The legislative battle over Chile’s energy needs [Junior]

A key legislative bill faces a fight from environmentalists and legislators, raising larger questions of how best to solve the energy crisis in Chile. 

A coalition of lawmakers and environmentalists is challenging a key legislative bill currently being fast-tracked through Congress. The measure is designed to support President Sebastián Piñera’s energy reform strategy, but critics charge it could also restrict rights of indigenous groups and landowners to pave the way for mega dam projects in the Aysén Region.

The “electric concessions bill,” which Piñera’s administration says is necessary to reduce bureaucracy around granting energy concessions — including the right to build lines or power facilities — has already passed the Chamber of Deputies and will go to the floor for a discussion of its amendments on Tuesday.

Many lament the extensive bureaucracy in Chile and say that this law will help facilitate additional, needed energy projects that the expanding mining industry will soon require.  

“In the current system, developers face a lot of bureaucracy for projects that have already been approved by the Environmental Impact Assessment,” said Ivan Couso, the former coordinator of the National Energy Efficiency Program in Chile.

“I think any measure to improve the efficiency of the procedures is important,” he told The Santiago Times.

Constitutional issues

But environmentalists publicly oppose the law and call for its rejection. A coalition of 22 organizations in the Aysén Region, united under the Citizens Coalition for the Aysén Reserve, says it tramples the rights of indigenous groups, among others.

There are several major issues with the bill’s amendments: indigenous groups would be consulted only after concession rights are granted; rather than before; electric companies would not be required to seek out alternative routes if concession lines are planned through protected areas; only residents living directly next to planned concession lines would be allowed to oppose concessions lines and local police forces could be legally allowed to protect the concessions.

The first point is one of the most contentious, as it is seen as a violation of the International Labor Organization’s (ILO) convention 169, which was written to give indigenous groups greater protections over their lands and which Chile has signed and ratified.

A coalition of 14 senators, which includes Aysén Region Sen. Antonio Horvath, finds the controversial amendments troubling, but hopes to strike them from the bill, rather than dismiss the entire law.

“These amendments are violating the rights that are in the constitution,” said Horvath, a member of the center-right National Renewal (RN) party.

“If the bill passes the second phase of discussion in the Senate, then we will appeal to the constitutional tribunal to dismiss these amendments,” he told The Santiago Times, referring to the court that decides constitutional issues.

Controversy over mega dams

The electric concessions bill is also designed to be one of the first legislative measures to support Piñera’s grand energy reform plans for the country: a public, electric highway which aims to connect the power grid in the north (SING) with the grid in the south (SIC), subsequently uniting 99.2 percent of the country’s energy under one system.

A separate “electric highway” bill is also in the Senate right now, and critics contend that the pair of bills together is a legislative strategy designed to clear the path for megadam projects in the Aysén Region like HidroAysén.

“Support for such huge investments is embodied in a number of inconsistencies that attack the most basic civil rights,” said a public statement by the Citizens Coalition of Aysén. “For example: the rights of indigenous peoples, protected areas, rights of stakeholders, among others, that will pave the way for these projects.”

Major dam projects have faced widespread controversy in Chile mainly because of the large reservoirs that big dam projects require will flood natural resources and cause irrevocable damage. Public approval for the HidroAysén dam remains low, while the project remains stalled in a special regulatory committee.

Presidential candidate Michelle Bachelet said last week at the final Concertación debate that HidroAysén was not a viable option. But a HidroAysén executive, which is owned by energy giants Colbun and Endesa, disputed her statement.

“It’s easy to say no to a project, the point is what is your proposal and so far I haven’t seen any put forth by the candidates,” said Daniel Fernandez, the project’s executive vice president, Monday.

Chile’s energy needs

Indeed, the question of how to solve Chile’s growing demand for energy hangs in the air.

The country faces numerous obstacles to produce sufficient electricity for its mining industry, which is predicted to double in the next eight years. Chile already relies heavily on energy imports with currently about one-third of its power supply from hydroelectric dams. The rail-thin nation stretches across diverse climates: from an arid desert in the north to provinces in the south that see measurable quantities of rain and snowfall each year.

Some stakeholders feel that the public electric highway is one policy solution that can ease the problems. Electric transmission companies like Transelec argue that the reforms under Piñera’s proposal will allow speed up the process for new concessions, which will increase competition, create less congestion and ultimately make the power network more robust and safer.

The intention of the energy highway should be to shuttle non-conventional renewable energy sources that are more readily in the north — like wind and solar — to the south, says Couso. But instead, the government is putting greater emphasis on moving energy from hydroelectric dams in the south to the north.

“The best incentive for such clean energy in Chile is the price, but this suspiciously remains high although there are hundreds of international players wishing to enter the Chilean market, due to three companies,” that have a strong hold on the market, he said, referring to Endesa, Colbún and AES Gener.

Chileans pay among the highest rates for energy prices in the Southern Cone and above average among the countries in the Organisation for Economic Co-operation and Development (OECD). While rich in copper, the country produces very little fossil fuels and is dependent on energy imports. Though the Andean nation stands among the top potential producers of tidal and solar energy, development has been slow.

While increasing competition is essential to driving down the price of energy in the country, it remains unclear what actual effect these laws may have on the energy market.

Necessary reform

Despite the dissension over these legislative bills and how best to meet these demands, what is clear is that Chile’s energy sector is in need of reform.

A relic of Pinochet’s dictatorship, the 1982 Electricity Act transformed the system from a vertically integrated, nationalized utility system to one that remains completely privatized today. Integration was dismantled and the current system is composed of generation, transmission and distribution sectors.  

Due to the equally controversial water code of 1981, Endesa, also the majority stakeholder of the HidroAysén dam, controls 80 percent of non-consumptive water rights in Chile.

The consolidation of utilities among a few large companies makes penetrating the market and encouraging competition difficult. One change that is planned as part of Piñera’s energy reform plan is that the state would control the ability to grant concession rights.

While many have long called for the energy sector to be once again nationalized, saying that these companies have too much power, some question the motivation of the government in this plan of reform.

“For the first time, since the dictatorship, the right-wing government is willing to somehow violate the dogma that the whole electrical sector has to be 100 percent private. It’s very curious,” Juan Pablo Orrego, president of the NGO Ecosistemas, told The Santiago Times.

Orrego argues that the government wants greater control in the energy market in order to ensure big dam projects move forward, saying if they control easements, they can sell them to whichever company they choose.

Piñera, though, is a supporter of the HidroAysén dam project.

“The government is trying to eliminate the new obstacles that civil society is starting to put forward against the abuse of the electrical sector,” said Orrego, adding that the public is increasingly becoming more politically active.

“There is a new Chile that is starting to defend its rights in a different way,” he said.

Deadline: July 31st, Wednesday

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