Competition, marginal cost tariffs and spot pricing in the Chilean electric power sector

Abstract Setting up competitiveness and privatizing the power sector has been an important goal of Chilean energy policy since 1974. The new organization of the electric sector includes deconcentration of generating and distributing companies, a new marginal cost and spot pricing system, coordination of generating companies through an economic load dispatching centre (ELDC) and a scheme for sharing transmission lines. This paper describes why and how those tasks were carried out in Chile.