Transmission expansion in Argentina 1: The origins of policy

As part of its electricity reform, Argentina developed a distinctive policy on transmission expansion. Market participants, rather than the transmission company or the regulator, would determine expansions. Initially, this policy proved controversial and some economists have been critical. This paper explains why it was decided to adopt the policy. The aim was to avoid the inefficiencies and over-expansions of the state-owned era. The solution was to introduce competition wherever possible and to minimise the role for regulation. The existing transmission system already contained several separate but coordinated transmission networks. Users would have the incentive to propose and approve expansions without the need for regulation, and competition was viable for the construction and operation of transmission expansions. The method has been criticised for allocating costs and votes according to usage instead of benefits. However, the method was pragmatic, to take advantage of the existing program for system control, and designed to limit the scope for subjective and unpredictable regulatory judgements. It has merit even where such problems do not apply, as a means of securing outcomes better tailored to the needs of users.