Ask Dominicans to choose one thing that would improve their country and the chances are that they will say “better, cheaper electricity”. The Dominican power sector has endured chronic difficulties for decades and, despite numerous initiatives to turn the situation around, a permanent solution to its electricity woes has yet to be found.
Blackouts are a frequent occurrence, although most Dominicans, from the humblest household to the largest corporation, have contingency measures in place to ensure that life carries on when the electricity is off. The least easily remedied spanner in the electric works is a culture of non-payment and power theft, sometimes perpetrated by the country’s largest private and public institutions.
No privatisation cure
Privatisation in 1999 took half the ownership of the system out of the hands of the Corporacion Dominicana de Empresas Electricas Estatales (CDEEE), establishing six distribution and generation companies, and a modified rate structure that set prices on a monthly index basis according to variations in key indicators. But the restructuring did little to ameliorate a situation that has recently been described as being on the verge of collapse. Government subsidies of fuel supplies that were promised to the generators regularly fail to materialise, leaving both generators and distribution companies run down and in a poor state of repair.
The Fernández administration is aware that this is an issue on which it will judged harshly, if things do not improve. In June 2005, president Leonel Fernández declared a clampdown on electricity theft and launched a National Energy Saving Plan in an attempt to use 10% less power through the use of low-wattage light bulbs and a voluntary freeze on air conditioning. Early this year, the government announced a $600m package for the power sector, conceding that $500m would be absorbed in paying off the debts of the state-owned electricity companies and distribution companies.
Power blueprint
Mr Fernández does, at least, have the moral and financial support of the multilateral community. His blueprint for electricity sector reform aims to stabilise electricity supply through decisive efforts to reduce losses, raise collections and improve the cash flow of distribution companies. It was prepared with a little help from friends at the World Bank, the Inter-American Development Bank and USAID, all of which believe that if he sticks to the plan, he can wean the electricity sector off government subsidy – “thereby making room for increased social spending to mitigate the effects of the [recent banking crisis] on the poor”.
Nonetheless, the government was obliged to request an exemption from the IMF last year because distributors had failed to make a strong enough effort to increase collections. A further dampener was that the IMF, in its wisdom, declined to provide financial backing for another linchpin in the government’s forward power strategy: the proposed construction of two 600-megawatt power plants.
Construction deal
On February 1, the CDEEE announced that Emirates Power DR SA had won the bidding for the construction contract and that the plants would be completed within two years. The company won on the basis that it would sell energy at 2.9 cents of a dollar per kilowatt/hour from its plant in the town of Montecristi, and 3 cents in the region of Azua, contingent on the CDEEE providing fuel and committing to purchasing at least 50% of the installed energy supply capability for 20 years.
The contract had originally been given to the US-based Westmont Group but the deal, which was awarded without a public bidding process, was later rejected by the government. Some observers have noted that the companies had the same representative in the country and that other bids tendered were more favourable to the Dominican Republic – not including a 20-year, 50% purchase requirement, for example.
The sector does, at the very least, continue to demonstrate its capacity to generate controversy.
