The Second Generation of Power Exchanges: Lessons for Latin America

Dec 1999
Almost two decades after the beginning of the Chilean and English experiments in power sector reform and privatization, many other countries have adopted or are in the process of adopting a model that promotes competition in the wholesale power market that is based partly on the pioneering efforts of those two countries. Some countries which adopted the English model but whose systems are dominated by hydroelectric power found themselves constrained by a structure that did not apply to their particular situations. And now, England and Chile are themselves radically revising their power trading arrangements. This paper attempts to answer the questions: Does this mean that their systems failed and that the countries that adopted them should go on the alert and adjust their models?; Or does it mean that the experiment failed and that the opponents of reform and those who maintained that it was impossible to mount a competitive model in the wholesale electricity market were right? This paper looks at the structure of the power markets (first-generation and second-generation reforms) in Chile, England/Wales, Argentina, Norway, Colombia, Australia, the United States and Spain.