Superintendent of Power Julio Cross claims that Union Fenosa is moving to become a virtual monopoly in the production and distribution of power in the Dominican Republic. The company was contracted during the Balaguer government in an effort to assist the Dominican Electricity Corporation (CDE), the state-owned power utility, in its restructuring. Despite having had access to privileged information, the Spanish company was allowed to bid for the capitalization of the CDE, and in 1998, the Fernandez government granted it the concession to distribute power to more than 60 percent of the nation.
The Fernandez government was also lax in allowing Union Fenosa affiliates to install power production plants, despite this being a violation of the Electricity Law.
During his campaign for the Presidency, Mejia had said he would revise the contracts once in power. He did. But the revisions again worked against the best interests of Dominican consumers. With the signing of the Madrid Accord, the Mejia government fixed the distribution companies? tariffs at levels significantly above market values, thereby increasing their earnings. In addition, the distribution contracts were extended.
The Mejia government extended the terms of the contracts from 5 years to 15, increased the commission to 2.75 percent of the total earnings, approved a resolution to impede large users to connect directly to the generators to reduce their billing, and increased the kWh from US$0.11 to US$0.165.
Superintendent Julio Cross, a highly reputable Dominican business consultant, has been a lone voice in government, among those seeking to restrain the abuses of the power companies. As reported in El Caribe, he said that Edenorte and Edesur, the Union Fenosa affiliates, have hyped their losses in order to convince the government to authorize the major tariff increases that obliged residential consumers to pay up to three times their already high power bills. The new tariffs mandated some of the highest rates for similar consumption, charged by similar companies, anywhere in the world today.
Cross says that now the power companies seem to want to increase their debt to such a point that the government will resolve to sell its shares as a way of meeting payments. This would be a timely occurrence, as it would coincide with onset of the dividends that must be paid to the government as owner of 49 percent of the capitalized power distribution companies. Cross says that he wrote to President Mejia in July 2002 alerting him to the Union Fenosa scheme.
According to Cross, the stability of the Dominican currency would be seriously threatened by the remittances of considerable profits by Union Fenosa.
Cross also said that the September increase in the energy tariffs is resulting in substantial earnings for the power companies.
