a study by national economic attorney's office FNE.

"The SING has a 98% concentration," he continued, in reference to the domination of E-CL, AES Gener and Endesa on the northern grid.

Senator Felipe Harboe lauded the bill for declaring regulated-price electricity distribution a public service, as residents generally don't have a say in choosing their power distributor.

The committee has until December 4 to make additional changes to the bill before putting it to a final vote. The bill has already passed the lower house.