Electrico

A. Chilean Electric System.

The chilean electric market was liberalised in 1982. In fact, the generation, transmission and distribution of electricity activities are undertaken by private companies. The state has only a surveillance role of the system and certain regulatory powers, especially in connection with the determination of certain tariffs.

From a physical point of view, theChilean electricity sector is divided into four electricity grids: Central Interconnceted System (SIC); Northern Grid (SING); and two minor isolated systems, Aysén and Magallanes.

The SING covers the north of the country, from Arica to Coloso in the south, some 700 km. in all. This grid, with an installed capacity at December 2008 of 3,593 MW, is 99.6% thermal generated. Peak demand on the SING in2008 was 1,897 MW and energy sales reached 13,219 GWh, representing an increase of 4.3% over the previous year. This zone is characterized by an extremely dry climate, which explains for an arid landscape that can be quite diversified in terms of relief cross-section and heig¬ht. This has greatly affected population distribution and density; people defini¬tely favor the coastal edge.

The SIC,is the principal system which supplies energy to 90 per cent of the Chilean population, is 2,400 km. long, linking Taltal in the north with Quellón, on Chiloé Island, in the south. With a firm installed capacity in 2008 of 9,824 MW, it is mainly hydroelectric based with 53.0% and the remaining 47% thermal and wind generated. Peak demand on the SIC in 2008 was 6,154 MW and sales amounted to 39,594GWh, representing a decrease of 0.9% from 2007.

Hydropower has traditionally dominated Chile’s electricity generation, a scenario which began to change when Chile began to import natural gas from Argentina. However, due to the Argentinean gas crisis, Chile has undergone a quite relevant process of diversification of its energy grid.

The electric market is composed by 31 generation companies,five transmission companies, and 34 distribution companies. Chilean total generation of electricity during 2007 was the amount of 42,413 GWh. Almost 38 per cent of the electricity of the country is produced by hydropower plants; 38.9 per cent comes from natural gas and diesel plants; 17.4 per cent comes from coal plants; 1.52 per cent comes from eolic and biomass sources of energy and 3.5 per centfrom oil.

B. Regulatory Framework.

The electricity sector in Chile is regulated by the General Electricity Services Law contained in Ministry of Mining Decree Law No.1 of 1982, enacted by the Mining Ministry, with its subsequent amendments Law No. 19,940 (2004), known as Short Law I; and Law No. 20,018 (2005), or Short Law II. These laws were redrafted and systematized under DFL 4/2007(“Electricity Law”). Electric sector is also governed by Electric Law regulations contained in Decree 327 of 1998 (“Decree 327”) and the corresponding technical regulations and standards.

Other laws and regulations important for the electric market are the following:

- Supreme Decree 44 was published in January 2007 which amends Decree 62/2006 that approves the capacity transfer regulationsbetween generating companies established in the General Electricity Services Law.

- Resolution No.6 was published in February 2007 amending the technical standards, with safety and service quality requirements for the SING and the SIC.

- Resolution 386, was published in In June 2007, set rules for the proper application of the mechanisms for increasing/reducing consumption between generators andconsumers.

- The “Tokman Law” No.20,220 was published in september 2007, which seeks to ensure supply safety to regulated customers and the sufficiency of the electricity grids in the event of the bankruptcy of an electricity generating, transmission or distribution company.

- Law 20,257 was promulgated in April 2008, motivating the use of non-conventional renewable energies (NCRE). The...