Summer 2009 Could Mean Lights Out for Parts of Costa Rica.

It is hard for me to understand how anyone could support monopolies or even think of them to be anything but big bullies. I grew up in a city where they were considered The Bad Guy – the local power and gas monopoly was hated by all for its unfair and unregulated prices, and was eventually eliminated in my teens – and consumers reveled in their right to choose service providers.

With serial rate increases and continually poor service, the Costa Rican Electricity Institute (ICE) is the biggest offender here in Costa Rica. Ostensibly, the Public Services Regulatory Authority (Aresep) governs ICE’s actions, but in practice, ICE does what it pleases. If ICE wants a rate increase, it demands that Aresep approve it. If Aresep disagrees with the percentage increase or refuses to approve any increase at all, ICE simply shuts off the power.

During summer 2007 (December 2006-April 2007), ICE practiced rolling blackouts in an attempt to save energy and profits. Costa Rica businesses and individuals lost approximately $20 million during that time, due to damaged machinery, lost sales, rotten food and other avoidable wastes. In its defense, ICE was forced into that decision because it did not have enough energy to supply the country’s needs. It is important to note, however, that ICE had already sold off 2007’s supposed “excess” energy to other nations, leaving Costa Rica in the dark.

Nearly two years later, ICE is again threatening rolling blackouts, but this time it is not for lack of energy. Indeed, though the company has rented several electricity-producing facilities, it now complains of a lack of funds to purchase diesel fuel (in order to create energy). What’s interesting is that, in April 2008, Aresep approved an 11 to 72 percent energy rates increase for consumers, depending on electricity consumption. At that time, Aresep additionally asked ICE to finance part of its future diesel costs with a credit loan.

In August 2008, ICE asked for a further15 percent increase in energy costs to cover rising diesel prices. Then in September 2008, the institute requested an average 46 percent consumer rate increase. When neither request was immediately approved, ICE threatened its consumers with rolling blackouts, if their demands were not met. Now, I am sure – that almost sounds like blackmail.

In October 2008, Fernando Herrero, an Aresep representative, wrote a public letter denouncing ICE’s pressures and tactics, pleading with them to take a loan out instead of passing the financial burden onto consumers. In response, ICE has just announced that it has started with “Plan B,” and is now preparing its blackout schedule for 2009. No specific details are yet known. According to Pedro Pablo Quirós, President of ICE, this is not a negotiation tactic, but rather responsible foresight. Apparently, if you’re going to punish your customers for your own financial problems, it is best to let them know in advance.

From where I’m sitting (admittedly, atop a high horse named “Biased”) ICE looks, at best, like a cranky two-year old who cannot stand to be told no. Less flattering, it is a company with poor planning for the future, a lack of responsibility and no competition to keep it in line. Unfortunately, ICE is not afraid to threaten, and knows that it is ever powerful. There is no recourse, no choice, no escape – we either pay increase rates, or we return to the Dark Ages. Now tell me, again, why monopolies are good?

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Filed under: Costa Rica News on October 22nd, 2008