Electricity returns to "Intensive Care"

[Don Tomas]

Mechanical failures, short circuits and the weather have caused the electricity situation to return to its "life support" status, with service fulfilling only 56% of the national energy demand. Most of the power stations have reduced their output in order to save fuel and EGE-Haina shut down its most important generator, the Sultana del Este, because of conditions created by winds and waves from Hurricane Ivan. AES-Andres announced that it was forced to reduce output from 300 MW to 170 MW due to mechanical problems caused by wave action resulting from the storm. In the Cibao Valley the situation is being described as precarious by El Caribe, with Smith-Enron going offline because of a lack of fuel, and the similar situations at the Puerto Plata Electric Company's generators. Seaboard was rationing its fuel and producing just 31 MW. All of the Itabo power stations are out of service because of mechanical issues and Haina was only producing 22 MW. As a result of this situation, 15-hour blackouts have once again become the norm for much of Santo Domingo and many other areas of the country. Meanwhile, Ede-Sur announced a plan to raise their collection rates, diminish illegal connections and recover long over-due bills.

[WSJ3]

New York Times

Article Tools
Print E-Mail Article Bookmark Discuss

SANTO DOMINGO, Dominican Republic, Aug. 13 - The temperatures within Luis Eduardo Aybar Hospital, one of this city's largest public surgery centers, sometimes climb above 100 degrees, making its operating rooms feel like saunas. But when the lights flicker on and off, and then stay off for hours, the doctors truly begin to sweat.

"I never thought I'd be practicing my trade by candlelight," said Dr. César Jesurum, a cardiologist who now does just that and frequently uses the glow from his cellphone to navigate the hospital's mazelike corridors. Backup generators often fail to operate during blackouts for lack of expensive diesel fuel.

"We learned to live without air-conditioning long ago, but electricity is another matter," he said. "This is absolutely harrowing."

While the medical staff manages to care for many patients, some complicated operations have had to be postponed.

A crescendo of blackouts is plaguing the Dominican Republic, a nation of 8.8 million that is festering while the government and foreign-owned electricity companies feud.

Its economy, which until recently was the Caribbean's most robust, has been thrown into upheaval in the last year after a banking crisis depleted resources needed to keep the nation's lights on.

President Hipólito MejÃ*a, who lost a re-election bid in May, has shown little inclination to confront the issue, attributing much of the blame for the power failures to Leonel Fernández, who returns to the presidency on Aug. 16 after a four-year hiatus. Much of the nation's generating system is owned by foreign investors, who bought their stakes during Mr. Fernández's previous term in the late 1990's.

"After we take office it will be up to us," Mr. Fernández, a lawyer, said recently.

A team from the International Monetary Fund, which suspended a $600 million aid package to the Dominican Republic last year, arrived in Santo Domingo this month to assess both the situation and whether Mr. Fernández can quickly assemble a cabinet that can address it effectively, people involved in the negotiations said.

He has already named an economist, Héctor Valdez Albizu, as the new president of the central bank, and has appointed other economic officials.

The MejÃ*a administration has been engaged in a dispute with the American companies - including the AES Corporation, Enron and Goldman Sachs - that control much of the nation's electricity industry. Mr. MejÃ*a has repeatedly called for their executives to be deported, describing the industry in a recent speech as a "mess" and a "disaster."

The companies, in turn, claim they are owed at least $300 million, much of it from the government itself.

"It's always a problem when things get personal," Julian Nebreda, the Venezuela-born executive who oversees AES's operations in the Dominican Republic, said in an interview.

In recent months, the companies, led by AES, which is based in Arlington, Va., have occasionally cut off electricity to the nation's distribution grid, contending that because the government has not paid its bills, they cannot import the natural gas and oil needed to fuel their operations. That decision has placed the companies at the center of a political and economic maelstrom over blackouts lasting as long as 20 hours a day.

In a country that is already reeling from an economic downturn brought on by the government's handling of a string of bank failures in the last year, protests over the blackouts are becoming a regular feature of daily life.

In one recent protest in front of AES's headquarters in Santo Domingo, for instance, community organizations carried signs painted with skulls and crossbones describing the company as a pirate. Some of the protests are turning violent. In the northern city of Santiago this month, for example, a policeman was shot in the leg after residents blocked roadways with burning tires and trees.

Dealing with the blackouts, meanwhile, is turning into a national obsession. Similar to the way people in neighboring Caribbean countries follow the fluctuating value of their currencies against the dollar, Dominicans measure the number of megavatios, or megawatts, available daily on the nation's electricity grid.

Using figures from a government agency overseeing the electricity industry, newspapers here fill their columns each day with reports on the amount of electricity flowing toward consumers, often noting that less than half of the Dominican Republic's demand of about 1,800 megawatts is being met.

"We're dealing with the consequences of one bad decision after another in the reaction to this crisis," said Bernardo Vega, an economist and a former ambassador to the United States. "Things would have been bad enough without a confluence of factors, from the rising price of oil to a devaluation of the currency that have put the squeeze on us."

Analysts trace the electricity industry's difficulties to the 1990's, when the Dominican Republic was one of the fastest-growing economies in Latin America with export-oriented manufacturers and a vibrant tourism industry, and international energy companies invested heavily to meet the growing demand for electricity.

Now a slow-burning financial crisis is contributing to the blackouts. Discoveries of fraud at several of the nation's largest banks last year and the government's decision to compensate depositors for potential losses threw the economy into a tailspin. That bailout cost the government an amount equivalent to about a fifth of gross domestic product, making a policy of subsidizing electricity for poor residents increasingly untenable. That, in turn, led the central government to clash with foreign power companies over late payments.

"We have worked closely with the government over the past two years," said Mariella Mahan, regional manager for the Caribbean at Prisma Energy. "However, the bottom line is that there are insufficient funds in the sector to meet generating costs."

Prisma Energy is a unit of Enron that controls many of its parent company's flawed forays into international energy markets, including a generator in the Dominican Republic that has been idle for much of the past year.

"High levels of losses, poor collection records and subsidized tariffs are the key elements," Ms. Mahan said.

Enron, which is hoping to emerge from bankruptcy protection this year, is seeking a buyer for its Dominican assets, as are AES and Goldman Sachs, the investment bank which became exposed to the electricity crisis last October after acquiring Cogentrix of Charlotte, N.C., a power company with a large presence in the Dominican Republic. Ed Canaday, a spokesman for Goldman Sachs in New York, said Cogentrix was trying to work with the Dominican government to resolve the crisis.

Adding to the sense of chaos associated with the blackouts, gunmen on a motorbike in June shot and killed Craig Hiserote, the general manager of Cogentrix's power plant about 40 miles east of Santo Domingo. Authorities investigating the murder said, however, that it was a contract killing arranged by Mr. Hiserote's Dominican wife and not related to tension over power failures.

With American power companies declaring their wariness to continue operating in the Dominican Republic, the only foreign utility that seems to have pried itself away from the situation with any degree of success is Union Fenosa of Spain. In a move that confounded foreign creditors, Mr. MejÃ*a's government agreed last September to buy a 50 percent stake in two ailing electricity distributors that the government sold to Union Fenosa in 1999.

The decision, which effectively renationalized the concerns, was what led to the I.M.F.'s suspension of the $600 million aid package, as well as to the worsening of a financial crisis that resulted in $2 billion of capital flight last year and a further weakening of the peso, according to Standard & Poor's. (Showing their ire over the transaction, many Dominicans refer to the deal as "Union Penosa," a play on the company's name and the Spanish word for "painful.")

Despite the I.M.F.'s action, the World Bank, sensing that the electricity crisis was deepening last February, approved a $100 million loan to help the Dominican government pay for electricity.

By June, however, after disbursing $50 million of the loan, the bank suspended the remainder until either the outgoing or incoming administration could come up with a cohesive plan for paying the electricity bills.

In the meantime, some residents are better prepared than others to deal with the blackouts. Most wealthy Dominicans have backup generators to provide electricity when the lights go out, transforming Santo Domingo into a crazy-quilt upon nightfall with leafier districts brightly lighted while most of the city smolders in the dark.

Then there are those who illicitly connect their homes or businesses to the grid to siphon off what current might be derived from the ailing system, transforming the rooftops of some neighborhoods into a labyrinth of wires. Jesus Nivar, a 40-year-old mechanic in a working-class neighborhood near the Luis Eduardo Aybar Hospital, justified this approach.

"It's not robbery when the desired object is hardly even there," Mr. Nivar said over the blare of Spanish-language rap music from a radio powered by an illegal electric connection at his garage.