The number of new companies created depends largely on the size of the previous incumbent. Provided each is above minimum efficient scale, four or more generation companies (gencos) may be created, although ultimately the minimum number of gencos required will be determined so as to create a competitive market.
- It may also be helpful to avoid grouping generation by region, to prevent the creation of local monopolies. In this sense, individual gencos should have portfolios spread across geographic regions, own a mix of generating technologies, and illustratively speaking, should not own more than 25% of generation assets in the country.
As for the number of distribution companies (distcos), this may depend on factors such as geographic cohesiveness, the desire for multiple comparators for regulatory purposes, and a balance between minimum efficient scale and a size at which constant returns to scale are reached.
- For example, distcos may initially be based on existing regional geographic territories. The creation of multiple distcos will not only allow for performance benchmarking among the companies by regulators, but will also create entities that are closer to the customer, and allow for more nimble decision making.
