Cabinet acts on power prices

PANAMA. The government called on an Extraordinary Cabinet Council yesterday to take action against recent about recent increases in electricity bills, after President Ricardo Martinelli had promised decreases.

A resolution was passed ordering measures like revising the tariff on water used for hydro-electric generation to establish a rate non transferable to the consumer.

The suspension of demand charge to all residential users was also ordered.

The Energy Secretariat and the Authority of Public Services (ASEP) must check all public tender procedures to buy power and energy from the energy distributors so this clarification guarantees separate formulas for tenders on hydraulic and thermic plants.

ASEP will analyze and research the $30 million subsidy the government is paying. The authority will have to hire private audit services to verify invoicing, meter readings, technical quality, tariff structure and complaints procedures.

To give an incentive for alternate sources of energy , the transmission Electrical Company (ETESA) will adjust transmission prices.

The execute will work on a law proposal to nullify existing purchase contracts between generator companies and distributors that are making burdensome transactions. At the meeting, the ministers approved that all customers from the distributor companies that pay their bills on time and have a complaint are not obligated to pay the current month and cannot have their service cut off until the dispute is resolved.

The resolution of the Cabinet includes an article that orders the distributor companies to contract 100 percent of their demand.

Whichever company does not comply with this requirement will only be able to pass on to the consumer price the average cost of current contracts, without including the purchases made on occasional market opportunities or “spot market”.

The spot market is a commodities or securities market in which goods are sold for cash and delivered immediately. Contracts bought and sold on these markets are immediately effective. They only work for transactions between generator companies because they do not guarantee quality or competitive prices and this is exactly what causes consumer prices to be unpredictable.

The meeting reviewed studies of the energy sector revealing market distortions that have translated in higher electric bills.