Regulated Electricity Retailing in Chile
33 Pages Posted: 10 Jun 2011 Last revised: 20 May 2017
Date Written: January 1, 2011
While some countries have unbundled distribution and retailing, skeptics argue that the physical attributes of electricity make retailers redundant. Instead, it is claimed that passive pass through of wholesale prices plus regulate charges for transmission and distribution success for customers to benefit from competitive generation markets.
We review the Chilean experience with regulated retailing and pass through of wholesale prices. We argue that when energy wholesale prices are volatile and prices are stabilized, distortions emerge. Regulated retailers gain little by mitigating or correcting them. On the contrary, sometimes price distortions increase their profits. We estimate the cost of three distortions that neither regulated retailers nor the regulator have shown any interest in correcting.
Keywords: retailing, shortages, price distortions, smart meters
JEL Classification: L51, L94
Suggested Citation: Suggested Citation