Regulation of transmission expansion in Argentina Part I: State ownership, reform and the Fourth Line

From 1992 to 2002, major expansions of the Argentine electricity transmission sector depended on users proposing, voting and paying for such expansions, which were then put out to competitive tender. Commentators hold this novel policy to have been unsuccessful, mainly on the ground that it substantially delayed investment in a much needed “Fourth Line” to Buenos Aire. This paper challenges this interpretation. The policy was chosen because the conventional regulatory framework could not be trusted to deliver more efficient transmission investment decisions. The delay to the Fourth Line was short. Most importantly, the Fourth Line was not economic. Hence the delay was beneficial both in deferring and in reducing costs. It indicated a need to reappraise transmission investment policy because the availability of gas had made it more economic to generate electricity near Buenos Aires than to transmit it a long distance.Argentina, electricity, transmission, regulation

Regulation of transmission expansion in Argentina Part II: Developments since the Fourth Line

Argentina’s 1992 transmission expansion policy was subsequently modified by, for example, including provision for transmission companies and proposing quality and substation expansions. There have been several such expansions, and no lack of investment in quality and reliability of supply. In 1999, reflecting a decision to give greater weight to political considerations, a Federal Transmission Plan was introduced to build lines designated by the federal and provincial governments. The original reform led to less investment in major transmission lines but more intensive use of existing lines. Competition to construct expansions developed, leading to lower construction costs. Thus the Argentine transmission expansion mechanism was a considerable success in terms of meeting the requirements of users efficiently. This experience suggests that involving users in the regulation of monopoly networks is feasible, and the scope for it may be greater than generally appreciated. However, the reconciliation of economic and political considerations needs further consideration.Argentina, electricity, transmission, regulation