Electric companies turn Martinelli's promised rate cut into an increase

Promised electric rate cut turns into an increase
by Eric Jackson, from other media

Minister of Commerce and Industry Roberto Henríquez told El Panama America that he feels frustrated. "There has been no reduction in the cost of energy, but instead an increase." This, after the Martinelli administration announced that there would be a 10 percent reduction in electric rates as of July 1. But the electric utilities, which are all partly state-owned, added fuel cost surcharges to the bills and customers saw increases of between 5 and 15 percent.

Yes, we have a business-oriented conservative administration, but then these particular increases fall upon those who use 500 kilowatt hours of power per month and heaviest upon large businesses users such as President Martinelli's Super 99 supermarket chain that requires all that electricity for refrigeration. It turns out that the people complaining the most are not residential customers but people like Valerio De Sanctis, president of the Industrialists' Syndicate of Panama.

This country has some of the world's highest electric rates. We generate the great majority of our power with hydroelectric dams but we have an energy policy for the most part written during the Moscoso administration by an ENRON executive, which by a convoluted argument about spot markets sets power rates according to the price of the most expensive form of energy that might be used to put electricity into our state-owned (ETESA) powerlines. Based on the price of fuel for thermal generated power, we get price adjustments in January and June every year, but the power companies can also add a fuel surcharge to the bills. That's what has been done to nullify Martinelli's promise to consumers.

So what's an embarrassed president --- and arguably overcharged supermarket baron --- to do? Martinelli called an emergency August 23 Sunday cabinet meeting to discuss the "crisis" and some of his ministers and advisors are talking in terms of a "war" against the electric companies.

A hint of what may come came on August 4, when the cabinet created the Direccion de Inversiones, Concesiones y Riesgos del Estado --- Office of State Investments, Concessions and Risks --- to oversee the businesses of which the government is part owner, to be part of the Ministry of Economy and Finance. That ministry is headed by one of Panama's richest businessmen, Alberto Vallarino, whose reputation is not that of someone who gets cheated on business deals. The new arrangement contemplates the ministry taking a greater role in the oversight of enterprises in which the government holds a stake and also seeks to tighten up practices with respect to the insurance that the government pays (or neglects to pay) to offset risks to its properties.

During the Moscoso and Torrijos administrations, books were juggled and questionable investments and management compensation give priority, such that partially state-owned utilities that were making a lot of money reported little or no profit and gave the government little return for its shares. Also during those administrations and going back before them, government insurance contracting has been an expensive political patronage plum that has in many embarrassing moments left valuable properties that were damaged, lost or stolen uninsured.

In the case of the electric companies, the government's position as a minority shareholder and as owner of the power lines over which electricity is carried give Martinelli some tools that add to the basic power to adjust rates twice a year. Plus, if push comes to shove, Martinelli also has the votes in the National Assembly to legislate a new utility regulation scheme.

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