Regulated Electricity Retailing in Chile

33 Pages Posted: 10 Jun 2011 Last revised: 20 May 2017

See all articles by Alexander Galetovic

Alexander Galetovic

Universidad Adolfo Ibáñez; Stanford University - The Hoover Institution on War, Revolution and Peace; University of Padua - CRIEP

Cristián M. Muñoz

affiliation not provided to SSRN

Date Written: January 1, 2011

Abstract

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

Galetovic, Alexander and Muñoz, Cristián M., Regulated Electricity Retailing in Chile (January 1, 2011). Available at SSRN: https://ssrn.com/abstract=1861247 or http://dx.doi.org/10.2139/ssrn.1861247

Alexander Galetovic (Contact Author)

Universidad Adolfo Ibáñez ( email )

Peñalolén
Santiago
Chile

Stanford University - The Hoover Institution on War, Revolution and Peace ( email )

Stanford, CA 94305-6010
United States

University of Padua - CRIEP ( email )

Padua
Italy

Cristián M. Muñoz

affiliation not provided to SSRN ( email )

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