ELECTRICITY SITUATION IN THE DOMINICAN REPUBLIC

UNCLAS SECTION 01 OF 02 SANTO DOMINGO 003629

SIPDIS

DEPT PASS WHA/CAR MCISAAC
DEPT PASS TO TREASURY LLAMONICA

E.O. 12958: N/A
TAGS: DR ECON ENRG EINV
SUBJECT: ELECTRICITY SITUATION IN THE DOMINICAN REPUBLIC
CONTINUES TO WORSEN



1. SUMMARY. The Dominican Republic's electricity sector has
witnessed a steady decline in energy production over the last
month, with blackouts in many areas reaching 15 to 20 hours
daily. The situation is expected to intensify Tuesday, June
22, when AES' Andres plant goes off-line for lack of fuel and
generation will equal approximately half of peak demand.
Sector representatives have met with President-elect Leonel
Fernandez to discuss the sector's problems. According to
Secretary of Finance Rafael Calderon, the GODR is

SIPDIS
implementing a plan now to assure payments for current
monthly costs, which will keep the sector running until the
end of August. END SUMMARY.

LET THERE BE LIGHT, PLEASE!


2. The Dominican Republic has witnessed a steady decline in
energy production over the last month. Blackouts have become
a daily occurrence with many areas experiencing 15 to 20
hours with no electricity. The system is presently
generating approximately 1000 to 1100 MW daily, a 30% deficit
during peak demand. This number will likely decrease
significantly starting Tuesday, June 22, when the AES Andres
plant shuts down for lack of fuel. Andres has been
generating 220 MW daily, out of a capacity of 300 MW, in an
effort to lengthen the number of days it can produce
electricity given their fuel supply. AES is not the only
generator using this tactic. Cogentrix, El Paso, and others
have been operating in a similar fashion. The drop in
production could result in a deficit of approximately 45%
during peak demand. (The system collapses at about 500 MW.
The country suffered through 700 - 800 MW daily during parts
of this past winter.) However, this may be offset by El
Paso, which received a fuel shipment last week and is looking
to increase its production, and Itabo, whose two plants were
shutdown for mechanical problems and are expected to come
back on-line during the first two weeks of July.

HE SAID, SHE SAID


3. The situation has been aggravated by the recent
recurrence of the public dispute between the GODR and the
generators over the status of debts. According to a report
presented by the generating companies to Leonel Fernandez and
the PLD transition team Friday, June 11, the debt to the
generators exceeds $413.7 million. Of that amount, $260
million is GODR debt and $154 million from Ede-Este. That
sum does not include debt owed between generators nor
disputed amounts between the GODR and AES and Haina.
According to the GODR, it has reached agreement on debt owed
with all the generators except AES and Haina. The GODR is
arguing that it has no debt with AES or Haina and that it is
the generators who owe the GODR for sale of energy and
transmission fees from CDE. In a meeting with Secretary of
Finance Rafael Calderon Friday, June 18, DCM asked Calderon
about the status of the debts. Calderon noted that the GODR
and AES planned to meet this week to discuss the matter.

COMPANIES PRESENT THEIR CASE TO LEONEL


4. On Friday, June 11, generating companies held a day-long
meeting with President-elect Leonel Fernandez and PLD
transition team representatives. Independent consultants
also attended. The session was a brief analysis of the
sector with the purpose of bringing the new administration up
to date on pending issues. The generators told the incoming
administration that the government was its own worse enemy in
the sector because it is too involved. The GODR, they noted,
controls 100% of transmissions, 83% of distribution, and 45%
of generation. The new administration was specifically
interested in learning more about: 1) net amount owed by the
GODR; 2) tariffs; and 3) Cogentrix. Fernandez mentioned to
the group that he is creating a sub-committee to concentrate
specifically on the energy sector and that he would announce
the committee members soon.

CALDERON OPTIMISTIC ABOUT FINANCES


5. According to Calderon, the GODR is implementing a plan to
assure payments for current monthly costs, which will keep
the rest of the sector running until the end of August. This
includes paying the $13 million it currently owes Cogentrix
before the deadline of July 9. With Cogentrix and El Paso
on-line now, and Itabo coming on-line in July it seems
possible the system will sustain itself for the next two
months.


6. Port au Prince minimize considered.
KUBISKE