'Trading in the Chilean market is going to have an important role'

This is an automated translation of the original release published in Spanish.

PRESS RELEASE from Acen
June 2024

The different unions of the electricity sector that sent their positions to the Court for the Defense of Free Competition (TDLC) regarding the possible reduction in the limit of connected power for free customers to access, a mechanism that the Ministry of Energy activated in December 2023. Through the request for a ruling on the matter from that court, they shared their various approaches to the topic in the webinar organized by ACEN this June 5.

During the event, the executive director of ACERA, Ana Lía Rojas, said that “the rounding of this range modification to be eligible as a free client is the concept of competition, and that is very important. It is necessary to consider this debate in a broad distribution reform in order to also understand what the effects are on the rest of the segments that we are also helping to also transition towards carbon-neutrality and low emissions."

Along the same lines, she recalled that, "the limit for Net-Billing self-consumption installations is 300kW. Therefore, in a broad and pro-competition view, an eventual reform, in addition to considering the non-erosion of contracts regulated, should also consider expanding the participating agents in the range of 300 to 500kW, so that the consumer has all the options for a choice regarding the tariff regime and consumption options: as a free consumer, as a regulated consumer or as self-consumption of Net-Billing."

For his part, Darío Morales, executive director of ACESOL, stressed that, in his union, they are not opposed to lowering the limit, but they believe it should be done with a broad and complete view since it would have a systemic impact. “In the medium term, all electrical systems have been moving towards customer liberalization and the incorporation of commercialization. It would be obtuse to think that marketing in the Chilean market will not have to play an important role. The point is how we move forward in a planned, controlled, but coherent manner, without generating problems in other segments.”

However, he added that “it is not necessarily so evident in my opinion that the simple reduction of the free customer limit will open sufficient space for marketing, competition and achieving price reductions. This has benefits and also cons. When making the request to the TDLC, the Ministry of Energy team did not do this cost-benefit analysis. We have to think carefully about whether it is worth taking on starting a discount measure for free customers in the conditions in which the electricity sector is today.”

Meanwhile, the executive secretary of ACEN, Eduardo Andrade, pointed out that the total energy that is in the regulated segment today is around 39.6% of the almost 78TWh/year that are consumed, “therefore, "The 1.3TWh/year represented by potential free customers who are in the segment between 301 and 500kW have a much smaller effect within the contracts that are currently signed between distributors and generators."

He emphasized that, if it is decided to lower the power limit, there will not be a stampede of users who are going to change from being a regulated client to a free client. “In the 4 years of transition from free to regulated client, in the segment over 501kW, the year when clients moved the most was 28% of the total. Studies carried out by ACEN show that the effect in the hypothetical case in which a massive change occurs would not exceed, in the most extreme case, 4% of the total contracted energy.”

Regarding future tenders, Andrade added, the lowering of the limit should also have no effect because the new tenders should consider in the amount of energy to be tendered that the energy of the new free clients will not be available. “The volume is so small that probably instead of seeing a tender for 3,000GWh/year, we are going to see a tender for 2,950GWh/year.

For his part, the executive director of Empresas Eléctricas, Juan Meriches, mentioned that the bidding processes must be protected since they have been key to generating greater spaces for competition in the field of generation. “There is a security component of that supply for regulated clients that is very important to protect.”

The bottom line, according to the representative of the distributors, is how the mutation in distribution is faced. “Any change of these characteristics must have the improvement of the networks as its first focus.” Although he commented that the marketing element must be part of the sector and that "this (the lowering of the limit) is a measure that is positive from the logic of opening spaces of competition," he stressed that one must be attentive to the effects of the migration.

He also stressed that it is "crucial that users who eventually migrate have all the possible information about what this migration means, not only in terms of prices, but also the obligations and costs that this means."

The moderator, Vannia Toro, vice president of ACEN, closed the webinar and highlighted that “as an association we have mapped and verified that several of the associates have made contracts with generating companies to finance new projects. That is to say, these 1.2TWh/year in the background also have to come from the generation segment through a demand aggregator and the doubts that existed were precisely whether it was going to come from fossil energy, existing energy, and what It has shown that they leverage new projects, financing new investments, and that is interesting to analyze.”