The new Chilean transmission charge scheme as compared with current allocation methods

We describe the new method used in Chile to allocate transmission charges among generating companies and customers, as defined in Law 19 940 of March 2004 (also known as Ley Corta or Short Law). We show that the new Chilean transmission charge scheme is a hybrid based on marginal cost pricing, identification of use through economic benefits and flow identification methods, and last, a postage stamp to redistribute almost all the charges that customers have to pay. We also estimate the direct per kilowatthour charge that customers will pay and discuss its effect on location and expansion signals.