DR1 Energy service "bad and expensive"

 

Superintendent of Electricity Francisco Mendez said today that

 

Dominicans are paying for an expensive and very bad and precarious energy service, when referring to the high rates paid by consumers which he believes reflect the inefficiency of electric distributors and the structural flaws in the sector. According to Listin Diario, the official stated that electric distribution companies must do their work and cannot continue giving excuses. The strategy should be to increase the commercial treatment given to users, to catch users who steal the service, and penalize those who incur in fraud and other aspects that damage the service. Mendez said the distribution companies have not met the levels they forecast and that is why radical decisions have had to be made in their administrations. They have never received payments so regularly. To date this year the government has allocated US$400 million that ha! ve contributed to keep the service stable. He also reported the World Bank has approved a US$150 million loan which still has to be passed in Congress. Mid-morning yesterday, the electric deficit was 23% of the demand.

 

The GMH believes he should have reffered not only to the rates, but to the total cost of electricity to the customers. While the distributors are an importante part of the problem, some of the structural flaws are under his own command, as the GMH has stressed, that are due to the rampant discrimination. The lack of compensation to paying customers, the exagerated subsidies to some of the customers, increase the flaws when you take into account that the signals are distorted. The result has been an increase in the vicious subsidies, intead of using feedback to decrease the subsidies and transform it to a virtuous process. The time delay in the action might increase the subdidies in the first months, but as soon as people see that compensation is for real, they will start paying (a delay might ensue on the lack of meters, but the impact should not be significant).

 

The capitalization in the Dominican Republic did not took into account the change of the system structure that the penetration of the disruptives gerenation and storage technologies that the customers have to solve the lack of supply security. That is the most important structural change to the system, which was not included in the due dilligence of the investors. That change is unavoidable, and the source of the solution to eliminate the price controls with retailers that are independent from the distributors: that is an integral part of the vision. In the mean time, the Superintendency should follow such vision that the GMH has designed for the future and work to help straighten the signals accordingly.

 

The government has the means to sell a real deregulation of the electricity business to follow the vision the GMH has proposed. The time is now, before the contract are renegotiated, before the contracts of the coal plans are awarded, before the distributors are privitized. We need to aim to reduce the cost of electricity to the society as much as posible, as soon as possible. A free market of electricity is the solution, the sooner, the better.

 

Please listen to what the GMH has to say. Customers want a service with value added. Many customers with high sensitivity to the interruptions that don't pay at all are not receiving value, because the interruptions destroy more value than the electricity they receive. Many other customers with low sensitivity to interruptions are being subsidized excessively under the system.