Jochi Vicente, a principal at Grant Thornton in the Dominican Republic, has presented an analysis of the Dominican power situation, concluding that there is a direct relation between the price of power as perceived by consumers and the level of losses in the sector. ?At higher rates, there are more losses,? he explains. He says high prices create a vicious circle because they encourage fraud, which in turn causes increased losses for the power distributors, less invoiced collections and a reduced cash-flow at the companies, thus undermining their capacity to pay the generation companies. In his opinion, until there is acknowledgement that the power sector has gone bankrupt, the necessary actions cannot be taken.
The Grant Thornton proposal is that the rate to the user be no more than US$0.10 per kWh ? a US$.046 reduction from the present rate. In Vicente?s opinion, sale-buy contracts need to be renegotiated and new power plants installed. He said that most power generated in the DR is done using technologies that entail high production costs and that 85% of the power sold is at a fixed cost. Only 15% is sold at competitive market prices.
In Vicente?s view, if contracts are not renegotiated ? even if efficient power producing plants are installed ? the fixed-price contracts will impede the transfer of any savings on to consumers. He proposes a toll of US$0.01 per kWh for a 30-year term to compensate the power companies for the restructuring of their contracts.
Read the full proposal in Spanish at http://dr1.com/news/2004/081904_grantthornton.pdf