Frequent power cuts in the most expensive hotels in the country; emergency storm lights in the offices of government ministers: signs of the Dominican Republic’s prolonged energy crisis are not hard to find. The overwhelmed electricity sector has been an Achilles heel for years, with huge losses from the poorly maintained transmission system. Demand for power in the fast-growing economy has virtually doubled in the past decade, but energy hungry businesses and tourist facilities have had to invest heavily in their own private back-up generators, since the national system could not be relied upon.
This year tension surrounding energy supply reached such a level that private generators, angry at millions of dollars worth of unpaid public sector bills, began shutting down their plants to try to force the government’s hand. The country’s blackouts worsened as a result, even though installed generating capacity of 2000MW should be more than enough to meet demand.
However, there is hope that many of the power problems will begin to disappear now that the Mejía government and the private companies have begun to reach agreement on eliminating the $131 million that the private companies claim is owed.
As part of the agreement, generators that were part-privatised in 1999 will reduce charges in return for longer-term contracts up to 2015. Furthermore, a long-awaited Electricity Law, which builds the regulatory framework for the sector, was finally enacted in July after years of languishing in congress.
“It was very sorely needed,” says Kevin Manning, general manager of Itabo, the generator jointly owned by the state-owned CDE and by AES of the US, which has 470MW of generating capacity. “I am pleased and impressed at the honest attempt by the current government to try to eliminate the debt,” he adds.
At the same time, at least another 500MW of private generating capacity is set to come on-stream this year and next: proof that foreign investors have not been deterred from doing business in the Dominican Republic despite the history of problems and disputes.
For example, AES is building a 300MW gas-fired plant, expected to be completed early in 2003, while Cogentrix, another US power company, is constructing an oil-fired 300MW plant at San Pedro de Macoris which should enter partial operation this year. The UK’s Commonwealth Development Corporation (CDC) has a 35% capital interest in the San Pedro plant.
Although around half of installed capacity is in the hands of independent power providers not linked to the state-owned Companía Dominicana de Electricidad (CDE), that company still remains a major player in the power sector, since it continues to own hydroelectric plants and the entire national transmission network.
Transmission was originally scheduled for privatisation, says Danilo del Rosario, executive director of the Office for the Promotion of Foreign Investment (OPI). However there is no sign of this happening soon.
Del Rosario says: “The president thinks we have got to sort out the bottleneck in the generation and distribution sectors first. When that is stable, we can talk about the transmission network. We don’t want another conflict at the moment on top of what we already have. The energy issue was inherited by this government so it is even more complicated for us. We have had to try to find solutions to these inherited problems.”
It could take two years to have generation and distribution problems fully sorted out, says Del Rosario. Meanwhile, he reassures that the government “isn’t asleep” but continues to invest in improving the transmission system, where power losses have been high.
Meanwhile, potential for social conflict over energy remains substantial, with distribution companies anxious to crack down on hundreds of thousands of illegally connected users in order to improve revenues. One observer says a solution to these illegal connections is fundamental to the long-term solvency of the sector.