The Cost of Residential Electric Shortage in Chile: An Estimation Using the Demand Curve

This paper estimates the residential outage cost in Chile's Central Interconnected System (SIC), using consumer's willingness to pay for energy. We first estimate the cost of reducing energy consumption efficiently, that is only the less valuable kWh (as indicated by the market demand curve) are rationed. Then we estimate the per-kWh cost of rationing by cutting off service. We find that the outage cost varies considerably depending on the length of the rationing period; and on how energy is rationed. Longer restrictions allow users to adjust more, and hence are cheaper. Similarly, we estimate that rationing efficiently is between two and six times cheaper than rationing by cutting off service.

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Keywords: Chile, Demand, Duality, Elasticity, Energy, Rationing

JEL Classification: L94

Suggested Citation: Suggested Citation

Benavente, Jose Miguel and Galetovic, Alexander and Sanhueza P., Ricardo and Serra, Pablo, The Cost of Residential Electric Shortage in Chile: An Estimation Using the Demand Curve (December 1, 2005). Revista de Analisis Economico, Vol. 20, No. 2, 2005, Available at SSRN: https://ssrn.com/abstract=1262483