C O N F I D E N T I A L SANTO DOMINGO 000892

SENSITIVE
SIPDIS

E.O. 12958: DECL: 08/12/2014
TAGS: DR ECON ENRG EINV
SUBJECT: LIGHT AT END OF THE TUNNEL FOR DR ENERGY SECTOR?

REF: SANTO DOMINGO 515

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Summary
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1. (U) President Fernandez announced on August 4, 2009 that
the GoDR, with the assistance of Inter-American Development
Bank (IDB), World Bank (WB), and the Organization of
Petroleum Exporting Countries (OPEC) will undertake a
two-year plan to address the country's electricity crisis.
The initial outline of the plan, however, indicates that it
will not address the chief problem affecting the energy
sector: large scale rate avoidance by major manufacturing and
retail businesses. The plan comes at a time when sustained
black-outs have led to increased public discontent over the
Dominican Republic's ineffective electricity system. End
Summary.

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Details Emerge on Two-year Plan to Solve Electricity Crisis
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2. (U) The August 4, 2009 meeting between GoDR President
Fernandez and representatives of the IDB and WB came as a
surprise to Embassy's electricity sector contacts. Dominican
electricity sector problems are voluminously documented and
after decades of GoDR inaction there is widespread skepticism
that the two-year plan will resolve the country's electricity
problems, which include a technically inefficient
distribution system, a high rate of electricity theft, and a
$500 million debt to electricity generators. The full plan
will not be released until early October 2009, but IDBrepresentatives publically disclosed some details.


3. (SBU) The commitments reportedly include $10 million to
improve the electricity distributionsystem, with the goal of
making technical systemlosses on-par with the regional
average of 12 pecent. Of the $150 million, the GoDR will
contriute $38 million. The remainder will be provided b
the WB ($42M), the IDB ($40M), and the OPEC ($30M). Current
total system losses due to inefficiecy and theft are
reported to be 33 percent. Howver, Roberto Herrera (protect
throughout), CEO o the San Pedro de Macoris Electricity
Company tod EconOff that losses may be as high as 40 percent
nationally. Moreover, Herrera says it is likely that 75 to
90 percent of the system inefficiency is due to theft, rather
than technical problems.


4. (C) The two-year plan puts particular emphasis on proper
metering and payment for energy use. According to Herrera,
there are 2.3 million energy users in the DR, yet only 1
million meters. He mentioned three principal types of energy
theft. The first type of theft involves illegal connections
from low-voltage power lines to homes and small businesses.
The second type of theft involves tapping into a neighbor,s
meter and slowly increasing the amount energy used to avoid
detection. The final, and most sophisticated theft, requires
complicit behavior on the part of the distribution companies.
In this scenario, a distribution company deletes the energy
use record resulting in substantially lower costs to the
user. Herrera went on to opine that the plan was "nothing
more than a publicity stunt".

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Comment
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5. (C) The outline of the two-year plan indicates that it
will not address the large-scale avoidance of electricity
payments by major manufacturing and retail companies. If, as
Herrera suggests, this avoidance is achieved through the
complicity of the distribution companies themselves, then
increased investment in metering is unlikely to result in a
solution. Final judgment should be withheld, however, until
the fall plan is presented in October. End comment.
BULLEN