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Investment decisions in electricity transmission in Argentina: The role of earmarked funds and gas pipeline expansions

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  • Chisari, Omar O.
  • Romero, Carlos A.

Abstract

This paper reexamines the problem of collective decisions of investment in electricity transmission in Argentina in the nineties. We summarize our previous results on the existence of a fundamental flaw in the evaluation of willingness-to-pay and on the need to consider the votes of groups of generators integrated through common ownership rather than individual generators. We discuss the workings of the SALEX account for financing expansions and confirm that the imperfect identification of voters could affect the evaluation of expansion projects. We also study an integrated model that considers two alternatives to electricity transmission: gas transmission and the location of generators; we show that location in the demand node voting against expansions in electricity transmission could be justified to maximize profits.

Suggested Citation

  • Chisari, Omar O. & Romero, Carlos A., 2008. "Investment decisions in electricity transmission in Argentina: The role of earmarked funds and gas pipeline expansions," Energy Economics, Elsevier, vol. 30(4), pages 1321-1333, July.
  • Handle: RePEc:eee:eneeco:v:30:y:2008:i:4:p:1321-1333
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    1. Paul Joskow & Jean Tirole, 2005. "Merchant Transmission Investment," Journal of Industrial Economics, Wiley Blackwell, vol. 53(2), pages 233-264, June.
    2. Chisari, Omar O. & Dal-Bo, Pedro & Romero, Carlos A., 2001. "High-tension electricity network expansions in Argentina: decision mechanisms and willingness-to-pay revelation," Energy Economics, Elsevier, vol. 23(6), pages 697-715, November.
    3. Gruner, Hans Peter & Kiel, Alexandra, 2004. "Collective decisions with interdependent valuations," European Economic Review, Elsevier, vol. 48(5), pages 1147-1168, October.
    4. Herbert Scarf, 1994. "The Allocation of Resources in the Presence of Indivisibilities," Journal of Economic Perspectives, American Economic Association, vol. 8(4), pages 111-128, Fall.
    5. Anderson, Kent P. & McCarthy, Amy, 1999. "Transmission pricing and expansion methodology: lessons from Argentina," Utilities Policy, Elsevier, vol. 8(4), pages 199-211, December.
    6. B. Douglas Bernheim & Michael D. Whinston, 1990. "Multimarket Contact and Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 1-26, Spring.
    7. Daniel De Wolf & Yves Smeers, 2000. "The Gas Transmission Problem Solved by an Extension of the Simplex Algorithm," Management Science, INFORMS, vol. 46(11), pages 1454-1465, November.
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