Power Generation, Transmission & Distribution 2024 Comparisons

Current electricity legislation in Chile divides the Chilean electricity market into three segments: generation, transmission and distribution. 

The generation segment operates under the principle of free competition and free access to transmission and distribution facilities to commercialise production. It is not recognised by the General Electric Services Law as a public service activity.  

Companies may participate in the Chilean electricity market through transactions in the spot market at marginal costs (spot market) or through the market of agreements to supply free customers or the distribution companies of regulated customers (power purchase agreements). Notwithstanding the above, the operation of this segment is co-ordinated by the National Electric Coordinator, an autonomous and independent electric authority, whose most relevant function is to maintain the security of supply with efficient costs. 

The transmission segment is defined in Article 73 of the General Electric Services Law and, due to its economies of scale and large area, is recognised by that Law as a natural monopoly. Therefore, the state is in charge of actively regulating it through the evaluation, valuation and remuneration of its main facilities (recognised by the General Electric Services Law as a public service activity), as well as other costs associated with the maintenance, operation and administration of the respective facilities. Likewise, the state, through the National Energy Commission, carries out the centralised planning of the expansions of the National Electric System. Then, through public and international bidding processes carried out by the National Electricity Coordinator, the exploitation rights of the tendered works are granted. 

The distribution segment, due to its high-density economy, high investment cost and extensive area of supply to the customer, is considered a natural monopoly, which implies the concession by the state. As in transmission, particularly with respect to its main segments, it is recognised by the General Electric Services Law as a public service. Therefore, it is regulated similarly to transmission, except that network expansions are not centralised in the state; they are carried out autonomously by the concessionary company. 

In addition, it should be noted that although Chilean electricity regulations, unlike those of other countries, do not expressly include the energy commercialisation segment, a growing market of customers is demanding more competition, which will lead to regulatory change. In fact, a bill on electricity portability is currently being processed, which, in general terms, expressly regulates the commercialisation segment. 

Lastly, it is important to note that storage systems are recognised in the electricity legislation; however, they are not part of a specific segment. On the other hand, storage systems operate under the principle of free competition and free access to transmission and distribution facilities to inject or withdraw energy. 

Currently, in Chile, the state does not own the electric infrastructure, but it is owned by private companies.  

The following are the companies that own the country’s main electricity infrastructure in the different segments that make up the National Electric System.   

• Generation segment:
1. AES Andes;
2. Colbún S.A.;
3. Enel Generación Chile S.A.; and
4. Engie Energía Chile. 
• Transmission segment:
1. Transelec;
2. Celeo Redes Chile;
3. Red Eléctrica Chile;
4. ISA Interchile; and
5. Grupo Saesa. 
• Distribution segment:
1. Enel Distribución;
2. CGE Distribución;
3. Grupo SAESA; and
4. Chilquinta Distribución. 

In Chile, there is no commercialisation segment; however, a bill is currently under discussion in Congress to create and regulate this segment. 

There are no special requirements or limitations on foreign companies acquiring an interest in the electricity sector. Notwithstanding the foregoing, acquisition transactions that are considered concentration transactions must be authorised by the National Economic Prosecutor's Office in accordance with the rules set forth in Law Decree No 211 on free competition.  

Additionally, the acquisition transaction must comply with the rules set forth in Law No 18,045 on the securities market. 

On the other hand, foreign investment in Chile is protected by multiple international, bilateral and multilateral treaties signed and ratified by the state and by a robust domestic legislation on property rights, which may be enforced before the ordinary courts of justice. Notwithstanding the foregoing, there is no domestic legislation that especially protects foreign investment that applies to the power industry. 

In connection with the foregoing, in the event of a conflict between the state and foreign investments, these shall be resolved in accordance with the conflict resolution mechanisms set forth in said treaties. In any case, Chile, since 1991, is a permanent member of International Centre for Settlement of Investment Disputes (ICSID), which ensures an international standard in the resolution of these conflicts. 

According to Decree Law No 211, the authorities empowered to approve or block mergers or other modifications in the market will be the National Economic Prosecutor’s Office and the Court for the Defence of Free Competition. In order to obtain approval of the merger or other modification, the following is necessary.  

• It is necessary to determine whether the act qualifies as a concentration operation in accordance with the requirements set forth in Decree Law No 211.
• If the act is considered as a concentration operation, it will be necessary to determine whether its notification to the National Economic Prosecutor’s Office is mandatory. In order to determine the obligatory nature of the notification, it will be necessary to determine whether the concentration operation equals or exceeds the joint or individual sale thresholds determined by the National Economic Prosecutor’s Office in its Resolution No 667. Notwithstanding that it will depend on the merger or modification in the market to be carried out, currently, the threshold for the notification to the authority to be mandatory in joint concentration operations is approximately USD100 million and for individual concentration operations approximately USD18 million. 
• The authority will then evaluate whether the concentration operation could substantially reduce competition in the market and may prohibit the operation or approve it with measures.      

Notwithstanding the above, according to Articles 7 and following of the General Electric Services Law, there are rules that limit vertical integration between companies of the electric sector, and according to Article 9 of the General Electric Services Law, the Electricity and Fuel Agency will be in charge of overseeing compliance with such Law. 

Consequently, apart from the aforementioned standards, there are no other requirements that must be met by the purchaser of a business. 

In Chile, there is no central authority that supervises and administers the supply of electricity and the development of transmission and distribution facilities, but it is divided into different agencies. The agencies involved in the supervision and administration of the National Electric System and the Medium Systems are set out below.  

• Ministry of Energy: the President of the Republic’s highest collaborative body, which is responsible for preparing and co-ordinating plans, policies and standards for the proper functioning and development of the sector, overseeing their compliance and advising the government on all matters related to the energy sector, including all types of primary and secondary energy sources. 
• National Energy Commission: a decentralised public body related to the President of the Republic through the Ministry of Energy that analyses prices, tariffs and the technical standards to which the various players in the Chilean electricity market must adhere in order to provide adequate and reliable quality service that is compatible with the most economical operation. 
• Electricity and Fuel Agency: a functionally decentralised service that is responsible for monitoring and supervising compliance with legal and regulatory provisions and technical standards for the generation, production, storage, transportation and distribution of liquid fuels, gas and electricity in order to verify that the quality of the services provided complies with current regulations and does not constitute a danger to persons or property. To comply with the aforementioned objectives, among others, it has the authority to interpret electrical regulations. 
• National Electric Coordinator: an independent technical body in charge of coordinating the joint operation of all the interconnected facilities of the National Electric System. 
• Panel of Experts: an autonomous collegiate body that resolves discrepancies and conflicts that arise among stakeholders in the Chilean electricity market arising from the application of the General Electric Services Law and the Gas Services Law. 

The most important regulatory changes in the last year were the following.

• In April 2024, Law No 21,667 on Tariff Stabilization was enacted. This Law aims to unfreeze the electricity tariffs that were set in 2019 in all its components or segments, ie, generation, transmission and distribution, following the approval of Laws No 21,185 and No 21,194. It also aims to optimise and clarify the use and administration of the Tariff Stabilization Fund in the context of the General Electric Services Law, in addition to adjusting certain financial and temporary aspects related to the stabilisation of electricity tariffs for regulated customers.
• In June 2024, the government approved new amendments to the Power Transfer Regulation (Supreme Decree No 70) that included: (i) a methodology to evaluate and recognise the power capacity of stand-alone energy storage systems; and (ii) a method was defined to determine the payment specifically for renewable energy plants equipped with energy storage capacities. 

The government recently presented a policy called “Second Phase of the Energy Transition”, which implies that renewable and clean sources go from being an important complement in the electricity system to constitute the main sources of generation, aiming at an electricity matrix with 100% clean energy before 2050, as it has been consensually agreed in the National Energy Policy some years ago. Efforts are moving in that direction, coherently with the accelerated decarbonisation actions with a focus on people that the Chilean government has committed to. This policy aims to promote a number of laws to enable an accelerated energy transition. 

Currently, the National Electric System has a problem with the dumping of renewable energy in the north of the country, since there is not enough capacity in the transmission system to transport the energy from the place where the energy is generated to the large consumption centres. 

The structure of the wholesale market in Chile is based on a competitive market in which generating companies are free to make investments and enter into supply contracts as they see fit.  

The entire operation of the wholesale market is co-ordinated by the National Electric Coordinator; however, the prices of energy and power will not be set by the latter, but their value will be calculated according to the marginalist theory, which represents the variable cost of the unit that will produce the next unit (marginal cost) instantaneously for all generation units. The price of energy will be calculated according to the marginal cost determined at different nodal points that are part of the National Electric System. 

Notwithstanding the foregoing, companies may buy and sell energy under power purchase agreements at a price they deem convenient. 

Lastly, another form of energy commercialisation is the awarding of the supply made by the distribution companies of their regulated customers to the generation companies that offer the lowest energy price in the respective bidding process carried out by the distribution companies, the bases of which are approved by the state. The supply contracts awarded in this process may have a term of up to 20 years. 

In accordance with Article 78 of the General Electric Services Law, the existence of international interconnection systems allows imports and exports of electricity to and from other jurisdictions. The systems of this type of international interconnections must be approved by Supreme Decree issued by the Ministry of Energy in an iterative procedure that must be evaluated by a technical body, the National Electric Coordinator. 

Likewise, the General Electric Services Law contemplates the possibility that the international interconnection systems may be considered of public service or of private interest. They will be considered of public service when they facilitate the conformation or development of an international electric market and complement the supply of the demand of the electric system in the national territory, facing different scenarios of availability of the generation facilities, including contingency and failure situations, considering the quality and safety requirements of service established in the regulation. This type of infrastructure will be assessed by the National Energy Commission and then approved by the Ministry of Energy by way of a supreme decree. 

The systems will be considered of private interest when they do not comply with the aforementioned objective.  

Currently, in Chile, there is only one operational international interconnection that imports or exports energy with Argentina on a private basis. Consequently, the price at which these exchanges are made are freely determined by the relevant parties. 

According to the National Electric Coordinator, currently, the supply of renewable energy in Chile has reached almost 64% of the installed capacity, 44% of which is non-conventional renewable energy, mainly solar and wind, the rest being hydroelectric. The rest of the energy matrix is composed of energy generated by fossil fuels. There is no nuclear energy generation in Chile. 

In accordance with electricity regulations, there is no concentration limitation as to the percentage of electricity supply controlled by a single entity in the market, however, in accordance with the rules for the defence of free competition, established in the Decree Law No 211, the authorities empowered to approve or block mergers or other modifications in the market will be the National Economic Prosecutor’ Office and the Court for the Defence of Free Competition. In order to obtain approval of the merger or other modification, the following is necessary.  

• It is necessary to determine whether the act qualifies as a concentration operation in accordance with the requirements set forth in Decree Law No 211.
• If the act is considered as a concentration operation, it will be necessary to determine whether its notification to the National Economic Prosecutor’s Office is mandatory. In order to determine the obligatory nature of the notification, it will be necessary to determine whether the concentration operation equals or exceeds the joint or individual sale thresholds determined by the National Economic Prosecutor’s Office in its Resolution No 667. Notwithstanding that it will depend on the merger or modification in the market to be carried out, currently, the threshold for the notification to the authority to be mandatory in joint concentration operations is approximately USD100 million and for individual concentration operations approximately USD18 million. 
• The authority will then evaluate whether the concentration operation could substantially reduce competition in the market and may prohibit the operation or approve it with measures.      

Notwithstanding the above, according to Articles 7 and following of the General Electric Services Law, there are rules that limit vertical integration between companies of the electric sector, and according to Article 9 of the General Electric Services Law, the Electricity and Fuel Agency will be the agency in charge of overseeing compliance with such Law. 

The Antitrust Division is a prosecutorial division of the National Economic Prosecutor’s Office that investigates conduct contrary to Decree Law No 211 and recommends to the National Economic Prosecutor courses of action in order to promote and defend free competition in the markets. 

The main conducts investigated by the Antitrust Division are abuses of dominant position, contemplated in letters b) and c) of Article 3 of Decree Law No 211. 

Likewise, the Antitrust Division is responsible for investigating predatory conduct, unfair competition, vertical restrictions, collaboration agreements, as well as other conduct that could violate Article 3 of Decree Law No 211. 

If, in its investigations, it detects the need for regulatory adjustments, the Antitrust Division may make regulatory recommendations to the government, in accordance with letter q) of Article 39 of Decree Law No 211.  

The Antitrust Division also prepares several reports for the Court for the Defence of Free Competition, mainly in non-contentious proceedings, and may act when competition provisions exist in sectoral regulatory norms, such as the General Electric Services Law; Decree Law No 323, Gas Services Law; among others. 

The Antitrust Division conducts its investigations in three stages:

• admissibility analysis ‒ in the event that a complaint has been filed;
• investigation ‒ during which proceedings are carried out, such as requests for information, summons to testify or to request information from public entities; and
• closure ‒ by closing the investigation, which may be accompanied by recommendations for regulatory changes or based on commitments from the relevant economic agents, by entering into an out of court settlement or by initiating a proceeding before the Court for the Defence of Free Competition. 

If infringements are detected in the work carried out by the Antitrust Division, the case may be submitted to the Court for the Defence of Free Competition, which may impose, both on legal entities and individuals, fines of up to:

• 30% of the sales of the infringer in the line of products or services associated with the infringement during the period for which it has been extended;
• double the economic benefit reported by the infringement; and
• approximately USD50 million, if the above parameters cannot be determined. 

Additionally, the modification or termination of acts, contracts, agreements, systems or arrangements that infringe free competition may be ordered, as well as the modification of legal entities under private law and even their dissolution. 

Lastly, another body in charge of detecting this type of anti-competitive behaviour is the National Electric Coordinator as an independent technical body in charge of co-ordinating the operation of the jointly interconnected facilities in the National Electric System that operate in an interconnected manner. Among other duties, the National Electric Coordinator is responsible for the ongoing monitoring of the competitive conditions in the electricity market in order to guarantee the electric system’s co-ordination principles. 

The main regulations governing the construction and operation of generation facilities are:

• the General Electric Services Law;
• the By-Laws of the General Electric Services Law;
• the Technical Standard on Quality of Service for Distribution Systems;
• Law No 18,410 creating the Superintendency of Electricity and Fuels;
• Supreme Decree 88 approving By-Laws for Small-Scale Generation Facilities (PMGDs); and
• the Technical Standard for Connection and Operation of PMGDs. 

In Chile, companies do not require a special licence for the construction and operation of generation facilities. 

Nevertheless, they must obtain certain permits set out in the electrical and sectorial regulations. The following are the most important permits and requirements. 

• Pursuant to Article 8 bis of the General Electric Services Law, any owner, lessee, usufructuary or whoever in any way exploits generating plants connected to the National Electric System and subject to the co-ordination of the National Electric Coordinator must constitute electricity generation companies domiciled in Chile. 
• Pursuant to Article 72-17 of the General Electric Services Law, the authority must grant authorisation for the connection of any project to the National Electric System. 
• Pursuant to Article 72-17 of the General Electric Services Law, a declaration that the project is under construction must be obtained from the National Energy Commission. 
• Environmental permits must be obtained according to the specifics of the respective project.  

Notwithstanding the above, the projects listed in Article 10 of Law No 19,300 and detailed in Article 3 of the Regulation are subject to the environmental impact assessment procedure (these articles include generators with a capacity of more than 3 MW). Modifications to these projects are also subject to the procedure, provided that they are of consideration (according to Article 2, paragraph g) of the Regulation). 

Those projects or activities that generate significant impacts (ie, effects, characteristics or circumstances indicated in Article 11 of Law No 19,300 and detailed in Articles 4 to 10 of the Regulation) are submitted as Environmental Impact Studies. All other projects are submitted as Environmental Impact Statements. 

Environmental Impact Studies always include at least one Citizen Participation Period, and when appropriate, a Consultation Process with Indigenous Peoples is also considered. The Environmental Impact Statements procedure may consider a Citizen Participation Period when it is requested by the citizens and arranged by the regional directorates of the Service or the Executive Directorate, as the case may be. 

The qualification of a project as approved, approved with conditions or rejected, is decided by the Environmental Evaluation Commissions in regional projects, and by the Environmental Assessment Service Executive Directorate in interregional projects. 

The procedure culminates in an Environmental Qualification Resolution. 

Furthermore, the General Electric Services Law restricts vertical integration among companies in the national transmission segment, on the one hand, and generation and distribution companies, on the other hand.  

First, the Law establishes that companies belonging to the national transmission segment may not engage, either by themselves or through related individuals or legal entities, in activities that in any way include the generation or distribution of electricity. 

In addition, any individual company participating in the distribution and generation segment, or any user not subject to price fixing in the national transmission system, may not, directly or indirectly, hold a share greater than 8% of the national transmission system’s total investment value.  

Further, the combined share of generation and distribution companies and of the users not subject to price fixing in the national transmission system may not exceed 40% of the National Electric System’s total investment value. These ownership limitations extend to corporate groups or legal or natural persons that belong to transmission companies or that have joint action agreements with transmission, generation and distribution companies. 

To develop, construct and operate a generation project, multiple permits are required from the authority, however, the number of permits and their difficulty will depend on the nature of the project, such as, its generation source and location. 

The most relevant conditions required for this type of projects are related to:

• obtaining an Environmental Qualification Resolution granted within the framework of the Environmental Impact Assessment System;
• authorisation for interconnection from the National Electric Coordinator; and
• construction authorisation from the respective municipality. 

Under the General Electric Services Law, power generation projects cannot obtain an electric concession that would entitle them to impose easements for their location or any other right over the land where they will be built. Notwithstanding the foregoing, pursuant Article 2 No 1 (a) of the General Electric Services Law, hydroelectric power plant projects may obtain from the state an electric concession that allows them to impose an easement to develop, build and operate the project. 

The above-mentioned electric concession must be requested by the interested party before the Electricity and Fuels Agency, accompanying all relevant background information on the project and the property where it will be located. This Agency will be in charge of reviewing the background and then, if applicable, in accordance with Article 11 of the General Electric Services Law, it will be approved by the Ministry of Energy through a supreme decree. 

In the event that during the processing of the concession, the owner of the project does not reach a voluntary agreement with the owner of the property for the value of the easement to be imposed, the General Electric Services Law provides for the possibility that a group of experts will determine the value of such easement and that this value plus 20% will be paid by the owner of the project. 

Pursuant to Article 72-18 of the General Electric Services Law, the withdrawal, relevant modification, disconnection, or cessation of operations without being due to failures or scheduled maintenance of generating units must be communicated in writing to the National Electric Coordinator, the National Energy Commission and the Electricity and Fuel Agency, at least 24 months in advance. 

In accordance with environmental legislation, the environmental authority will require the project owner to contemplate a project closure phase in which it must describe in detail how it will dismantle the facilities, restore the environmental components that have been affected (if any) and how it will comply with the rest of the environmental legislation. The closure phase will be part of the Environmental Qualification Resolution that approves the project. 

The project owner may be penalised for non-compliance with the project closure phase.

The main regulations governing the construction and operation of transmission lines are:

• the General Electric Services Law;
• the By-Laws of the General Electric Services Law;
• Supreme Decree No 125 approving the By-Laws for the Coordination and Operation of the National Electric Power System;
• Law No 18,410 creating the Superintendency of Electricity and Fuels;
• the Technical Standard for Safety and Quality of Service; and
• the Technical Standard for Coordination and Operation.  

Pursuant to Law No 19,300, environmental reviews are required for transmission projects.  

On the other hand, storage projects will not be required to enter the Environmental Impact Assessment System; however, the transmission line through which it connects to the National Electric System and the substation attached to it must be reviewed from an environmental point of view. 

In Chile, companies do not require a special licence to build and operate transmission facilities. However, they must obtain specific permits set out in the electrical and sectorial regulations. The following are the most important permits and requirements. 

• Pursuant to Article 7 of the General Electric Service Law, the operating companies or owners of the national transmission systems must be incorporated as open or closed corporations subject to the information and publicity requirements of the Law on Corporations.
• Pursuant to Article 72-17 of the General Electric Service Law, the authority must authorise any connection to the National Electric System.
• Environmental permits must be obtained according to the specifics of the respective project. 

Notwithstanding the above, the projects listed in Article 10 of Law No 19,300 and detailed in Article 3 of the Regulation are subject to the environmental impact assessment procedure (this Article includes high-voltage power transmission lines and their substations). Modifications to these projects are also subject to the procedure, provided that they are of consideration (according to Article 2, paragraph g) of the Regulation). 

Those projects or activities that generate significant impacts (ie, effects, characteristics or circumstances indicated in Article 11 of Law No 19,300 and detailed in Articles 4 to 10 of the Regulation) are submitted as Environmental Impact Studies. All other projects are submitted as Environmental Impact Statements. 

Environmental Impact Studies always include at least one Citizen Participation Period, and when appropriate, a Consultation Process with Indigenous Peoples is also considered. The Environmental Impact Statements procedure may consider a Citizen Participation Period when it is requested by the citizens and arranged by the regional directorates of the Service or the Executive Directorate, as the case may be. 

The qualification of a project as approved, approved with conditions or rejected, is decided by the Environmental Evaluation Commissions in regional projects, and by the Environmental Assessment Service Executive Directorate in interregional projects. 

The procedure culminates in an Environmental Qualification Resolution; and pursuant to Article 72-17 of the General Electric Service Law, a declaration that the project is under construction must be obtained from the National Energy Commission. 

Furthermore, it should be noted that the General Electric Services Law restricts vertical integration among companies in the national transmission segment as well as generation and distribution companies. 

First, it establishes that companies belonging to the national transmission segment may not engage, by themselves or through related individuals or legal entities, in activities that in any way include the generation or distribution of electricity. 

Secondly, companies in the domestic transmission segment may only carry out activities that do not include electricity generation or distribution through subsidiaries or affiliated companies. 

On the other hand, the individual share of companies operating in the distribution and generation segment, or of users not subject to price fixing in the national transmission system, may not exceed, directly or indirectly, 8% of the total investment value of the national transmission system. The joint share of generation and distribution companies and users not subject to price fixing, in the national transmission system, may not exceed 40% of the total investment value of the national system. These ownership limitations apply to business groups, legal entities, or individuals belonging to transmission companies or that have joint action agreements with transmission, generation and distribution companies. 

As for storage, this will not require special permits and, if it is part of an energy transmission project, it must be evaluated in conjunction with such facilities.

It should be kept in mind that given the public service nature of this segment, its planning and therefore the expansion of the system is centralised. This means that it is the authority that determines which transmission facilities are required for the main segments (and which will be remunerated by the system) and then public and international bidding processes will be carried out to determine the most competitive offer that will be awarded the respective construction and operation rights for each facility. 

Once these construction and operation rights are awarded, the following permits will have to be obtained:

• an Environmental Qualification Resolution granted within the framework of the Environmental Impact Assessment System;
• authorisation for interconnection from the National Electric Coordinator;
• construction authorisation from the respective municipality; and
• an electric concession to impose mandatory easements on the owner of the property. 

Pursuant to Article 2 No 1 (c) of the General Electric Services Law, transmission projects may obtain a public transmission service concession that allows its holders to impose easements on the land on which they are required to locate, develop and operate the project. The easement grants the rights to:  

• build overhead or subway lines across the properties of others; 
• occupy the land necessary for the transportation of electric energy, from the generating plant or substation to the points of consumption or application; and
• occupy and close the land necessary for the electric substations, including the living quarters for the surveillance personnel. 

The above-mentioned electric concession must be requested by the interested party before the Electricity and Fuels Agency, accompanying all relevant background information on the project and the property where it will be located. This Agency will be in charge of reviewing the background information and then, if applicable, in accordance with Article 11 of the General Electric Services Law, the concession will be approved by the Ministry of Energy by way of a supreme decree. 

In the event that during the processing of the concession, the owner of the project does not reach a voluntary agreement with the owner of the property for the value of the easement to be imposed, the General Electric Services Law contemplates the possibility that a group of experts will determine the value of such easement and that this value plus 20% will be paid by the owner of the project. 

Pursuant to Article 2 No 1 (c) of the General Electric Services Law, transmission projects may obtain a public transmission service concession that allows its holders to impose easements on the land on which they are required to locate, develop and operate the project. However, according to Article 52 of the General Electric Services Law, the owners of electric lines are obliged to allow the use of their poles, towers and other facilities necessary for the establishment of other electric lines when the easements covering them were constituted by means of an electric concession.  

The above-mentioned electric concession must be requested by the interested party before the Electricity and Fuels Agency, accompanying all relevant background information on the project and the property where it will be located. This Agency will be in charge of reviewing the background information and then, if applicable, in accordance with Article 11 of the General Electric Services Law, the concession will be approved by the Ministry of Energy by way of a supreme decree. 

The valorisation process is carried out by the National Energy Commission and is performed for all existing transmission facilities every four years (mainly focused on the regulated assets). It begins with a valuation process where all relevant parties are able to participate; this process aims to determine the annual transmission value per tranche (VATT) for each transmission facility, composed of the annual investment value annuity (AVI) plus the operation, maintenance and administration costs (COMA) duly adjusted for income tax (AIER). Once such valuation process is closed, the tariffs will be determined for all regulates assets and shall be in force for a four-year period.   

Regarding the transmission assets that have been awarded in the context of the expansion plans defined by the authority, the following rules apply.

• New Works (Obras Nuevas): during the first five tariff periods the VATT of these assets will correspond to that resulting from the bidding process for the awarding of the execution and operation rights.
• Expansion Works (Obras de Ampliación): during the first five tariff periods the VATT of these assets will correspond to the annualisation of the investment value resulting from the bidding process for the awarding of the construction and execution of the work, with the value of a discount rate plus the COMA adjusted by the AIER.
• For the rest of the existing works, the VATT will be considered as the valuation methodology as the sum of the AVI and COMA duly adjusted by the AIER. 

On the other hand, the service conditions of transmission facilities are determined by different regulations, such as:

• the General Electric Services Law and its By-Laws; and
• the Technical Standard for Safety and Quality of Service issued by the National Energy Commission. 

In accordance with Article 79 of the General Electric Services Law, the facilities of the transmission systems of the electric system are subject to an open access regime, being able to be used by third parties under technical and economic conditions that do not discriminate among all users, through the payment of the transmission system’s remuneration.  

The National Electric Coordinator shall approve the connection to the transmission systems after verifying that the proposed connection solution complies with the criteria of optimal operation and open access of the respective system. The National Electric Coordinator shall be responsible for establishing the payments, based on the application of the tariffs determined by the Ministry of Energy, after a report from the National Energy Commission, for connection costs, engineering studies and analysis or rights of use of such facilities, as well as the technical requirements and terms to carry out such works, as determined by the regulations. 

The main regulations governing the construction and operation of electrical distribution facilities are:

• the General Electric Services Law;
• the By-Laws of the General Electric Services Law;
• the Technical Standard on Quality of Service for Distribution Systems;
• Law No 18,410 creating the Superintendency of Electricity and Fuels;
• Supreme Decree 88 approving the By-Laws for Small-Scale Generation Facilities; and
• the Technical Standard for Connection and Operation of PMGDs. 

The general rule is that a permanent or provisional public distribution service concession is required to establish, operate and exploit distribution facilities.  

In this segment, there is no centralised planning by the state and the distribution company decides how to plan the development and operation of its facilities to meet its customers’ needs, without prejudice to the fact that the distribution systems are subject to the National Electric Coordinator’s approval. 

Additionally, it should be noted that electric service concession companies have a duty to report to the Electricity and Fuel Agency regarding the connection of any new facilities and/or users, as well as the performance of their facilities, including failures, their number and restoration times, among other variables. Consequently, this authority will be the body responsible for overseeing the distribution companies’ operations, detecting any failure to comply with the regulations, and applying compensations and penalties when applicable. 

On the other hand, it should be noted that public distribution service concessionaires must be incorporated as open or closed corporations and their business must exclusively consist of electricity distribution, subject to the information and publicity obligations referred to in the Law on Corporations. 

The main purpose of the aforementioned legal obligation is to identify and limit any financial movements arising from the distribution activity, separating the accounting of companies that provide public distribution service from any other activities that they are allowed to carry out in parallel, such as, the sale of energy to free customers (retail commercialisation and electricity product sales, among others).  

Notwithstanding the foregoing, public service concessionaires are not limited to conducting activities related to the segment. However, it should be noted that a bill on electricity portability is currently being processed, which, in general terms, expressly regulates the commercialisation segment. 

Lastly, it should be noted that obtaining environmental and sectoral permits will depend on the specifics of each respective project. 

To develop, construct and operate electric distribution facilities, different permits are required from the authority. 

The most relevant permits are: (i) electric distribution concession; and (ii) different environmental permits depending on the type of project. 

Pursuant to Article 2 No 2 of the General Electric Services Law, interested companies may obtain concessions to establish, operate and exploit public distribution service facilities. The concession grants, mainly, the following rights to its holders:  

• to impose easements to install lines and substations on national public use property and private land; 
• to use national property for public use;
• to open pavements, roadways and sidewalks of public roads;
• to receive the payment of the monthly invoicing for the process of Distribution Added Value; and
• to participate in the rate-setting processes and demand minimum returns. 

The concession must be requested to the President of the Republic through the Ministry of Energy. 

Article 17 of the General Electric Services Law does not grant exclusivity of establishment, operation and exploitation of the distributor that obtained a definitive concession, allowing a new interested distributor to request and obtain a new concession in a part or in the totality of the already concessioned territory, being able to configure an overlapping of concessions, having the new concessionaire the same obligations and rights that were granted to the one that is operating in such territory.  

Pursuant to Article 2 of the General Electric Services Law, concessions to establish, operate and exploit public distribution service facilities are regulated by said Law. Requests must be submitted to the President of the Republic through the Ministry of Energy. 

The tariffs are determined by the National Energy Commission, which is a public agency created by law. The design of the tariffs is based on a four-year process of technical studies to determine the companies’ efficient costs. Based on these costs, the authority sets a regulated rate, which is a discount rate that fluctuates between 6% and 8%. This distribution tariff process is called Distribution Added Value and, to determine its components, the National Energy Commission commissions a cost study through a bidding process with private parties.  

This study is conducted and supervised by a committee of distribution company representatives. The results of the study may be reviewed, corrected and adjusted by the National Energy Commission and, in such case, the distribution companies may make observations that, if not addressed, may be filed as discrepancies before the Panel of Experts. 

Then, the National Energy Commission will prepare the preliminary basic tariffs to determine the segment’s profitability rates. The results of this process allow the National Energy Commission to set, by means of decrees, different tariff options for regulated customers and tolls for free customers within the distribution concession zone. 

On the other hand, the distribution service provision conditions are determined by law and by the technical standards established by the National Energy Commission.