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Purely Dominica

Purely Dominica

people-waiting Creole wedding Theme – photograph by Liudmila Domennova (wedding Photographer)

Your Dominica morning news roundup for Wednesday September 17th 2008:

After very strong criticism and threats of demonstration from being the general public, DOMLEC officials took time out to address and clarify some of the issues causing the rise in cost of electricity in Dominica. These people really think that Dominicans are fools – like Dominica is the only country where oil prices are still rising, unlike our neighboring islands.

Petro Caribe Designed to Provide Energy Stability for Dominica, but DOMLEC Directing Manager Mr. Joel Huggins says that Petro Caribe deal benefited the consumers and not DOMLEC. Consumers are still awaiting these benefits…Mr. Huggins.

Prime Minister Roosevelt Skerrit could be called as a witness next month in the British Virgin Islands in a case between two prominent individuals fighting over the Layou River Hotel Project issue.

PM Skerrit has ordered tighter security including cameras at the Princess Margaret Hospital following the latest incident in which a man made sexual advances towards a female patient at the Children ward. It’s about time ❗ ❗

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1 Comment »

Comment by pete
2008-09-17 15:11:44

I am not sure what was presented by Domlec on the reason behind the high tarrifs, but let me add some historical perspective:

First the tarrif is due to the current environment as well as the past structure and events. It was a fact that Domlinica’s tarrifs were the second highest rate in the Caribbean before the oil crisis and the Vat imposition that saw the bills skyrocket.

So let’s break it down a little. First Domlec’s tarrif saw significant increases in the years following the New Hydro expansion project. The consumers probably do not recall that it was penalized for development of hydro power (which saves fuels and decreases operational expenses in the long run). This may sound ironic, but somebody has to pay for the sixty-odd million dollars that the company spent on hydro power expansion (we will leave out the litigation issues which cost another few million). Mind you – this increase in tarrif was unavoidable – it was actually one of the conditions that the financiers would have to agree on for the lending for this undertaking. From a business perspective its a fair expectation.

Shortly after this hydro expansion project, there was a short period of relativley stable operations in power production, not to mention operational savings when hydro power contributed 70-odd percent of the electricity energy produced. This was shortlived however, as the company failed to timely install additional modernized capacity to meet demand. The result: increased operational costs, non-optimized revenues and more power required from diesel sources. Meanwhile, right at that time, the new owners CDC, cleverly crafted an agreement which gave the company the right to raise or lower tarrifs depending on returns on investments. The company was also guaranteed a minimum return. One of the ways of delivering on returns, of course was to adjust the tarrifs. And adjust Domlec did.

Then came the VAT storm, where the government was adjusting its tax policy. The government was able to somewhat turn around its gloomy economy, partly out of new taxes and auterity measures. Electricity, an essential service, was not spared at the time.

Unfortunately the oil crisis soon came along as well. The company simply employed what was allowed by law in pasing the costs to consumers. It did nothing wrong. It should be worth noting, that a component of the fuel surchage includes fuel used in generation. Obviously, with hydro plants decapitated by management issues and natural disasters such as the hurricane of last year, more diesel was used in production. Furthermore, some of that additional diesel consumed also represents losses. Yes, losses due to technical and none-technical. In other words, fuel wasted or not accounted for ends up in the tally of fuel used in generation. So, yes the consumer pays for it in various ways as ineffeicient operations in other areas increases costs and decreaseses returns, hence contributes to the compensation the company has made by jacking up tarrifs over the years.

So you see, there are many factors adding to the equation, some of which may not have been articulate by Domlec. The lesson for both Government and Domlec, is that there has not been enough of a good rapport all around. Domlec to government, Domlec to consumers, Government to consumers. The parties have taken each other for granted. The Petro Carib thing too did not yield substantial divendends in terms of fuel costs savings. Domlec too, has not given the consumer a fair shake in terms of deligent operational management and a strategy of susitenance to meet demand. Yes, so the high tarrifs have been contributed by Domlec as well as the government (including previous administrations), but also, undeniably external factors such as the cost of fuel and hurricanes.

I understand that people are frustrated about Domlec’s excuses and perhaps don’t care for the big picture or historical perspectives and want a relief now. However Chris, to compare Domlec’ situation with the other islands is a little more complicated that you might presume. How many other island had the gurantee of a certain return on investment? How many had the regime of both Hydro and diesel power? How many had significant hydro power investments? How many had disruptions in direction and major shareholders like Domlec had? How many had similiar prices of diesel fuel? Did they have the same type of inefficient equipment? What were their operational costs? How was the tarrif calculated? Were tarrifs kept low by their Governments deliberately? Did their governements give any concessions regarding fuel prices? What was the structure of their fuel surcharges? How well were these companies managed? What incentives did management have to minimize losses. What was the consumer base?.how did the governments there regulate the electricity sector?..We can ask a litany of questions. Bottom line is that we have to compare apples to apples, analytically.

Interestingly, the island which is closest in terms of economy and also the structure of the power company is St. Vincent. They also have some hydro power there, though not as successful. Interestingly too, we now share a common legacy, not just in terms of former owners. The former General Manager of Vinlec, St. Vincent now runs Domlec. There was a time when The Vincention government also was not happy with developments in the power industry there…But that’s another story. Or is it? Food for thought


ps. here’s an intresting document on how the OECS has been thinking about dealing with the rising cost of electricity in the Region:

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