Regulation of transmission expansion in Argentina Part I: State ownership, reform and the Fourth Line

From 1992 to 2002, major expansions of the Argentine electricity transmission sector depended on users proposing, voting and paying for such expansions, which were then put out to competitive tender. Commentators hold this novel policy to have been unsuccessful, mainly on the ground that it substantially delayed investment in a much needed “Fourth Line” to Buenos Aire. This paper challenges this interpretation. The policy was chosen because the conventional regulatory framework could not be trusted to deliver more efficient transmission investment decisions. The delay to the Fourth Line was short. Most importantly, the Fourth Line was not economic. Hence the delay was beneficial both in deferring and in reducing costs. It indicated a need to reappraise transmission investment policy because the availability of gas had made it more economic to generate electricity near Buenos Aires than to transmit it a long distance.

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