Regulatory Governance and Chile's 1998-99 Electricity Shortage
In the early 1980s Chile reformed its electricity sector, introducing a regulatory framework that became influential worldwide. But in 1998 and 1999 La Nina brought one of the worst droughts on record, causing a price system collapse, random power...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2001/11/1631783/regulatory-governance-chiles-1998-99-electricity-shortage http://hdl.handle.net/10986/19498 |
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okr-10986-194982021-04-23T14:03:43Z Regulatory Governance and Chile's 1998-99 Electricity Shortage Fischer, Ronald Galetovic, Alexander BASES COMMERCIAL POLICY CONSUMERS DEMAND CURVE DROUGHT EFFLUENTS EL NINO ELASTICITY ELASTICITY OF DEMAND ELECTRICITY ENERGY CONSUMPTION EQUILIBRIUM EXCESS DEMAND EXPECTED VALUE FORECASTS FUELS HYDROLOGY INSURANCE LEGISLATION LOBBYISTS MARGINAL COST MARGINAL COSTS MARGINAL VALUE OPPORTUNITY COST OPPORTUNITY COSTS PH POWER PLANTS PP PROPERTY RIGHTS QUALITY STANDARDS RAIN RAINFALL REGULATORY FRAMEWORK RESOURCE ALLOCATION RISK AVERSE RUNOFF SNOW SPOT PRICE SURPLUS SURPLUSES TRANSACTIONS COSTS VALUATION In the early 1980s Chile reformed its electricity sector, introducing a regulatory framework that became influential worldwide. But in 1998 and 1999 La Nina brought one of the worst droughts on record, causing a price system collapse, random power outages, and three-hour rotating electricity cuts. The authors study the interaction between regulatory incentives and governance during the 1998-99 electricity shortage, showing that the supply restriction could have been managed without outages. The shortage can be blamed on a rigid price system, which was unable to respond to large supply shocks, and on deficient regulatory governance, which led to a weak regulator unable to make the system work. The authors also show that the regulator's weakness stemmed not from lack of formal powers but from vulnerability to lobbyists and a lack of independence. Moreover, the regulator seems not to have fully understood the incentives in the price system during supply restrictions. The authors conclude that the Chilean shortage shows the limitations of a rigid price system requiring heavy regulatory intervention. This suggests that countries whose governance structures are ill suited to dealing with loopholes left by the law should rely as much as possible on market rules that clearly allocate property rights ex ante and leave the terms of contracts to be freely negotiated by private parties. 2014-08-20T18:03:28Z 2014-08-20T18:03:28Z 2001-11 http://documents.worldbank.org/curated/en/2001/11/1631783/regulatory-governance-chiles-1998-99-electricity-shortage http://hdl.handle.net/10986/19498 English en_US Policy Research Working Paper;No. 2704 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research Latin America & Caribbean Chile |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
BASES COMMERCIAL POLICY CONSUMERS DEMAND CURVE DROUGHT EFFLUENTS EL NINO ELASTICITY ELASTICITY OF DEMAND ELECTRICITY ENERGY CONSUMPTION EQUILIBRIUM EXCESS DEMAND EXPECTED VALUE FORECASTS FUELS HYDROLOGY INSURANCE LEGISLATION LOBBYISTS MARGINAL COST MARGINAL COSTS MARGINAL VALUE OPPORTUNITY COST OPPORTUNITY COSTS PH POWER PLANTS PP PROPERTY RIGHTS QUALITY STANDARDS RAIN RAINFALL REGULATORY FRAMEWORK RESOURCE ALLOCATION RISK AVERSE RUNOFF SNOW SPOT PRICE SURPLUS SURPLUSES TRANSACTIONS COSTS VALUATION |
| spellingShingle |
BASES COMMERCIAL POLICY CONSUMERS DEMAND CURVE DROUGHT EFFLUENTS EL NINO ELASTICITY ELASTICITY OF DEMAND ELECTRICITY ENERGY CONSUMPTION EQUILIBRIUM EXCESS DEMAND EXPECTED VALUE FORECASTS FUELS HYDROLOGY INSURANCE LEGISLATION LOBBYISTS MARGINAL COST MARGINAL COSTS MARGINAL VALUE OPPORTUNITY COST OPPORTUNITY COSTS PH POWER PLANTS PP PROPERTY RIGHTS QUALITY STANDARDS RAIN RAINFALL REGULATORY FRAMEWORK RESOURCE ALLOCATION RISK AVERSE RUNOFF SNOW SPOT PRICE SURPLUS SURPLUSES TRANSACTIONS COSTS VALUATION Fischer, Ronald Galetovic, Alexander Regulatory Governance and Chile's 1998-99 Electricity Shortage |
| geographic_facet |
Latin America & Caribbean Chile |
| relation |
Policy Research Working Paper;No. 2704 |
| description |
In the early 1980s Chile reformed its
electricity sector, introducing a regulatory framework that
became influential worldwide. But in 1998 and 1999 La Nina
brought one of the worst droughts on record, causing a price
system collapse, random power outages, and three-hour
rotating electricity cuts. The authors study the interaction
between regulatory incentives and governance during the
1998-99 electricity shortage, showing that the supply
restriction could have been managed without outages. The
shortage can be blamed on a rigid price system, which was
unable to respond to large supply shocks, and on deficient
regulatory governance, which led to a weak regulator unable
to make the system work. The authors also show that the
regulator's weakness stemmed not from lack of formal
powers but from vulnerability to lobbyists and a lack of
independence. Moreover, the regulator seems not to have
fully understood the incentives in the price system during
supply restrictions. The authors conclude that the Chilean
shortage shows the limitations of a rigid price system
requiring heavy regulatory intervention. This suggests that
countries whose governance structures are ill suited to
dealing with loopholes left by the law should rely as much
as possible on market rules that clearly allocate property
rights ex ante and leave the terms of contracts to be freely
negotiated by private parties. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Fischer, Ronald Galetovic, Alexander |
| author_facet |
Fischer, Ronald Galetovic, Alexander |
| author_sort |
Fischer, Ronald |
| title |
Regulatory Governance and Chile's 1998-99 Electricity Shortage |
| title_short |
Regulatory Governance and Chile's 1998-99 Electricity Shortage |
| title_full |
Regulatory Governance and Chile's 1998-99 Electricity Shortage |
| title_fullStr |
Regulatory Governance and Chile's 1998-99 Electricity Shortage |
| title_full_unstemmed |
Regulatory Governance and Chile's 1998-99 Electricity Shortage |
| title_sort |
regulatory governance and chile's 1998-99 electricity shortage |
| publisher |
World Bank, Washington, DC |
| publishDate |
2014 |
| url |
http://documents.worldbank.org/curated/en/2001/11/1631783/regulatory-governance-chiles-1998-99-electricity-shortage http://hdl.handle.net/10986/19498 |
| _version_ |
1764439885768294400 |