2.6. Institutional framework of the electricity sector
The Chilean electricity sector is closely linked to different public and private sector institutions. These institutions and market agents may inter-relate through coordination, direct dependency, contractual, property and binding relationships, among others, and are detailed in this chapter. Figure 13 shows some of the main interactions of the electricity sector actors with these institutions.
The main institutions linked to the regulation of the Chilean electricity sector are the following:
- The Ministry of Energy.
- The National Energy Commission (CNE).
- The Superintendency of Electricity and Fuels (SEC).
- The Independent Coordinator of the National Electric System.
- The Panel of Experts of the General Law of Electrical Services
- The Court of Defense of Free Competition.
Other institutions linked to the sector that see specific aspects are the Chilean Nuclear Energy Commission (CCHEN), the Ministry of the Environment, the Ministry of National Assets, the Energy Sustainability Agency (ASE), the Corporation for the Promotion of Production (CORFO) and the Ministry of Mining, among others.
The functions of the main institutions linked to the electricity sector are described below.
The Ministry of Energy, an entity created by Law 20.402 and which came into force on February 1 of 2010, is the highest organ of collaboration of the President of the Republic in the functions of government and administration of the energy sector.
Its general objective is to prepare and coordinate the plans, policies and standards for the proper functioning and development of the sector, ensure compliance with them and advise the Government on all matters related to energy.
For the purposes of the competence of the Ministry of Energy, the above mentioned Law establishes that the energy sector comprises all activities of study, exploration, exploitation, generation, transmission, transportation, import and export, storage, distribution, consumption , efficient use, and any other concerning electricity, coal, gas, oil and derivatives, nuclear, geothermal and solar energy, and other energy sources.
In addition, the creation of the Ministry of Energy reorganized the powers of the public sector in relation to the energy sphere, concentrating the functions of the sector, which previously were in the Ministries of Mining and Economy, Development and Tourism, and modified the dependence of the National Energy Commission (CNE), the Superintendency of Electricity and Fuels (SEC) and the Chilean Nuclear Energy Commission (CCHEN), which came to interact with the President of the Republic through the Ministry of Energy.
The conduction of the Ministry corresponds to the Minister of Energy and the internal administration to the Undersecretary of Energy, who is the Superior Head of the Service and coordinates the action of the public services of the sector. In addition, it has the presence of a Regional Ministerial Secretariat in each of the regions of the country.
The National Energy Commission is a public legal entity, functionally decentralized, with its own assets, which is related to the President of the Republic through the Ministry of Energy, created by Decree Law 2224 of 1978, as amended by Law 20.402 which created the Ministry of Energy.
It is the technical body in charge of analyzing prices, tariffs and technical standards to which companies of production, generation, transport and distribution of energy must be adhered, in order to have a sufficient, safe and quality service, compatible with the more economical operation. Their functions are:
- Technically analyze the structure and level of prices and tariffs of energy goods and services, in the cases and forms established by the Law.
- Establish the necessary technical and quality standards for the operation and operation of energy facilities, in the cases indicated in the Law.
- Monitor and project the current and expected functioning of the energy sector, and propose to the Ministry of Energy the legal and regulatory rules that are required, in matters within its competence.
- Advice the Government, through the Ministry of Energy, in all matters related to the energy sector for its better development.
The Electrical Department of the CNE conducts indicative planning of investments in generation and transmission, prepares the regulations and technical standards, and calculates tariffs for regulated customers, amongst other activities described in the Law.
Administration of the CNE corresponds to the Executive Secretary, who is the Chief of the Service and has legal, judicial and extrajudicial representation.
The Superintendency of Electricity and Fuels is related to the President of the Republic through the Ministry of Energy. It was created as such in 1985, through Law 18.410, organic of the SEC, according to which its mission is to monitor the proper operation of electricity, gas and liquid fuel services, in terms of safety, quality and price, when these are regulated.
Responsibility of the SEC is to monitor compliance with legal, regulatory and normative provisions, grant gas and electric provisional concessions, and impose sanctions, among other matters.
The Independent Coordinator of the National Electric System (Coordinator) is a technical and independent body created by the new Law 20936 of 2016, responsible for coordinating the operation of the set of installations of the SEN that operate interconnected with each other. The Coordinator replaces the old Economic Load Dispatch Centers (CDEC) of SIC and SING.
The Coordinator is an autonomous corporation of public law, non-profit, with its own equity and indefinite duration. The Coordinator is not part of the State Administration, however, must comply with strict guidelines on transparency, and must keep publicly available the applicable regulatory framework, its organizational structure, financial statements, the composition of its board of directors, The consolidated information of its personnel, any payment received in the year by each member of its Board of Directors and the Executive Director and the annual public account that accounts for the fulfillment of management objectives. Likewise, the Coordinator must provide all the information requested, except for any of the causes of secrecy or reservation established by law or the Constitution, or that its publicity, affects the proper fulfillment of the functions of the Coordinator or rights of the people.
The direction and administration of the Coordinator will be in charge of a Board of Directors, composed of five directors, who will be chosen separately, in public and open processes, by a Special Nomination Committee. The directors and the President shall serve for five years in office and may be re-elected once, but may be removed from office by the Special Committee on Nominations, for abandonment of functions, negligence or lack of suitability.
The Special Nominating Committee shall be composed of the following members: the Executive Secretary of CNE, a Counselor of the High Public Management Council, the Chairman of the Panel of Experts or one of its members, and the President of the Free Competition or one of its Ministers.
Unlike the old CDECs, financed entirely by generators, the financing of the Coordinator is established through an annual budget, financed through a public service charge made to all end users, free and regulated, fixed annually by CNE.
The Panel of Experts of the General Law of Electrical Services is an organ created by Law 19.940 of 2004 exclusively for the electricity sector. It has limited power and is composed of a group of expert professionals. Its function is to pronounce, by means of opinions of binding effect, on those discrepancies and conflicts that arise due to the application of the electrical legislation and that must be submitted to its consideration according to the Law. It also pronounces on the controversies between two or more companies in the electricity sector that, by mutual agreement, submit to their decision.
The institution is comprised of seven professionals with a long and wide ranging professional or academic experience. Five of them must be engineers or possess a degree in economic sciences, they may be nationals or foreigners, and two must be lawyers. Panel members and a Lawyer-Secretary are appointed for six-year periods by the Tribunal for the Defense of Free Competition, through a public tender process. The panel’s composition is partially renewed every three years.
Prior to the legal change of 2016, the operating costs of the Panel of Experts were financed by the generation, transmission companies and public service concessionaires, on a prorate basis. Its gross fixed assets. However, that law changed this and the Panel of Experts is now funded by all end users through a public service charge.
Another important institution to mention is the Court of Defense of Free Competition, an institution created by Law 19.911 of 2003. Although it is not only linked to the electricity sector, it is very important in it, since one of the motivations of the regulation of the electricity sector is precisely to foster competition.
This is a special collegiate Court, similar to an Appeals Court, devoted exclusively to competition matters, comprised of three lawyers and two economists, all experts in competition and with the rank of ministers.
This court is a special and independent jurisdictional entity; subject to the directional, correctional and economic supervision of the Supreme Court, whose main function is to prevent, correct and sanction violations of free competition.