Radhames Segura, spokesman for CDEEE, the government electricity corporation, admitted that the government is obliged to pay 30% overcharge when compared to international standards when purchasing power from local generators. He told Hoy newspaper that the government seeks to renegotiate the Agreement of Madrid (signed in the Mejia government), the Smith and Enron agreement (signed during the Balaguer administration) and the Cogentrix agreement (signed during a previous Fernandez administration). He said the renegotiations are necessary to reduce the overpricing.
During the interview, he said that the DR needs to seek alternate fuels to reduce costs, thus he justified the interest in the coal-fueled power plants that are slated to be installed during this government. This week, Emirates Power was chosen to install four 300-megawatt plants. Segura told the newspaper the price of the kWh would be ! US$0.05, and the plants would be installed in Manzanillo and Hatillo, Azua. He said this would be much less than the present US$0.10-.12 cent the government is now paying to Itabo power generation company. He said World Bank environmental protection standards would be enforced. Segura accepted criticism of the errors in the capitalization of power in the Dominican Republic, started under the Fernandez government (1996-2000). But he said that when the Mejia government had the opportunity to correct the errors, and instead he chose to worsen these, in detriment to Dominican consumers.
He said that the Fernandez government had left contracts that would have expired in three years, but the Mejia government extended their duration to 15 years. He said that the Madrid Agreement signed by the Mejia government Sept-October 2001 instituted a "perverse incentive." He explained that the earnings of the power companies increase, and their yield, with the price of petroleum. "Th! is perverse incentive paradoxically means higher prices of fuel genera te increased profits for the producers," he said. He explained that the way the formula is structured based on an initial price that had to do with the fuel and another with the cost of operation and maintenance. The formula was not adjusted even if the price of petroleum increased, said Segura. He says there is an over-indexing in favor of the generators, which results in a 25-30% overcharging in the prices of power.
He said the addendum was instated in violation of the Electricity Law that says that contracts need to be granted in tenders. He said that President Fernandez has entrusted a commission to negotiate with the producers.