Privatization of the Electric Company

At the very end of its term, the out-going Congress in Honduras passed a law on January 20 mandating that no later than June, 2015, the Empresa Nacional de Energia Electrica (National Electric Energy Company) must be taken private. Well, semi-private. The law has two main thrusts. It first creates the Comision Reguladora de Energia Electrica (CREE), a commission to regulate the newly created electricity marketplace in Honduras. CREE will be situated in the Superministry of Strategic Planning, but the law designs it to be semi-independent, with its own budget and technical resources.  It will be charged with setting up a free market electricity marketplace for Honduras.

The legislation enables private companies to build competing transmission and distribution systems. Emil Hawit, current head of ENEE, says that this energy marketplace will result in lower electricity prices for Hondurans. The new law also mandates that the ENEE be broken up into three private companies:  one charged with competing in the power generation market, one charged with running the current power transmission system and electrical grid, and a third overseeing the distribution of power to customers.

 

Each company will be given its own shares, but the government will continue to own all the shares for at least the next 30 years. Current ENEE employees will be assigned to one of the three companies based on their duties. Much of Honduras' high electricity price is based on the ridiculous energy contracts ENEE signed with Honduran power generators, contracts that had ENEE buying all of the fuel oil used to generate power, and still paying a premium for the power generated with that oil.

 

Hawit did allow that Hondurans will have to pay the real price for electricity, suggesting that the new law might also end subsidies for light users: people with low energy consumption. So on the macro-level, costs may come down; but with private companies and shareholders expecting profits, there may well be greater impact on the most vulnerable users of electricty.

 

Welcome to the world the Hernández administration wants to promote: the rush by the outgoing Congress to pass legislation before the more diverse legislative body comes in is giving us a much more transparent view of his vision than anything he or his transition team has had to say. (1/28/14) (image courtesy Internet)

 

Note: This article was originally published by Honduras Culture and Politics.

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