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Photo:Schoolgirl on her way to primary school by Schwarzerkater.

Your Dominica Morning news roundup for Wednesday September 11th, 2008:

On the eve of a planned demonstration by Consumers against high utility rates CAHUR, Prime Minister Skerrit announces that Venezuela have agreed to build a new power in Dominica. How IRONIC! Mr. Skerrit – consumers want to see reductions in their electricity bills NOW… 😡

HATS goes to Cable and Wireless Caribbean, who announced yesterday that it will give support to the region to the tune of more than US$500,000 in cash and services to assist victims of the resent hurricanes and tropical storms that affected the region. Thanks for caring Cable and Wireless.

Since Former Opposition leader Earl William name has surfaced in another money scandal, much publicity is directed forwards the United Workers Party. But the newly appointed opposition Leader Ron Green says the new accusations against Party member Earl Williams will not affect the operations of the party and that it will take the appropriate measure. I wouldn’t want to be in your shoes Earl… 🙂

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16 Comments »

Comment by Suki Subscribed to comments via email
2008-09-11 08:42:59

It is interesting that Venezuela seems to be very interested in aiding the island and its needs, I just wonder, what do they want in return? If someone would be able to tell me what the average electric bill is like in Dominica assuming a moderate size home (please specify EC dollars or US dollars) I would appreciate it. Thanks!

Suki K Tranqille

Comment by Veselo
2008-09-11 10:10:13

=========
Distribution of powet to the consumer is 54 cents per kilowatt hour.
bedroom household which consumed about 580 kilowatt hours of electricity a month and paid DOMLEC $840 in June 2008
=========
It is from the sun newspaper for July 2008, so I believe it is XCD.

Comment by Suki Subscribed to comments via email
2008-09-11 10:34:38

Thank you.

 
 
Comment by pete Subscribed to comments via email
2008-09-11 16:51:45

Suki,

Venezuela is really exchanging cash and goodwill for building its political capital in the region. Simple. Caribbean leaders and countries with smaller economies need aid. Communism is dead, aid from the US is just about non-existent these days. So what better time for the Caribbean islands to seek comfort and support of its other neighbors? I do not question Venezula’s and Cuba’s socialistic principles which support coming to the aid of its neighbors. Of course some trade is involved as some of the aid money makes its way back to aid countries. By the way, this support is not limited to just the Caribbean. For example, Venezuela has helped residents of the northeastern US for a few years with subsidized low priced heating fuel oil, for which many residents were very greatful. I do not think at the time it was concerned about reaping any major political gains from that.

Something similar happens with China and Japan. in the region. They want our sympathy, votes and support in forums like the UN. And rightfully, China for example has taken its place as a country to be reckoned with (never mind its political leanings and alleged human right abuses). Of course those countries expect political support in return and I think its a small price to pay, relatively.

pete

Comment by Suki Subscribed to comments via email
2008-09-11 19:25:35

Pete,

Almost as soon as I sent in the comment I realized the error of my ways, I have been questioned too often about why I would choose to help someone to ever judge anyone or any entity that decides to help. When and if they have an ulterior motive, that will be revealed. My general distrust of government is what prompted the response but of course that is no excuse. You are correct in that it is only natural for Cuba and Venezuela to support the countries in its region – better to make friends then enemies. I have not doubt that one day Dominica will find itself in the position of providing that support.

Suki K Tranqille

 
 
 
Comment by pete Subscribed to comments via email
2008-09-11 14:22:03

Chris,

Correct me if I am wrong, but isn’t the utilities commision responsible for rates? In that case they have oversight into tarrifs. However, I do not think the commission can unilaterally rule that rates should be lowered. I think its a question of approving or disapproving Domlec rate hike requests.

The other thing to note is that the electricity bill also allows for Domlec to charge fuel surchage. So Domlec is operating within what it is allowed to do. Clearly the world fuel prices (over which Domlec has no control impacts the high bills). I think VAT is also part of it (or was) the reason behind high electricity bills.

So the real power of The PM lies in removal of the taxes which affect the fuel costs or radically changing the agreement that gives Domlec the right to charge fuel surcharges. (Of course the company may quicky go under if fuel surcharges are removed, without any other concessions, but thats another story).

Fuel surcharges are not unique to the Dominica electricity provider and is charged all over the world and throughout the Caribbean. The real question is, if the government agrees to remove for example taxes and duties associated with electricity production (fuel related and customs related), would it accept the reduction (by millions of dollars) of these important sources of revenue to government coffers? How would that affect social services for example? That’s the dilemna the PM is faced with. These pconcerns have been faced with other governments too, but it is just made worst by current economic situations.

I agree though that Domlec must be more efficient in delivering services and minimize operating costs, and lossses, be they technical and non-technical. They are way too high. A few years ago Domlec had the second highest electricity tarrif in the caribbean (yes, that’s despite having hydro).

How about adding capacity that can run cheaply, some may say? One thing people must understand however, that these capital costs of renewable energy expansion are expensive, though in the long term they should minimize operational costs. If Domlec were to go into hydro expansion or geothermal now for example, and save fuel costs in the future, under the current structure it would result in immediate tarrif increases not decreases, as lendors will seek to ensure that the company adjusts its rates to meet its financial obligations.

But it takes a combination of strategies to make those things happen in the best interest of the customer. The customer in general is not concerned about these, but has a right to good quality service at a reasonable price. Domlec has failed on these. But Domlec too is alo pointing fingers at the government! (hint for all concerned: good public relations is key to the succes of any solution)

There are several issues here. Bottom line is this – can the PM/government act quickly to releave the burden on the consumer? Certainly, but it comes at a cost elsewhere (or put another way, loss in revenue). It could slash the taxes etc. My bet is that Govt won’t act in one fell swoop, but will choose to put pressure on the company by opening up the market to other players etc. that way it can still get to keep the revenues generated to its treasury!

I don’t expect Venezuela will make anything happen however to impact electricity prices. They have not done that for fuel prices despite the long touted plans. I don’t expect the other potential players will make an impact in a hurry. These projects can be long and drawn out. The other geothermal possibiliies may also take time. (By the way, there was a geothermal proposal in the mid 1980s where Domlec was obligated to buy all the powere that was expected to be so generated, from a joint company set up with government participation, but absolutely nothing came out of that. So let history repeat its lessons.

I appreciate the interest and discussions on this topic. I feel the pain of the Dominican paying public and the inconvenience that the non-ending supply disruption brings. Skerrit can make some bold moves but the repercussions can be serious and he needs to keep the big picture in mind. Domlec is unlikely to make significant expansion plans in what it considers to be a tentative and even hostile environment. Domlec’s major shareholders and the hundres of smaller ones in Dominica and elsewhere wants the dividends Domlec pays annually to keep flowing. There are many share holders to satisfy. There are many stake holders with varying interests and emphasis.

From an economic development perspective, there are numerous implications. More expense on utility bills will mean lowered consumer buying power. It will also add to delinquencies and instability in other ways as people make choices to keep the homes powered vs other decisions. As you can imagine this will have ripple effects in the economy. People are having a hard time paying the utility bills, so how can we expect them to pay hospital user fees for example? Higher tarriffs also result in higher costs for others services as these costs are passed on. High tarrifs (among other problems) also discourages the investors, so investments go to other countries where their operational costs are low. (I will not even mention the impact of the supply interruptions). These implications are significant and far reaching.

The consumers inevitably may have the power. Not the power of choice certainly, unless its the choice of not to pay. But possibly the power of their frustration. Lets see what gives. I really hope it does not come to that, as happened with demonstrations in 2001, but there are many factors at play here. This is a complicated issue and the way forward calls for good judgement, diplomacy, good public relations. Things are coming to a boil it seems!

Incidentally, believe it or not, the demonstrations of 2001 actually made the company change its mind on moving forward with its new power station that was supposed to have started that year. (The generators were almost tested and construction had almost started when the order was canceled). Ironically this has now increased the operational current expenses and supply interrruptions that continue even now. (The company now rents even more equipment for its power generation with a high rate of breakdowns).

Ok, lets play ball…would like to hear other views!

pete

 
Comment by pete Subscribed to comments via email
2008-09-11 16:20:32

Cable and wireless can always be counted upon for being a good corporate citizen! I will join the voices in recognizing that.

As for Earl, anywhere else his polical career would be history. I think he will continue to survive as a parliarmentarian at least. But if he is a man of firm convictions he would do the honorable thing and resign. There may be lower standards in Dominica, unfortunately. Politicians have been known to continue to be elected and even be placed in the seat of government despite serious (even convincing) allegations. So let’s just say that perhaps he forgot where he put the money. We all misplace things, don’t we? 😉

The other burning question I have is: what does the local bar association has to say about such members in its ranks? I suppose like everyone else, he is supposedly innocent until proven guilty. He should be concerned about his career too. After all we do trust our lawyers, right?

Well, lets wait a bit. The guy just has some amnesia. He will remember where he put it!

pete

 
Comment by Joel Halfwassen Subscribed to comments via email
2008-09-11 21:54:53

Yeah. I am trying to figure out what the government of any country has to do with the price of power and what is it that people think governments can do to reduce rates. More importantly, why would they even want to? Power cost what power cost. If you can’t afford then you do without. It is that simple. It is a commodity and nothing more. Nor should it be anything more. You want to pay less for power then use less. Electricity and gas are not a human right.

Joel

Comment by Chris
2008-09-12 00:42:01

I understand your point Joel – there is nothing much government can do to reduce the rates of consumers electricity. But what they can do is to provide the people with a choice. presently in Dominica Domlec is the sole electricity company, who enjoy 4.5 million in profits annually from a population of just under 69,000 – do the maths.

I remember when Cable and Wireless was the only Telecommunication Provider in Dominica – Dominicans were paying some absorbent rates for local and international call – but since Digicel and Orange enter the market. Dominicans no have a choice and they enjoy much lower calling rates. Right now, I can call my mom every evening for free – this would never happen 5 years ago.

So though I understand that there is nothing much the government can do in reducing consumers electricity bills, but they’ve the power to open the market, and remove this monopoly Domlec have been operating for years on the backs of Dominicans.

Comment by pete Subscribed to comments via email
2008-09-12 08:23:00

Chris,

I agree that competition in general is good. But there can be only so many players in a small market like Dominica with about 20,000 consumers. Thats where econonomies of scale comes in. Its a relatively expensive undertaking and is more complex than that of telecom. Of course there has to be a guarantee that the players in the market can feed into the existing transmission grid, which is owned by Domlec. It would not be economically viable to have seperate distribution lines by those power producers. Therefore one assumes that Domlec will also agree to purchase the power. Of course Domlec would play hardball about the price it would pay to buy the power. In the end the negotiated price by Domlec and the other party may not be large enough to economically justify a substantial investment, unless that entity supplies for the other island (a feasibility with geothermal, in which case the exports may subsidize the local consumption).

Realistically there will be some savings in costs that Domlec can passed on, but then the Government can’t force Domlec to buy a certain quota from any new production facility and that new company will not run its own lines directly to the consumer. Its not as simple as that Chris.

With cable TV the other players could bring in their equipment and run their own lines to the consumer, with a relatively low capital undertaking. With Cellphone, there are no lines of course, so the offering can be made simple. Low distributions costs operating in the terrain offered by Dominica is a major challenge.

There are lessons to be learned from opening up markets with a small consumer base. Why do you think the other telephone land line players have or are dropping out? How long do you think Orange and Digicell telecom companies can compete for against Cable and wireless for cellphone service? Why is Marpin telecom in receivership? Why did AT&T drop out? Do you know that the current players are subsidized from other regional operations?

Introducing a new player in such a small market for electricity who can only generate power will only result in subsidies from somewhere, unless they market elsewhere. For example this seems to be the case with geothermal production proposal (mind you it still has to go through exploration). With Venezuela’s supposed interest in power production on the island, I am not even sure where this is going. It might be another big talk project like the refinerery, when the other accompanying deals on that surface and kills it. I am skepitical about that too. The promised lowerered fuel costs from Venezuela’s petroleum storage project in the island would have been more impactful on prices and tarrifs, but what happened to that big fat promise? See where I am going? Don’t be too excited.

A good option would be co-generation, whereby a company comes in with a factory say, and sells the excess power to Domlec. And even if it sells just a small amount, it still retains its substantial business. Again, Domlec has a substantial bargaining power, unless government changes the Electricity act and forces it to buy. But the negotiated price may not mean substantial decreases in rates unless Domlec becomes more efficient.

Even in the larger islands with substantial populations and stable systems, other players have not been able to come in. In Trinidad a generating company emerged (from the power supplier) and now sells power to T&Tec, which also buys power from other co-generating industries, but thats another issue. Besides Trinidad has 1 million consumers and numerous heavy industries that consume huge amounts of power. Read: Economies of scale.

Talking about the profit issue, why is that an issue? The company MUST make a profit (and areasonable and consistent one at that) to survive. Its a private company too, and shareholders demand returns on their investment. $6 million is alot of money? Really? This is EC dollars!! Do you know how much it costs to go into any significant power expansion (even just one generator)? Do you know how much it would cost the company to come back from a serious hurricane disaster that could happen tommorrow (the costs that insurance does not cover, ask Grenada)?

One more thing, $6million profit is not cash in the bank. Although it looks like a huge sum for Joe Blow, struggling to pay his bill, it is just accounting profit. Some of it is tied up in receivables (including the bills governemnt does not pay). Furthermore, lenders are seriously concerned about not just revenues but more significantly: leverage, liquidity, solvency, profitability! Chris, do me a favor, please and download a copy online of the company’s annual report to get better insights, if you want to really anlayze this. If you can, pause and look at the financial report too..
http://www.domlec.dm/index.php?option=com_content&task=view&id=21&Itemid=51

Domlec is also playing its role, in terms of community involvent, sponsorship etc., spending substantial sums. We need also to give credit where credit is due. So while we look forward to lower costs and demand better service, my aim was to give a reality check so we appreciate the broader picture. The issues are more complex than most people think. All parties have a responsible role, and PR (or lack of it) is very relevant. But in the end, we need to keep it real!

Pete

 
Comment by Joel Halfwassen Subscribed to comments via email
2008-09-12 14:43:09

Truer words have not been said. Thank you for clearing that up for me!

 
 
Comment by pete Subscribed to comments via email
2008-09-12 07:02:31

Joel,

I agree with you totally. Of course its electricity is an essential commodity and is of concern to all. But people can play their part to conserve. You are right.

Expectations are made worst when the political parties make pronounements and promises but can do very little in reality. Government is supposed to fix everything wrong right? Or so they think. Its not even about the free market. But the `government did own the company (at least most of it) once. I suppose this prolongs the misconceptions too, about the extent of its power. T

There was a huge outcry too, when hospital user fees were introduced years ago. The avearge user could not understand why they had to pay, even though it was tame by global standards. The outcry would be that this is a poor country. People don’t understand the economics of it. Again, thats where education and PR comes in.

One thing is certain however. The service offered by the company in terms of reliability of power and outage rates is unacceptable. The technical and non-technical losses are attrocious. Management decisions or indecisions as well as the company’s numerous change of ownership and the governments perecieved hostility have negatively affected major plans. This contributes to higher costs in operations that are passed on to the consumer and that also contributes to the rate structure. There is no question about that. You can not take away the right of the consumer to get better service for what he pays. If the consumer is not being served adequately, then the better argument for protest action (which is being contemplated) is that the tarrif is an unfair burden and too high.

Pete

Comment by Joel Halfwassen Subscribed to comments via email
2008-09-12 14:45:41

How is power regulated in Dominica? Do you know? Can anyone come in to supply power or is it based on a legal monopoly?

Comment by pete Subscribed to comments via email
2008-09-12 21:37:16

Joel,

I don’t live in Dominica anymore and a new electricity supply act was passed in 2006 I think. I am not sure what the revisions were to the former 1996 Act.

Just some history:

The former Electricity Supply Act of 1996 maintained that Domlec had the sole right to generate and distribute power on the island. This act had also stipulated that anyone bringing in a generator had to apply for a license that was approved by government, but had to be first vetted by Domlec. Other concessions were also given to Domlec by the agreement. Therefore it would appear than any major generators of power would have had to be sanctioned by both Domlec and Government (in reality, the Government).

Before you wonder what the government was thinking about such an Act, it is instructive to understand that when the government sold out its majority holding to the once owners, British entity CDC in 1997, passage of its proposed Act was conditional to the sale agreement. In other words CDC crafted the Act that government passed. Clearly CDC considered that even the small business who only had the intention of keeping its refrigerators and lights on, as competitors to its power business!

So theoretically Domlec could have prevented a private person from self-generating (though in reality this harrdly happened). But here’s how the whole mentality at the time got more absurd. Over the much of its history Domlec has had problems simply meeting demand. So generator holders at some times actually did Domlec a favor, by being able to slf-generate! Indeed, there were times in recent years that Domlec asked large private generators to help doing their own generation in times where Domlec production was down.

At this time, however, I am not sure whats required as far as licensing. However it is worth noting that even when under the old act, most small private consumers never really botherered securing an actual license..either that or it was simply a rubber stamping process.. I know of only one public case where a an entity (a local hotel) was denied the right to self generate when Domlec cut off its power due to a failure to pay its bill! (I think the hotel already had its generator, but I am not sure it had a license or whether the license was rescinded). However I think in that case Domlec was just using its influence to recover its receivables from that hotel.

Ok, I am not living on the island now, and as I said there were some changes to the 1996 Act, aimed at some level of deregulation, so it is likely the former license requirement was softened by the act of 2006. I think however that Domlec’s sole rights to distribution still remain. For the history buffs, see an interesting article a few years ago, when Government was getting wary about Domlec (then owned largely by CDC):See how incensed the government was then.
http://www.thedominican.net/articles/domlectwo.htm

Also, see: http://www.da-academy.org/johnson14.html

On the whole question about small island challenges and renewable energy, here is a very relevant document:
http://www.inforse.dk/doc/renewable_energy_on_small_islands.pdf

pete

Comment by Joel Halfwassen Subscribed to comments via email
2008-09-13 13:04:12

That last document is a great read! Just wish it wasn’t 13 years old! 🙂

 
 
 
 
 
Comment by Suki Subscribed to comments via email
2008-09-12 09:24:36

This is a blog entry from Chris that I thought might be appropriate – there are other ideas (good ones) about how to reduce energy costs on the island. I like this idea in particular, “1.The getting of electricity in the required quantities for domestic use of island residents and for production needs from the local raw materials and some part from the garbage or waste.” Perhaps Dominica should ask Venezuela for their scientists instead? Thanks Chris, good ideas never go to waste.

Sustainable Development Ideas for Dominica
Chris

Written by Chris in Ramblings

The whole idea of an oil refinery in Dominica was clearly a bad idea, that’s why my many Dominicans rallied against the idea – forcing Prime Minister Skerrit to put all plans of the oil refinery on hold. Hooray for that. But Dominica still faces an economic crisis, cost of living is on a steady rise, fuel is also taking its toil, and not forgetting the price of electricity.

Prime Minister publicizes that any Dominican wishing to share ideas on how to help develop Dominica can make an appointment to see him. We at Dominica Weekly made two attempts to setup an appointment with the PM, to share several ideas we came up with that can help Dominica develop and also help in the curbing the problem of high electricity bills. But our attempts were unsuccessful.

We decided to develop this website called Caribbean Investments, where everyone can read the different ideas. We offer an energy program on the basis of progress and sustainable development of Dominica. Dominica, following its image of the pristine island, can provide a power, which completely expelling the oil products from the island. Dominica people must implement these ideas; the government should not be only a trendsetter in the construction of new ideas and should not bear the monetary costs to realize this projects.

Caribbean Investment Website Consists of the Following Ideas:

1.The getting of electricity in the required quantities for domestic use of island residents and for production needs from the local raw materials and some part from the garbage or waste. And electricity will be received by the large towns or several adjacent buildings or individual homes.

2. Clever use of the electricity:
a. Traditional – for households with gas stoves will be replaced with more user-friendly electric ovens.
b. Transfer gradually some part of transport to use reserved electricity in batteries, another part of transportation – to use the energy of compressed air.

3. Establish the production of National Car for Dominicans on the island.

4. Attract interested scientists from developed countries for the scientific study: make Dominica to be the scientific research polygon of the future technology.

Other Ideas Worth Reading

* Dominica as a Model for a Green Energy Future
* Wood gas generator construction details
* Biogas: Energy from waste
* Storing electrical energy
* Ecotourism

In basis of our concept of development states the well tested and proven in the practice technical solutions. Many of them had been used widely and successfully in the past, but have been pushed out to please the oil giants, which has created the myth that humanity, which tens and thousand of years successfully avoided oil cannot longer do without it. This is not true, and we have to prove the opposite: we call on the front edge for technological progress that would allow humans to live in harmony with the nature, without poisoning it with ill-famed convulsions of modern atomic-oil civilization.

 
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