The effects of the high cost of electricity are hitting business, as reported in Hoy newspaper today. The electricity sector has been one of the most affected by corruption over the years, and the long time practice of passing on the inefficiencies of the system to those who pay for the service seems to have reached the point where businesses can no longer absorb the high costs and are closing down.
As reported, The Santiago Victor Espaillat industrial zone 14 companies have closed, leaving 13,000 workers without jobs. The industrial zone employment dropped from 41,838 employees in 2005 to 28,753 in 2006. While the reduction in companies is also attributed to competition from abroad, Simon Tomas Fernandez, president of one of the free zone companies, said that until the electricity tariffs are adjusted, the country will continue to lose competitiveness.
Thousands of small businesses have had to close, crushed by what are probably the highest power rates in the Americas.
In a statement that partially explains the high rates, Listin Diario quotes a statement from Radhames Segura, vice president of the Corporacion Dominicana de Empresas Electricas Estatales, who says that the Madrid Agreement signed during the previous government obliges distributors to purchase power at an excess price of 30%, that needs to be passed on to consumers.
Dominican Corporation of State-Owned Electric Companies (CDEEE) Executive Vice President, Radhames Segura, has said that contracts under the Madrid Accord are forcing electric distribution companies to overcharge for power supplied. In an interview with Listin Diario, Segura said that the CDEEE can prove this overcharge and that the indexation formula – which he called “a perverted incentive” – produces greater profit as the price of fuel increases. According to Segura, efforts must be made with the distributing companies to improve this situation, but he admits that they are also purchasing power at an overcharge that hinders their recovery.
Power generating companies have not replied positively to the government’s request to renegotiate the Madrid Accord contracts, something that could reduce the cost of electricity. Segura adds that the Madrid Accord was not an “innocent agreement” and said the local media has made a lot of references to the coal generator tender which was done in public, but nothing was said about the Madrid Accord, which was signed in Spain, without any witnesses.