Transmission expansion in Argentina 5: The regional electricity forum of Buenos Aires province

Stephen C. Littlechild and Eduardo A. Ponzano

Energy Economics, 2008, vol. 30, issue 4, pages 1491-1526

Abstract: This paper supplements analyses of Argentine transmission expansions at the federal level by looking at experience in Buenos Aires province. A Regional Electricity Forum of distribution companies has drawn up and begun to implement a 10-year transmission expansion plan. Contrary to previous fears, getting agreement between the members on investment and cost sharing has not been unduly problematic. More challenging was getting approval of the provincial government on funding. Deferring tariff reductions and using the revenues for investment facilitated the process, and now some innovative financing arrangements are underway. Again contrary to some previous suggestions, the controversial Area of Influence method was extended rather than replaced. This overcame concerns about free-riding. Progress and investment have been severely curtailed by the economic crisis in 2001 and subsequent federal government policy. The arrangements nonetheless appear to be working well, and to be conducive to more efficient transmission expansion. This confirms that it is practicable and advantageous to allow users rather than the transmission company or the regulator to propose and determine transmission investment, even in a meshed rather than radial system. An appropriate regulatory framework is needed to approve that part of the total budget to paid by distribution business consumers, but this does not require the regulator to lead or monitor the detail of the process.

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