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The Colombian electricity market and its impact in hydrothermal expansion

The creation in Colombia, in 1995, of a competitive market for electric energy corresponded to a change in the control mechanism of society over the electric power sector: previously the control was held by the government using least cost central planning; at present it is done based on the economic principles that govern the markets. Centralized planning and market economy look for the same objective: the minimum cost to satisfy demand of electricity, which is related to the maximization of the social, consumer plus producer, surplus. This is coherent with Article 6 of Law 143 of 1994, which regulates in Colombia the market for generation, transmission, distribution and trading of electricity and establishes: "Efficiency principles force the correct allocation and use of resources so as to guarantee service at the minimum economic cost". Preference for a market economy is based on the belief that it is more efficient due to competition among agents. The regulation of a market cannot define the conditions of optimality. One of its functions is to facilitate, may be to force, that the agents operate near the optimal social point.