VZCZCXYZ0000
OO RUEHWEB

DE RUEHSG #1147/01 3591634
ZNR UUUUU ZZH
O 241634Z DEC 08
FM AMEMBASSY SANTIAGO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4200
RHMCSUU/DEPT OF ENERGY WASHINGTON DC IMMEDIATE
INFO RUCNMER/MERCOSUR COLLECTIVE IMMEDIATE

UNCLAS SANTIAGO 001147 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON ENRG KNNP SENV TRGY PGOV CI
SUBJECT: CHILEAN: ENERGY HIGHLIGHTS FOR NOVEMBER-DECEMBER 
2008 
 
REF: SANTIAGO 01140 
 
¶1. Summary: This cable provides updates on developments in 
the Chilean energy sector.  Energy Minister Tokman announced 
the national energy crisis has ended.  A hydroelectric 
project planned for the Patagonia region has stopped 
operations while HydroAysen, the energy company overseeing 
the project, addresses inquiries on the environmental impact 
on the region.  Opponents of the project filed a lawsuit 
against HydroAysen and the Region's Governor.  The National 
Energy Commission (CNE) awarded contracts on November to 
three companies to conduct separate studies on the 
possibility of producing domestic nuclear energy in the 
country.  CNE announced a reduction in energy prices of up to 
five percent for the next four years.  Paraguay will sell 
electricity to Chile via Argentina.  Three new wind energy 
parks are expected to contribute 38.24 megawatts (MW) to the 
south of Chile while environmentalists worry over possible 
negative effects on the landscape of the region.  END SUMMARY. 
Energy Shortage Ends 
-------------------- 
 
¶2. Energy Minister Tokman publicly declared on November 4 
that Chile's national energy crisis was officially over.  He 
attributed the change to measures designed to reduce energy 
use adopted by the GOC and to effective public education 
campaigns.  Tokman indicated high levels of precipitation 
facilitated the generation of hydroelectric power generation 
of levels sufficient to meet current national needs.  It is 
still uncertain if Chile will meet the additional 12,000 MW 
required over the next 10 years to meet energy needs in the 
long-term. (NOTE: On average, 1 MW of energy can generate 
power for 1,000 households.) 
More Obstacles for Hydroelectric Generation 
------------------------------------------- 
 
¶3. The Chilean Regional Environmental Commission (COREMA) 
reviewed an 11,000-page Environmental Impact Study (EIS) on a 
proposed Patagonia dam project that generated a total of 
3,150 public inquiries.  The goal of the project is to build 
five major dams in the south of Chile which would produce 
approximately 2,750 MW of electricity and cost an estimated 
$3.2 billion. HydroAysen is the company overseeing the 
project and constructing the dams.  The inquiries raised 
concerns about the environmental impact of the dams on the 
region. Construction of the five plants and supporting 
operations will be halted for approximately nine months while 
HydroAysen addresses these concerns. 
¶4. The Patagonia Defense Council filed a civil suit on 
November 21 against HydroAysen for illegally initiating the 
construction of the hydroelectric plants. The governor of 
Chile's XI region, Selim Carrasco, is also accused of 
ignoring recommendations made by government entities like 
COREMA on the accuracy of the EIS. 
Nuclear Energy Feasibility Studies Announced 
-------------------------------------------- 
 
¶5. Chile's recent energy shortages spurred the GOC to 
consider alternatives and explore the full range of energy 
sources, including renewable and nuclear energy (reftel). 
CNE awarded contracts November 27th to three different firms, 
Amec-Cade (Chilean-British), Stuk (Finnish), and 
Technopark-Intermash (Chilean-Russian).  Each firm will issue 
a report on one of the following topics: the implications of 
producing nuclear energy, defining the plant best suited for 
Chile and designing the regulatory framework necessary for 
nuclear energy technology.   The studies are not likely to be 
completed before the end of 2009 making it unlikely the 
Bachelet Administration will reach a final decision.  This 
could create an issue for the presidential campaign 
(elections are slated for the end of 2009). 
Electricity Prices Expected to Drop 
----------------------------------- 
 
¶6. CNE declared on November 27 electricity prices will 
decrease in the coming months by up to five percent.  The 
price reduction results from a review of the Value Added 
Distribution (VAD) tax.  The tax is calculated based on the 
additional value of a given product over the cost of the 
commodities used to generate that product.  The new 
electricity prices will post retroactively from November and 
extend into 2012. 
Paraguay Sells Power to Chile 
----------------------------- 
 
¶7. After four months of discussions Argentina, Paraguay, and 
Chile reached an agreement on December 17 to sell electricity 
to Chile.  Paraguay will route 200MW of energy to the north 
of Chile through Argentina.  This will account for over 10 
percent of the existing energy needs in that region.  The GOP 
is expecting to earn between $70 to $80 million from the 
 
transaction.  Argentina is also expecting monetary 
compensation from its involvement although exact amounts are 
still being negotiated.  Energy Ministers from all three 
nations will continue to collaborate to finalize the terms of 
agreement. 
Mixed Feelings over New Wind Energy Parks 
----------------------------------------- 
 
¶8. Three wind energy farms capable of producing a total of 
38.24 MW are planned for Chile,s VIII Region.  One of the 
energy parks will include ten turbines and will be located 
inside Pedro del Rio Zanartu national park. 
Environmentalists are concerned about the possible impact on 
the original landscape of the area since the park is mostly 
wetland and a natural sanctuary.  Zanartu park administrator 
Martin Dominguez doubts the project will take off despite 
approval from the National Commission for the Environment 
(CONAMA). 
URBAN