Latin American power watch. Domrep snubs imf by delaying electricity tariff hik
The Dominican Republic’s government has shelved plans to order monthly increases in electricity tariffs and reiterated its opposition to an IMF proposal to hike tariffs by 18pc. Rates will remain unchanged in December, even though they should have increased by 1.1pc based on higher oil prices and the depreciation of the peso, the superintendent of electricity Juan Bautista says. This will increase the government’s subsidy bill by $36.9mn and bring the total power sector subsidy for this year to $376mn.Talks are continuing with the IMF over its demand for an 18pc increase in power tariffs as a condition for the release of a further tranche of a $1.7bn loan agreed in 2009. But government officials say an increase on this scale is “not possible”. The government’s alternative proposal is to hike tariffs gradually, by 1.5pc/month, until market-driven rates are achieved.Subsidy will be cutThe officials insist that the government remains committed to meeting an IMF condition to progressively cut the subsidy and end it by 2013. The IMF agreed to allocate $383mn for the subsidy last year, which later reached $720mn. And the 2009 subsidy was budgeted at $462mn, but eventually hit $700mn.The private-sector Dominican Republic Industrial Association (AIRD) has condemned the government’s stance on tariffs. “The management of the power sector has been marked by factors of a political and social nature, often far removed from economic reasons,” AIRD says.The government’s rejection of the 18pc tariff hike and deferral of the December tariff increase coincide with intensified campaigning in the run-up to the country’s presidential election in May.An immediate double-digit hike in power tariffs could undermine support for the governing Dominican Liberation Party’s presidential candidate Danilo Medina and increase support for the opposition Dominican Revolutionary Party’s candidate, former president Hipolito Mejia.Power already cutA power tariff increase could also ignite violent street protests, particularly given that a spate of blackouts — some lasting up to 12 hours — have taken place since 27 November. Electricity demand was 2,002MW on 2 December, some 473MW more than production, state-owned electricity agency Seni says.The Dominican Republic’s chronic power deficit will be eased slightly when a 78MW gas-fired plant is commissioned in early 2013. US-based company LS Energia’s subsidiary LSED is building the plant. Construction will begin in the first quarter of next year.
Latin American Power Watch (December 2011)