After 4 years of freezes, Chile electricity rates start to climb

Average regulated client electricity bills in Chile are poised to start climbing in the double digits after more than four years of virtually no adjustments.

Authorities froze all bill components – generation, transmission and distribution – in 2019 in response to the social protests that erupted in October of that year. 

Economic fallout from the COVID-19 pandemic of 2020-23 added pressure to keep rates steady – which happened, with the exception of an unfreezing in 2023 of the transmission component of bills.  

Now, amid the need to reduce a resultant multibillion-dollar generator debt pile and normalize the sector, rates are climbing. 

For example, by January 2025, typical monthly household bills of clients who consume 180kWh are in line to grow 62% to 37,937 pesos (US$41.44) when compared with the 23,407 pesos charged today, Chilean energy consultancy energiE said in a report.

The first increase is due to take effect this month, followed by hikes scheduled for July, October and January.

Meanwhile, a typical industrial and commercial client in a rural zone that, today, consumes 4,800kWh a month and pays 1 million pesos is expected to pay, from October, 1.90mn pesos for the same amount of electricity consumed, a hike of 90%.

Daniel Salazar, managing partner of energiE, told BNamericas: “We’re talking about a sharp increase in rates that will have effects on customers but was necessary to normalize the flows and income of the companies. 

“The situation shouldn’t have reached this point; it’s the result of bad decisions made by authorities from the year 2019 to the present. Just to give an example, the delay and postponement of decrees and decisions accumulated a debt that has generated interest of the order of 1.4 billion pesos, an amount that all families will have to pay, which makes the scenario even more dramatic.”

Generators have started monetizing receivables. IDB Invest, the private sector arm of Latin America-focused IDB, has bought some.

A recently enacted law that opened the door for ending the rate freeze, is “credit positive for rated power projects and large corporate generators (gencos) by allowing for the gradual increase of electricity tariffs and alleviating working capital pressures,” rating agency Fitch said.

The law also greenlights a subsidy scheme to support vulnerable consumers. 

Balances owed to generators, which include both large multinationals and smaller players, are due to be fully paid by 2035.

Rate freezes were viewed as a factor behind the relatively low participation levels registered in Chile’s last regulated power supply auction.

Electricity rate freezes were implemented as part of efforts by congress to ease the social unrest that was initially sparked by a 30-peso increase in the price of a peak-hour ticket to travel on capital Santiago’s metro system. This was followed by calls for better public services and pensions and for a new constitution, among other demands.