MercoPress. South Atlantic News Agency

Energy prices for Chilean business the highest in three years

Hydroelectric production was down to 42% of total output in February

The cost of producing energy keeps going up in Chile, as the drought in the north drags on and the international price of petroleum increases.

February was the most expensive month in almost three years, according to figures from Chilean bank BICE Inversiones. The last time energy prices were this high was during the 2008 drought.

The average marginal cost of the electrical system rose to US$242.70 per megawatt in February, which reflects a 75% increase since February 2010 and a 39% increase since last January. During the 2008 drought the marginal cost reached US$ 338.40 per megawatt.

The marginal cost of producing a megawatt of electricity reflects the price at which companies buy energy and is used as an indicator of energy prices for consumers.

Mabel Weber, an analyst at BICE, said that the ongoing lack of rain since 2010 caused a decrease in hydroelectric production, which is the cheapest form of electricity in Chile.

Hydroelectric production was down to 42% of total output in February, and some days dropped as low as 30%.

In the absence of hydroelectric production, energy producers turned to fossil fuels: natural gas, coal, and diesel. Last month, gas and coal generated about half of all energy production combined, at 27% and 23%, respectively. Diesel generated 8% of the nation’s energy needs in February.

Francisco Aguirre, of the consulting firm, Electroconsultores, said that the energy sector is functioning with unrealistic production costs, and “costs will keep going up so long as petroleum goes up.”

Mining and Energy Minister Laurence Golborne said Wednesday he was “relatively calm” about the increase in petroleum prices, in an interview with Radio Cooperativa.

“The country has certain reserves, we have a guaranteed level of gas, we have contracts with suppliers for these situations… we shouldn’t have any problem,” Golborne said.

BICE Inversiones said that marginal energy production costs should hover around US$150 per megawatt throughout the year, but if the drought continues, costs might rise to over US$200 per megawatt during the winter.

The demand for energy this year is expected to mirror economic growth, increasing between 5 and 7%, according to officials from the Central Interconnected System (SIC).
Energy demand in February was 10.05% higher than last year, but the SIC dismissed the jump as a reflection of the unusual drop in energy demand during February 2010, the date of Chile’s 8.8 magnitude earthquake.

By Jackie Seitz – Santiago Times