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Business & Economy Briefs

Torrijos announces electric rate hikes, probe of alleged abuses
by Eric Jackson

On March 27, just after the end of most Panamanians' work day, President Martín Torrijos went on national television, using the dedication of a new office at the Ministry of Labor Development to reveal the key recommendations of his Energy Saving Commission. (The commission's actual report, however, was not immediately available.) The two main points were that electricity for larger residential customers and for businesses will be going up, but much less than had been contemplated in the suspended 30 percent rise that was in effect for a few days in January; and that there will be an investigation of past market manipulations by the electric companies.

Rates will go up on April 1, but the president left it to the recently reformed Public Utilities Regulating Board (Ente Regulador) to determine the specifics. Last January's 30 percent rate hike was "unacceptable," Torrijos said. "The commission found that the electric companies can justify an increase of up to 15 percent, however, the government judges that the increase can't be more than 9 percent," which the president argued corresponds to the real increases in world petroleum prices.

The government will continue to subsidize the electric bills of two-thirds of residential users, those who use less than 200 kilowatts per month. He urged Panamanians to "redouble efforts to make rational use of energy."

"The commission has found indications of market distortions... and a possible maniupulation by some agents and the Ente Regulador, with grave prejudice to users," the president noted, adding that he's calling for an investigation. By whom he did not specify.

Torrijos indicated that hydroelectric and other renewable energy projects will be speeded up and that "greater incentives" would be created for such projects. One of the members of his commission, Ministry of the Presidency Ubaldino Real, owns part of a hydroelectric project and in the face of criticism of conflict of interest earlier refused to resign, and now it seems that with whatever motive, Real has effectively feathered his own nest. Torrijos didn't answer questions about that or anything else after his announcement.

In January there was a capitalist revolt against the 30 percent rate hike, led by those sectors most affected --- the broadcast and telecommunications media, supermarkets and manufacturing. Food prices went up immediately last January and by and large have not come down, so the latest increase should not be as sharply felt by those whose household bills will be kept the same by subsidies. Food is sensitive to energy costs at the retail level mainly due to the expense of refrigeration. Most producers in Panama don't use electric dryers, but fuel for gas dryers and to run tractors and other farm equipment fluctuates with world prices. (At the moment gasoline in Panama is again approaching $3 per gallon, or in other words is close to the record highs set in the middle of last year.)

Torrijos said that the rates in effect as of April 1, which replaced those set to go into effect in January and would have expired by law at the end of June, would be kept in place through the end of this year. However, on the presidential website it was noted that the commission recommended that electric rates be adjusted monthly, in accordance with fluctuations in world energy prices.

In general, business leaders expressed relief that the rate hikes were not higher. Farm and labor leaders are also low-keyed in their initial responses, and in some cases called for the Panama Canal Authority or other state entities to begin selling more electricity on the market in order to counteract any monopolistic practices by the private generators. There were no public celebrations by hydroelectric companies, nor were there any indications that environmentalists, farmers and communities that stand to be displaced,and other sectors opposed to specific dams are likely to call of their protests.

For its part Panama's largest distributor of electricity, Union Fenosa, took out full-page ads in the daily newspapers to deny that it had manipulated electricity prices by failing to contract for enough power to meet its customers' needs and then buying energy on the more expensive spot market. "The company has always had a policy of contracting for all of its demand and when we have not achieved this it has been because the supply of energy hasn't been sufficient or due to the high prices offered," the ads claimed.

Also in this section:
Central American free trade talks to start again
Electric bills going up
Third US mad cow case hasn't prompted the RP reactions that prior ones did
Business & Economy Briefs