DR1: "No Way Out," says Segura, but the GMH says There Is Way.

Santo Domingo, October 25th, 2005

 

Ing. Rhadamés Segura

Executive Vicepresident of CDEEE

Secretary of State

 

Dear Mr. Secretary,

 

I have read with great interest your declarations on DR1. Contrary to most people, I firmly believe there is way out. But the way out is not with a symptomatic solution, but with a fundamental solution. All the difficulties experienced in the power sector are similar, although slower, to those of the banking industry.

 

To find the way out you need to understand that the electricity business is under a systemic crisis. To get out the crises, there is a need to find the undelying causes. The GMH has a hypotheses of where the leverage is to turn the vicious circles into virtous circles. That hypotheses will lead to a vision of a very simple environment, where retailers replace the distributor and the regulator on the price negotiation with customers, completing a market where risk are managed and distributed properly among generators, retailers and customers.

 

While the banking crisis is being treated as a systemic crisis, the electricity crisis is being treated otherwise. The reason is that the multilaterals have not dealt before with such an animal. The Dominican Republic power sector case is the precedent. The GMH is prepared to issue a white paper to demonstrated, but is lacking financing to confirm the hypotheses. With a real understanding of the crisis, a renegotiation with the multilaterals will make available the funds required to transform the power sector into a very robust environment.

 

President Fernández need to do what Franklin Delano Roosevelt did on the systemic crisis of the Great Depression. He needs to listen to sound advise of electricity and business profesionals to get a strong grasp of the systemic crisis. Underneath the systemic crisis there is a great opportunities write the first chapter of trully working power sectors, where risk management is mitigates efficiently all kinds of externals schocks. We have not doubt that there is a way, which will help to attract investments, decrease operating costs of businesses, create new jobs, lead to the development of the country, reverse brain drain, and most of all take the power sector out of the No Profit Zone.

 

Best Regards,

 

José Antonio Vanderhorst Silverio, PhD

Interdependent Consultant on Electricity

 

 

Radhames Segura, vice-president of the Dominican Corporation of State-owned Electric Companies (CDEEE), has said that there is "no immediate way out of the electricity crisis," and that the government is not disregarding the possibility of intervening in the Ede-Este distribution company. Segura admitted that "the public is receiving very expensive electricity, and they are not willing to continue supporting this or the continual blackouts that occur due to power rationing." Segura said that there was no miraculous way out of the situation, and that the government has well conceived plans but it will take two years for the results to be seen. Segura also commented on the fact that Ede-Este has been administered by AES-Dominicana since it was privatized, but that this entity has recently sold its shares to a Californian company, TCWW, and TCWW chose AES-Dominicana to run the operations, all without c! onsulting the Dominican government, a major partner in the privatization process. In fact, Segura told reporters from Hoy that the government was going to ask TCWW to change the management of Ede-Este because, in his words, "AES has not proven to be efficient in the Dominican Republic."
Continuing along with the electricity theme, El Caribe reports that there will be renewed negotiations about the contracts with power generators, starting this morning. Under review will be the Madrid Accords and the IPP contracts. (Independent Power Producers) The discussions will include planning and cash flows projected for 2006. The meeting will attempt to clear up just how large the accumulated debts are for the Rural Electrification Project (PER), the Program for the Reduction of Blackouts (PRA) as well as the IPPs' deficits. According to El Caribe, two weeks ago the government announced its need to renegotiate the contracts with the IPPs with a view to clearing up the exact cost p! er kilowatt/hour. According to Segura, current invoices are at least 2 5% overpriced. The power providers have said on several occasions that they have not sat down with government negotiators because they have not been asked to do so. Today's meeting is the first step towards the renegotiation of the contracts. According to Hoy, once the government has in its hands the numbers of the total deficit, then President Fernandez can talk to the World Bank and the IMF in order to ensure that the subsidies do not exceed the US$300 million approved by the IMF.