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Electricity problems - Experts say stop the subsidies
posted on: Nov 3 2010 8:42 by The Reporter. Viewed 1198 times.
International finance and economics experts argue that the Dominican Republic's electrical power deficit is a problem of governance (management) and not just technical, “in the sense that they know the solutions, but have not undertaken them because there are interests that impede them carring out the necessary policy reforms.”
Experts agree that the central problem of the electricity sector has been and remains a generalized subsidy that puts retail prices below the costs of generation and distribution.
Manuel Agostín, Osmel Manzano, Rafael Rodríguez-Balsa and Ernesto Stein outlined this and other issues in their report “The path to sustainable growth in the Dominican Republic”, research completed by the end of 2009 and circulated in August by Inter-American Development Bank (IDB) for policy analysis in the DR.
The report deals with issues of taxation, competition, institutions and the electrical problem.
At it stands, the Standing Committee of the Senate Energy Affairs and executive vice president of the Dominican Corporation of State Electrical Companies (CDEEE), Celso Marranzini, will meet on Wednesday 10 to discuss the termination of contracts signed by the private power generation companies and the Dominican State, which have been deemed harmful.
The solution to the protracted crisis in the Dominican electric sector is extremely important to restore the country’s competitiveness, ensure sustainable growth and reduce poverty levels, they say.
They argue that the tax burden imposed by the sector through direct and indirect subsidies is very high, shifting much-needed social expenditures. And besides, the rising production costs are reducing the return on investment.
The reduction of high levels losses in the distribution system and improving the quality and reliability of energy supply are the most important factors that must be resolved to alleviate the crisis in the Dominican Republic.
“These two factors fall into a vicious circle, since the low quality of the service generates a permanent customer dissatisfaction. Similarly, high rates have exacerbated the problems, “they say.
They believe that the solution to the technical and financial crisis would improve governance and increase transparency of the public sector in the country but there are both institutional and political constraints to implement it. The path to sustainable growth in the Dominican Republic is a publication prepared by the IDB for policy dialogue with country authorities and is based on investigative work.
Tax Reform?
Experts say the country needs a new tax reform, like that was tried in 2004. However, continuing to increase the tax burden will not be easy in the short term. The idea of a new reform has been discussed by international organizations, and something the Dominican Government has so far refused so as not to affect the poor and middle class Dominicans.
Specialists believe that the requirements under the World Trade Organization (WTO) will force the country to approve the corporate income tax inside and outside the free zones, no later than 2015 and that will require a reduction in the ISR corporate rate which is 25% for firms outside the zones, and charge a rate equal to the firms located within the free zones.
They claim that the international competition to attract companies is very strong and the ISR will come down.
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Posted by: Yannick martin on Nov 5 2010 10:46
The governement should subsidie the poorest people especially in remote areas with SOLAR POWER . This country is blessed with plenty of sun and even plenty of wind for turbines.Come on Leonel it can be done >
Posted by: mags on Nov 10 2010 9:53
edenorte is a mess. they charged me for a new mwter which they had not installed, started sending me bills for anything up to 24000peso quoting readings that were nothing like what was on the meter. i tried to explain but just got a blank stare . in the end i went to the superintendant next to central medico. where i at last met with some comman sense 8 months later i am still trying to get all the money they owe me .
Posted by: mags on Nov 10 2010 9:53
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