Abstract
In this paper we discuss second-generation electricity reforms being formulated in Latin America and how they are being reshaped by the California crisis, which had stood as a paradigm, at least in theory, for fully competitive markets. We argue that the main lesson policy makers in Latin America should draw from the experience in California and other electricity markets around the world is that the liberalization of wholesale markets will not result in more competitive outcomes where market concentration is significant, final consumers are isolated from actual marginal production costs and capacity is tight. At least in the case of Argentina and Chile, the California crisis has had a “positive externality” by persuading policy makers, at least momentarily, to postpone liberalization reforms and make them realize the complexities in implementing competitive markets.
Similar content being viewed by others
References
Borenstein, S., “The trouble with electricity markets (and some solutions),” POWER Working Paper PWP-081, University of California Energy Institute, January 2001.
Chandley, J.D., Harvey, S.M., and Hogan, W.W., “Electricity market reform in California,” Cambridge, Mass, November 22, 2000.
CNE (Comisión Nacional de Energía), Project to reform the current electricity law, Document for public discussion, September 2000 (www.cne.cl).
Díaz, C., Galetovic, A., and Soto, R., “La crisis eléctrica de 1998–1999: Causas, consecuencias y lecciones,” Estudios Públicos, vol. 80, pp. 149–152, 2000.
Green, R., “The electricity contract market in England and Wales,” Journal of Industrial Economics, vol. 47, pp. 107–124, 1999.
Joskow, P. and Kahn, E., “A quantitative analysis of pricing behavior in California's wholesale electricity market during summer 2000,” January 15, 2001.
Kelman, R., Barroso, L.A., and Pereira, M.V., “Market power assessment and mitigation in hydrothermal systems,” IEEE Transactions on Power Systems, vol. 16, pp. 354–359, 2001.
Montero, J.P. and Rudnick, H., “Precios eléctricos flexibles,” Cuadernos de Economía, vol. 38, pp. 91–109, 2001.
Montero, J.P. and Sánchez, J.M., “Crísis eléctrica en California: Algunas lecciones para Chile,” Estudios Públicos, vol. 83, pp. 139–162, 2001.
Read, W., Newman, I., Pérez-Arriaga, I., Rudnick, H., Gent, M., and Román, A., “Reliability in the new market structure (Part I),” IEEE Power Engineering Review, vol. 19, pp. 4–14, 1999.
Rudnick, H., Varela, H., and Hogan, W., “Evaluation of alternatives for power system coordination and pooling in a competitive environment,” IEEE Transactions on Power Systems, vol. 12, pp. 605–613, 1997.
Rudnick, H. and Zolezzi, J., “Electric sector deregulation and restructuring in Latin America: lessons to be learnt and possible ways forward,” IEEE Proceedings Generation, Transmission and Distribution, vol. 148, pp. 180–184, 2001.
Rudnick, H., “The Californian model as the paradigm for second generation reforms in Latin America,” 2001 IEEE Power Engineering Society Summer Meeting, Vancouver, Canada, July 2001.
Stachetti, E., “Auction Design for the Colombian Electricity Market”, mimeo, University of Michigan, 1999.
Vázquez, C., Rivier, M., and Pérez-Arriaga, I.J., “If pay-as-bid auctions are not a solution for California, then why not a reliability market?” Electricity Journal, vol. 14, pp. 41–48, 2001.
Villar, J. and Rudnick, H., “Hydrothermal market simulator using game theory: assessment of market power,” Paper TPWRS-00169–2002, approved for publication IEEE Transactions on Power Systems (2002).
Watts, D. and Rudnick, H., “Game theory applied to the Chilean electricity market,” Research Report, Universidad Católica de Chile, 1998.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Rudnick, H., Montero, JP. Second Generation Electricity Reforms in Latin America and the California Paradigm. Journal of Industry, Competition and Trade 2, 159–172 (2002). https://doi.org/10.1023/A:1020887106859
Issue Date:
DOI: https://doi.org/10.1023/A:1020887106859