Iraima Capriles, executive director of the Economic and Social Council, the body in charge of the discussions for the signing of the Education, Electricity and Fiscal Pacts in the Dominican Republic, announced the postponement of the signing of the Electricity Pact. The decision is reached after the president of the Association of Industries of Herrera and the Province of Santo Domingo (AEIH) held a press conference on Wednesday, 20 December 2017, to announce that organization would not be signing the document and explained the reasons why.
Antonio Taveras Guzmán, president of the Association of Industries of Herrera and the Province of Santo Domingo (AEIH), announced in the press conference that it would not sign the Electricity Pact announced by the Council and the Medina administration. The pact signing was announced after three years of meetings among electricity sector stakeholders. Taveras stressed that the Electricity Pact as conceived by the government lacks the mechanisms that guarantee genuine competition in the electricity generation market, as well as truly transparent bidding processes.
Taveras Guzman said that what is being signed in no way will resolve the national electricity problems. He said that in institutional and market terms there are important voids not being addressed in the Electricity Pact. Thus, AEIH could not commit to sign the agreement at this time.
Taveras Guzman said AEIH participating actively in all the phases of the process, but the so-called consensus reached does not resolve the electricity problem because the fundamental points were not resolved.
He said the General Electricity Law No. 125-01 establishes that 80% of the energy purchased should be done so by contracts and 20% on the spot market. On the spot market transactions are in cash and delivery is immediate. Taveras said that if this provision of the law were met it would lower the generator purchase costs. Taveras pointed out that currently the generators are instead acting as banks, charging high interests for arrears and delays in payment by the government. This practice raises generation costs and the final rates to consumers and distorting prices. In conclusion, Guzman reiterated that the Electricity Pact does little to find a long-term solution to the nation’s energy problems.
Taveras said that the Electricity Pact as presented for signing strengthens dominant positions of the present stakeholders restricting access of new competitors to the energy generation market. That is, the document fails to streamline processes and does not empower the full range of energy stakeholders, many of whom historically have been left out of discussions.
Taveras said that the Pact does not present a compelling route for development of the sector in the long term and does not incorporate an effective process to monitor future growth in demand plan. In addition, the plan does not encourage progressive changes to the generation matrix to facilitate an increase in clean energy in the future.
In addition, Taveras pointed out that the government refused to share details so that the Punta Catalina Thermoelectric Power Plant, the most important contribution of the Medina administration to the electricity deficit, could be part of the discussions.
Taveras said that for the AEIH, the main problem confronting the Dominican Republic electricity system is the precarious and inefficient management of the power distribution companies. These are today managed by the government. Taveras, they will not be attending as they believe the document is deficient, and he said that the country has a serious problem with institutionalism, adding that the high level of politicization of the distributors is deepening the problems of the electricity sector.
He went on say that the government-owned distributors are working with a payroll some five or six times larger than what they should have and that the pact will not improve the situation. He said the distributors have losses of more than 32% that is a burden on the National Budget because the central government has to subsidize these to the tune of more than US$1 billion a year. He said this is an unsustainable situation whose solution is crucial for a trustworthy and competitive system.
Taveras called for the need for the diversification and opening of the electricity market, to allow real competition that will lower energy costs and lead to reasonable energy prices so that the consumers can, in turn, receive a higher quality energy service and at lower rates.
The executive vice president of the Association of Industries of the Dominican Republic (AIRD), Circe Almanzar, in turn, says that the AIRD backs the signing of the pact as it stands.
The Electricity Pact was ordered by the National Development Strategy Law 1-12 in 2012. It has taken the government five years to present the copy for signing.
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National Development Strategy Law
21 December 2017
