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prescribed DG-penetration threshold is reached, enabling
regulators to make policies that actively promote DG during
the short term and giving investors certainty about how long
such a program will last.

Final Remarks
The transition toward economic, reliable, and low-carbon
power networks in Latin America is not easy, since special care is needed to avoid raising electricity bills beyond
affordable levels. Equity and fairness are highly relevant to
the variety of tariff levels and desirable network-services
outputs, such as quality and reliability levels, among network users, making network regulation and rate making
particularly difficult. We illustrated the regulatory concerns in Latin America, with a focus on Chile and Brazil,
related to finding the right distribution network price-control regulations to achieve energy policy goals in the most
effective manner.
Balancing distribution-sector costs and benefits will
require a more active network-operation approach to take
advantage of innovative smart grid technologies and create opportunities for OPEX-based solutions (which are
more cost-effective) to displace CAPEX-based solutions.
Network users, especially DERs in the form of DG, storage, flexible demand, and so forth, will need to cooperate
by deploying and managing their equipment properly. This
will require the use of smart meters and new IT technologies, price signals, and other control signals that must be
managed in real time.
Incentive-based regulations (which are preferred in most
of Latin America instead of cost-of-service regulations) and
tariff structures must evolve to align private and public policy objectives, incentivizing network companies and users
(producers, consumers, and prosumers) to act accordingly.
Under an evolved approach, regulators are expected to take
a more active role in scrutinizing the data of real companies
regarding costs, assets, and plans. Regulations would need
to provide appropriate guarantees, rewards, and penalties
for companies and users, motivating them to deploy efficient
solutions aligned with public policy, especially reliability.
They should also ensure that the resulting tariffs are affordable to all, including vulnerable consumers in rural areas.
This evolution will be challenging in Latin America as it will
require more regulatory resources, since the historical practice has relied on simpler approaches with a low burden and
implementation cost.

Acknowledgments
We would like to acknowledge financial support from
the National Research and Development Agency of Chile
(through the Complex Engineering Systems Institute CONICYT PIA/BASAL under grant AFB180003; the National
Fund for Scientific and Technological Development, under
grants 1181928 and 1181136; the National Fund for Scien-

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tific and Technological Development/Iniciacion, under grant
11180875; the Fund for Financing Research Centers in Priority Areas, under grant 15110019); and FONDEF IDeA grant
number ID19I10158). We would also like to thank Paula
Valenzuela from PSR, Rio de Janeiro, Brazil, for her valuable contributions.

For Further Reading
T. Jamasb and M. Pollitt, "Reference models and incentive
regulation of electricity distribution networks: An evaluation of Sweden's Network Performance Assessment Model
(NPAM)," Energy Policy, vol. 36, no. 5, pp. 1788-1801,
2008. doi: 10.1016/j.enpol.2008.01.034.
P. L. Joskow, "Incentive regulation in theory and practice: Electricity distribution and transmission networks,"
in E
- conomic Regulation and Its Reform: What Have We
Learned? N. L. Rose, Ed. Chicago, IL: Univ. of Chicago
Press, 2014, pp. 291-344.
G. Strbac, D. Kirschen, and R. Moreno, Reliability Standards for the Operation and Planning of Future Electricity Networks (Foundations and Trends in Electric Energy
Systems, vol. 1). Hanover, MA: Now Publishers, 2016,
pp. 143-219.
R. Moreno, A. Street, J. M. Arroyo, and P. Mancarella,
"Planning low-carbon electricity systems under uncertainty
considering operational flexibility and smart grid technologies," Philos. Trans. Roy. Soc. A, Math. Phys. Eng. Sci.,
vol. 375, no. 2100, Art. no. 20,160,305, 2017. doi: 10.1098/
rsta.2016.0305.
P. Djapic et al., "Taking an active approach," IEEE Power
Energy Mag., vol. 5, no. 4, pp. 68-77, 2007. doi: 10.1109/
MPAE.2007.376582.
J. D. Jenkins and I. J. Pérez-Arriaga, "Improved regulatory approaches for the remuneration of electricity distribution utilities with high penetrations of distributed energy
resources," Energy J., vol. 38, no. 3, pp. 63-91, 2017. doi:
10.5547/01956574.38.3.jjen.

Biographies
Rodrigo Moreno is with the University of Chile, Santiago;
Instituto Sistemas Complejos de Ingeniería, Santiago; and
Imperial College London.
Bernardo Bezerra is with PSR, Rio de Janeiro, Brazil.
Hugh Rudnick is with Pontificia Universidad Católica de
Chile, Santiago.
Carlos Suazo-Martinez is with SPEC, Santiago, Chile.
Martha Carvalho is with PSR, Rio de Janeiro, Brazil.
Alejandro Navarro is with the University of Chile, Santiago, and Systep, Santiago.
Carlos Silva is with Universidad Adolfo Ibáñez, Santiago, Chile.
Goran Strbac is with Imperial College London, United
Kingdom.
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