An Aproximation of the Optimality and Efficiency Problems of the Colombian Electricity Industry (Una Aproximación al Problema de Optimalidad y Eficiencia en el Sector Eléctrico Colombiano) (Spanish)

Abstract

The paper proposes a theoretical model for understanding the functioning of the spot energy market in Colombia. In particular, it analysed the optimal performance for the three best-known types of multiunit auctions, Vickrey, discriminatory and uniform. The modelling, being a game of incomplete information includes features of the Colombian energy industry, such as reconciliations, private contracts and the uncertainty of the demand. The empirical analysis describes the sector in terms of efficiency and optimality. The efficiency’s literature referers to the condition in which winners of the auction are the agents with lower costs. Evidence of adverse effects have been found from the compensation mechanism for negative reconciliations in the perios of study (2000-2007). On the other hand, a mechanism is called optimal if it is the mechanism that leads to lower spending. The spending comparisons show that under a discriminatory auction could lead to a lower spending than the uniform one.

Keywords: Multi-unit auctions, Colombian electricity industry, structural econometrics.

JEL Classification: D44, C14, C15, C23.