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2.4. Transmission and distribution systems

Transmission systems are used to transfer large volumes of electricity from generation centers to consumption centers, while distribution systems have traditionally been used to bring such energy to final consumers 2. In addition to their different function or purpose, from the electrical point of view distribution facilities differ from those of transmission mainly at the voltage levels used as will be seen below.

Transmission systems consist of installations enabling the transport of electricity from centers with surplus generation to those with a deficit, operating at the highest voltage levels. In Chile the European standard of 50 Hz nominal frequency is used.

These installations, which allow the transportation of electrical energy, mainly correspond to transformers, protection equipment, control and maneuvers (located in substations) and electric lines. Voltage levels used in the National Transmission sector currently cover the range of voltages between 23 kV and 500 kV.

In Chile, the transmission system is divided into four segments known as National Transmission, Zonal Transmission, Transmission for Development Poles, and Dedicated Transmission. International interconnection systems, which are subject to special rules, are also part of the transmission system. It is important to note that the segments named above correspond to the new transmission segments defined by the Law o20.936 of 2016 and therefore replaces the commonly used name (trunk system, subtransmission systems and additional systems). The new transmission segments and their relationship with generators and consumers are presented in Figure 9. Subsequently, the formal definition of each of these systems is presented.

The rating of the facilities, i.e. the process of associating each transmission installation to the different segments (national, zonal, polos and dedicated), is carried out by CNE every 4 years.

National Transmission System

According to what is defined by the new Law 20936 of 2016[10], the National Transmission System is one that allows the creation of a common electric market, interconnecting the other segments of the transmission. It is constituted by the electric lines and substations that allow the development of this market and make possible the supply of the total demand of the electric system, in the face of different scenarios of availability of the generation facilities, including situations of contingency and failure, considering the requirements of quality and safety of service established in the law, regulations and technical standards. These facilities include those formerly known as trunk transmission facilities.

Zonal Transmission System

According to the new Law 20936 of 2016[11], the Zonal Transmission System consists of those electric lines and substations arranged essentially for the current or future supply of regulated, territorially identifiable customers, without prejudice to the use by free customers or generation means connected directly or through transmission systems dedicated to said transmission systems. Zonal Transmission Systems operate at voltage levels greater than 23 kV and commonly less than or equal to 110 kV, a large part of this segment operates at even 66 kV. These facilities include those formerly known as subtransmission facilities.

Transmission Systems for Development Poles

The Transmission Systems for Development Poles introduced by the Law 20936 of 2016[12]) are systems that will be constituted by the electric lines and/or substations, destined to transport the electrical energy produced by means of generation located in the same pole of development, towards the transmission system, making an efficient use of the national territory. The Ministry of Energy is responsible for establishing the new Development Poles in long-term energy planning (see section The definition of Poles of Development within the Law [13]is the following:

“Development Poles will be understood as those areas that are territorially identifiable in the country, located in the regions in which the National Electric System is located, where there are resources for the production of electrical energy from renewable energies, whose use, using a single system of transmission, it is in the public interest to be economically efficient for electricity supply, having to comply with environmental and land use laws. The identification of these zones will take into account the fulfillment of the obligation established in Article 150°bis, that an amount of energy equivalent to 20% of the total withdrawals allocated in each calendar year has been injected into the electric system by Non-conventional renewable generation.”

If, due to coordination problems between different generation project owners, all or part of the production capacity of one or more Development Poles defined by the Ministry of Energy can not materialize, CNE may consider in the plan of annual expansion of Transmission Systems for such Development Poles. Likewise, CNE may incorporate in this plan the change of Dedicated Transmission Systems, new or existing, to Transmission Systems for Development Poles. This in order to allow its use by new projects of generation.

Dedicated Transmission Systems

The Dedicated Transmission Systems are constituted by radial electric lines and substations, which are interconnected to the electric system, are arranged essentially for the supply of electric energy to users not subject to price regulation or to inject the production of the generating plants to the electric system[14]. These facilities include those formerly known as additional transmission facilities.

International Interconnection Systems

International interconnection systems [15] are made up of electric lines and substations designed to carry electrical energy to enable its export or import, to and from the country’s electric systems. Within these systems, the law distinguishes between international interconnection facilities of public service and private interest. International public service interconnection facilities are those that facilitate the conformation or development of an international electricity market and complement the supply of the demand of the electric system in the national territory against different scenarios of availability of generation facilities, including situations of contingency and failure, considering the requirements of quality and security of service established in the law, regulations and technical standards.

The Law 20.936 of 2016 introduced important changes regarding access, payment and transmission planning. The following are the most important general aspects of these issues:

The installations of the  transmission systems are subject to an open access regime and can be used by third parties under non-discriminatory technical and economic conditions. Owners of installations of transmission systems, with the exception of dedicated systems, may not deny access to the transmission service to any interested party due to technical capacity. The connection must be allowed to the installations without discrimination of any kind, and if it is necessary to carry out the extensions, adjustments, modifications and reinforcements that are necessary for such connection then they shall be carried out. In the case of dedicated systems, the owners of these systems will not be able to deny the service to any interested party when there is available technical capacity of transmission and the coordinator will be able to determine the technical capacity available of the Dedicated Transmission Systems.

The Law of 20.936 of 2016 made structural changes to the payment of transmission systems, seeking to simplify methodologies of calculation and transparency of transmission costs. Therefore, this new law allows a transition from a scheme of allocation of costs by use of the network to a scheme based on a single charge to the demand, better known as “postage stamp”. For this purpose, the principles of the payment methodology prior to the Transmission Law are described below. The principles of the methodology subsequent to the Transmission Law, besides the principles that will be applied in the transition period in which both methodologies are applied and that will last until 2035, when the contracts expire under the system of payment previous to the Law of Transmission. It is worth mentioning that these methodologies coexist in the electricity market.

In both systems, before of the legal change of 2016, the annual value of the corresponding transmission is always sought annually from the owner companies. The calculation of the annual value of the National Transmission, Zonal, Poles and the payment for use of Dedicated Transmission facilities used by users subject to price regulation will be made by CNE every 4 years based on the evaluation of these facilities. This is a relevant change for the Zonal Transmission (formerly known as Subtransmission), since previously only the economically adapted facilities were paid and not the actual value of the facilities made.

It should be noted that legal change of 2016 establishes that the discount rate to be used to determine the annuity of the investment value of the transmission facilities may not be less than 7% and not more than 10%. The rate is determined by the CNE every 4 years through a study following a standard methodology, publicly tendered and with appeals to the Panel of Experts in case of discrepancies. Regulation S.D. N°10 of 2019 establishes the provisions applicable to the processes of qualification, valuation, pricing and remuneration of the facilities of the transmission systems.

Principles of the payment system of the transmission following the Transmission Law

For each of the National and Zonal Transmission Systems, a single charge for use with charge to the demand will be established, so that this revenue constitutes the complement to the real tariff revenues in order to collect in total the annual value of the transmission of each section of the system. Tariff revenue is understood as the difference that results from the application of the marginal costs of the actual operation of the system, with respect to the injections and withdrawals of power and energy in said segment. Likewise, a single demand charge will be established for the payment of the Dedicated Transmission used by users subject to price regulation. Finally, in the case of transmission for Poles, a single charge will be established to the demand that pays the proportion of the facilities not used by the existing generation. The yearly value of the transmission not covered by said charge shall be given to generators injecting their production into the corresponding pole in proportion to their installed generation capacity and their location.

In summary, payment of the above single charges will be charged to free and regulated final consumers, and will be calculated every six months by CNE. This system of simple charges on demand apply from 2019 to all new supply contracts. However, contracts previously concluded and whose parts do not agree to change to the new system will remain under the old system until its expiration.

Principles of the old payment system
One of the fundamental principles of the old payment system of the transmission is the direct allocation of costs, so the methodologies used are quite complex and detailed, since it is necessary to estimate how much each segment of the transmission used each participant of the market, simulating a large number of different scenarios, conditions, hydrology, etc.

In the national transmission (formerly trunk transmission), the payment under the old system is made through two main revenues received by the transmission companies: tariff revenue and charges. The charge corresponds to the value resulting from subtracting from the annuities recognized to the transmission companies (in the process of valorization of the system), the resulting tariff revenue. In this way, a system with high transmission losses will have high tariff revenues (large differences in the marginal costs of injection and withdrawal), and therefore, lower charges. Otherwise, a system with low transmission losses will have lower tariff revenues and higher charges. The charge is assigned to generations and consumptions according to a proration scheme based on the expected electrical use that each facility makes of the system. This scheme has different treatments depending on whether it is National, Zonal or Dedicated Transmission Systems.

It is not common to use the concept of tariff income at the international level. In fact, in systems with uninodal energy bags, this income does not exist and all transmission costs are covered, for example, through stamped payments among the different agents in the market. Also, unlike what happens in European countries, this payment does not depend on the contractual relations that generators and consumers have. The following figure summarizes the situation described.

It should be noted that the payment of transmission charges involves all generators, regardless of the level of voltage or subsystem to which it interconnects. The amount of the payment depends on the result of applying the methodology of evaluation of the use of the corresponding system.

Transition from the old payment system to the new payment system
Due to the great change that it means to move from a cost allocation system to a demand-stamped system, the Law considers a transition period in order to gradually allow the actors to absorb these changes. For this reason, the system of collection, payment and remuneration of the national transmission will have a long transition period that will last until December 2034, as follows [16]:

  • All national transmission facilities that start operating from 2019 and the interconnection between SIC and SING will be subject to the new regime, i.e., will be paid through a single charge by the final consumers.
  • Until December 2018 all national transmission facilities will be payed under the old compensation system.
  • During the period between January 2019 and December 2034, payments for use of the transmission system by generating companies for injections and withdrawals associated with contracts signed prior to the entry into force of the law (July 2016) shall be applied with the principles of the old payment system, with some modifications, being the most important a progressively reducing payment of charges of generators, which will be passed on to the final consumers. Thus, in 2035, 100% of the national transmission infrastructure will be paid by final consumers through a single charge.

Similarly, regarding the payment of Zonal Transmission Systems, the Law 20.936 of 2016 eliminates the payment of generators and charges completely of final customers, which began to take effect once the Law [17] was approved.

It is worth mentioning that for purposes of remuneration, the use of the facilities of respective transmission system by the companies that inject or withdraw energy; and the payment by transmission to the companies that own or operate the national transmission system, are calculated as a single electrical system (SEN) without distinction of the old SIC and SING[18].

The Law 20.936 of 2016 also makes substantial changes to the transmission planning process. Among the main changes are the following:

  • Introduced a new long-term energy planning process carried out by the Ministry of Energy.
  • It extended annual transmission planning process maked by CNE to some transmission segments3 (previously the process was limited to the expansion of the national system) and incorporates new criteria for planning.
  • It gave new powers to the Ministry of Energy to define territorial corridors in order to facilitate the development of certain transmission works and the definition of paths.

Under this new regulatory framework, every five years the Ministry of Energy must develop a planning process for the different energy scenarios of expansion of generation and consumption with a horizon of at least 30 years. This process should include scenarios of projection of energy supply and demand and in particular electric, considering the identification of Development Poles, international exchanges of energy, environmental policies that have an impact on the sector and energy efficiency objectives, among others. For each identified development pole, the Ministry must prepare a technical report distinguishing each type of generation source. For this, the Ministry must carry out a strategic environmental assessment in each province where one or more Development Poles are located.

The energy planning regulation [19] establishes the conditions, characteristics, deadlines and stages by which the long-term energy planning to be developed by the Ministry of Energy will be governed.

On the other hand, CNE will carry out annually the process of transmission planning that should consider a 20 years horizon. For this, the coordinator will send an annual expansion proposal for the different segments of the transmission. Subsequently, CNE must convene a stage for the presentation of proposals for transmission expansion projects where promoters of the same must present their respective proposals.

Using the guidelines of the long-term planning carried out by the Ministry of Energy, the coordinator’s annual proposal and the project proposals presented by its promoters, the Commission must carry out a planning covering the job necessary for the expansion of the National, Development Poles, Zonal and Dedicated Transmission System used by public distribution service concessionaires. This planning may receive comments from the interested participants and institutions that will have to be reviewed and answered (accepting or rejecting them) by the Commission that will finally issue a definitive technical report of the expansion plan. Finally, participants and interested parties may present discrepancies regarding the expansion plan to the panel of experts who must issue an opinion within 50 concurrent days. The S.D. N°37 of 2021 approves the regulation of transmission systems and transmission planning, which contains the provisions for the planning process, as well as the stages and deadlines.

Once the final technical report of the Commission has been received, the Ministry of Energy will be able to fix the expansion work of the transmission systems that are to start the tendering process in the next twelve months in accordance with what is indicated in S.D. N°37 of 2021. Likewise, jobs that require corridor studies will be determined by the Ministry of Energy based on criteria such as voltage levels, purpose of use, difficulties of access to or from generation Development Poles, the complexity of its implementation and the magnitude of the same.

The preliminary study of the corridors to be tendered, accepted and supervised by the Ministry of Energy must be accompanied by a Strategic Environmental Assessment (EAE) [20]. The study should contemplate alternative corridors, the collection of information on matters of land use, of protected areas, socio-economic information of communities, besides geological and geomorphological aspects. Likewise, it should include alternative engineering designs that allow identifying alternative ranges and the economic cost of these strips and an overall analysis of social and environmental aspects, among other aspects. Likewise, it must undergo a process of consultation or indigenous participation when appropriate. The regulation that establishing the procedure for the determination of preliminary corridors[21], sets in greater detail the stages and deadlines for the execution of the study.

As a result of the study of corridors and Strategic Environmental Assessment, the Ministry of Energy will fix the preliminary corridor, which because of public utility may be taxed with one or more assesments.

The distribution systems are made up of the lines, substations and equipment that allow the provision of the electricity distribution service to final consumers, located in explicitly defined and limited geographical areas. The distribution companies operate under a public service concession regime in these areas, with an obligation to service and regulated tariffs for the supply to regulated customers under certain standards defined by technical standards. In the distribution sector, two voltage ranges are established:

  • High voltage in distribution: defined for voltages higher than 400 V and up to 23 kV, often known as medium voltage.
  • Low voltage in distribution: defined for voltages below 400 V.

According to these definitions, the feeders of the distribution systems (high voltage in distribution) operate at different voltages between the specified ranges, such as: 12, 13.2, 15 and 23 kV. On the other hand, low voltage distribution networks in Chile operate at 220/380 V. It is important to note that voltage levels used in Chile are different from those defined in European countries where distribution systems can reach voltages of 60 kV or higher.

Regarding to regulated customer, it pays a fee calculated by the authority, and in general terms is obtained by adding the purchase price of energy and power by the distribution company, which is currently defined by a bidding process led by CNE, plus the costs associated with a model distributor operating efficiently. The latter component is determined with the elaboration of a single study that will be mandated by the CNE and will be carried out by an independent consultant in accordance with what is determined in the bidding conditions that can be observed by the companies and interested third parties. The latter is one of the changes introduced by Law N ° 21.194 promulgated in December 2019. Additionally, the cost determination process allows citizen participation, generating incentives for discussion and decision-making based on technical and legal arguments. and economical.