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Before Privatisation, electricity generation in Chile was done by a vertically integrated monopolistic company. High transmission and distribution losses, and power outages were commonplace. There was regulatory agency, but it was not politically independent. Government was required to provide enormous subsidies to the sector to ensure its continued existence. This figure reached levels of approximately US 200 million, at about the 1970s.Chile astutely undertook regulatory reforms prior to electricity Privatisation, so that when it came on-stream between the 1986-1989 period, there was already the institutional framework in place to govern generation, transmission and distribution of electricity. These oversight duties were to be performed by a special regulatory body called the CNE. In addition, competition was encouraged by breaking up the vertically integrated monopoly into smaller service providers along the value chain. This entailed having separate companies for generation, transmission and distribution.Post-Privatisation, electricity prices in Chile were regulated based on customer size. Distributors were allowed to freely negotiate prices with large consumers, with demand of more than 2 megawatts. Prices for smaller users were regulated by the CNE, as a means of protecting the welfare of those without tremendous economic clout. Electricity Privatisation in Chile led to efficiency gains, improved service quality and reduced prices. The cost to consumers in 1981 was more than the level at 1989, suggesting that efficiency gains were passed onto consumers. The electrification drive gained momentum with the advent of Privatisation, such that, by 1989, 97.9% of Urban Households and 62% of rural ones had access to electricity. It was concluded that the benefits accruing to all stakeholders in the electricity sector of Chile were attributable to regulatory reforms, as opposed to Privatisation itself.


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