At a glance: What’s worrying Chilean nonregulated electricity clients

Increases in the cost of supply is the prime concern of nonregulated electricity clients in Chile.

That is among the takeaways of research conducted for nonregulated user association Acenor by consultancy In-Data. Acenor members include miners and other industrial sector players. Sixty-two clients, whose power usage accounts for 51% of nonregulated consumption, participated in the survey.

Chile has around 2,000 nonregulated clients, with around two-thirds of consumption corresponding to the mining sector.

Eighty-seven percent of survey respondents expressed heightened concern about power prices and the impact this has on country competitiveness, given that the average price in Chile is above that of neighboring mining powerhouse Peru and even European countries like Spain, France and Germany.

Of respondents, 67% also expressed heightened concern over regulatory uncertainty at the time of signing contracts, citing a lack of visibility over price fluctuations, especially when planning for the following year.

The three others completing the top five concerns surround efficient energy consumption management, power market conditions variability, and clean energy or low-carbon energy consumption.

Rises in electricity prices impact GDP, according to central bank research.

During a recent Acenor event, the group’s chair, Francesca Milani, summed up the situation: “We are convinced that the way for Chile to progress is to have an energy transition that reaches everyone, with a secure, high-quality, increasingly renewable electricity supply, and at competitive prices.”

Concern comes in a context where renewable energy output has placed downward pressure on the electricity generation component but where systemic costs have travelled in the opposition direction and offset these gains. Systemic costs paid by nonregulated clients have climbed to around US$20/MWh from US$2/MWh in four years. Large users have also seen electricity overheads impacted in recent years by a public service charge implemented as part of the government’s regulated end-user price stabilization legislation.

Ninety percent of respondents said supply costs had outpaced inflation over the past year, and that the rises were chiefly related to systemic costs or side payments (60%), transmission (53%) and public service charges (42%).

Systemic costs incorporate charges for complementary services, hydropower reserves and technical minimums, as well as payments made by generators to cover a stabilized price paid to distributed generation plants known as PMGDs.

An estimated US$217mn, or roughly 20% of systemic costs last year, corresponded to these charges, which have been trending up and are expected to hit the US$300mn mark this year, fueling concerns about the potential trickle-down impact on decarbonization efforts. Last quarter PMGD capacity stood at around 3GW of Chile’s non-conventional renewable energy park of 18GW. Capacity could reach nearly 5GW in 2026 amid strong growth in the number of projects – up to 9MW, primarily solar PV and chiefly connected to the distribution network – being built.

The government established a working group to analyze the stabilized price they receive, described by some as a de facto subsidy that creates power market distortions.

In parallel, a government bill in congress, to raise money to pay subsidies to some 4.7mn regulated clients impacted by stiff rate increases, could result in PMGDs receiving a revenue haircut of around 35% through 2027 and has sparked debate and allegations the measure constitutes a unilateral change to the rules of the game. Another revenue-raising component of the bill is a doubling of the carbon tax on fixed emitters to US$10/t from US$5/t, a hike that may eventually be passed on to clients.