ANALYSIS AND DESIGN OF SUBSIDIES TO DOMICILIARY ELECTRIC UTILITY SERVICES IN COLOMBIA THROUGH EXPERIMENTAL ECONOMICS

Abstract: Domiciliary electric utility services in Colombia have a cross subsidy system. There are subsidies to the households who live in houses located in strata associated to low wealth levels, and taxed rates to the better off. The subsidy system has been working for a couple decades, after the liberalization of the electricity sector; the system has had continuation according to the Public Service Law 142 of 1994 of the Colombian Congress. Since then, this law has undergone some changes, but generally it maintains its structure and its basic principles. (Medina, 2007). Professionals of the electricity sector have called for revisions of the system, in order to provide alternative schemes and gather empirical evidence on performance. Thus, such analysis might be useful to those responsible for policy formulation and professionals sector that will consider keeping the subsidy scheme, modify or remove. Experimental Economics has come as a methodology to analyze and evaluate alternative schemes of subsidies in a controlled environment where participants were economically motivated. Thus, it has been possible to observe empirical data from the laboratory to see its effects and implications before they are implemented in reality. This confrontation leads to refinements and advances in time. (Smith, 1976). So far, we have run four sessions of experiments. The subjects were subsidized electricity consumers. Through a board game we could analyzed the way they make their consumption choices and through the comparison between the current consumption of subsidies and consumption with alternative schemes, it was possible to know the possible effects of its applicability