Fischer R., Galetovic A. (2003).

Regulatory Governance and Chile’s 1998-1999 Electricity Shortage. Journal of Policy Reform, Volume 6, Issue 2, pp. 103-124.



We study regulatory incentives and governance during the 1998–1999 electricity shortage in Chile. We argue that it was feasible to manage the shortage with no outages. The outages can be blamed on the rigid price system and deficiencies in regulatory governance, which led to a weak regulator unable to make the price system work. The shortage shows the limitations of a rigid price system requiring regulatory intervention. It suggests that countries where governance structures are weak should rely as much as possible on market rules that clearly allocate property rights and leave contract terms to be freely negotiated by private parties.