Critics Say ICE is Partially at Fault for its Outrageous Expenses.

In the wake of the announcement that the Costa Rican Electricity Institute (ICE) may raise electricity rates by 30-80 percent, several groups have asked the Hacienda (Treasury Department) to grant the entity tax-free status for fossil fuel imports. Though only 10 percent of Costa Rica’s entire energy consumption is derived from gasoline, 40 percent of ICE’s expenditures are spent buying the pricey liquid – a tax exemption would go a long way toward reducing the financial burden on the population who are struggling to adapt to other recent increases to the cost of Living in Costa Rica.

Earlier this week, ICE announced that it would require an average 46 percent rates increase to cover its costs. In 2009, the company estimates that its gasoline consumption costs will increase by ¢71 billion ($129.3 million) from ¢105 billion ($191.3 million) to a total cost of ¢176 billion ($32.6 million) – a 68 percent increase. Under the new rates plan, the more a family or private residence consumes, the higher its per kilowatt rate.

For some, such an increase will prove cumbersome, but manageable. For many Costa Ricans however, even a 30 percent increase on their $25 monthly bill will be almost impossible to fit into the budget. To aid both types of consumers, the Chamber of Industries, among other public and private groups, has asked “to eliminate the fuel tax that ICE uses for the generation of electricity.” The proposal has the support of the National Liberation Party (that of President Arias), the Citizen Action Party and the Frente Amplio.

The country is clearly worried about the pending increase. Juan María González, President of the Chamber of Industries, explained that a rate increase so much higher than the rate of inflation — which is the equivalent to many Costa Rican’s annual income raises — would have a serious impact on national inflation and employment, as well as Costa Rica’s ability to compete in the international economy. González also suggested that ICE finance part of its fuel purchases on credit, instead of passing along the entire burden to its consumers.

In addition to González’s suggestions, five unions, among them the Union Association of ICE Employees and the National Association of Public and Private Employees, indicated that granting ICE a tax exemption is of urgent need. Regarding these concerns, Jenny Phillips, Vice Minister of the Treasury, said that it will be possible to grant ICE a tax exemption. Before that can happen however, Congress must stipulate where the country will recover the funds that would have been collected from ICE. Under the suggested plan, ICE would save almost 15 percent, or ¢23 billion ($41.9 million). Certainly, the Costa Rica economy cannot easily dismiss almost $42 million in annual taxes without feeling the blow.

The issue at hand is urgent and important, but ICE has also shown a lack of initiative to prevent such problems. The company currently derives most of the country’s energy needs from less expensive sources, including wind and hydro power. However, delayed construction of new plants, or damages have caused the company to turn back to fossil fuel to fill the electricity void, thus driving up the bills. In 2003, ICE employees went on strike for 21 days to secure financial support for further hydropower research and development. Today, that project reports a ¢50 billion ($91 million) financial problem – many want to know where the money went, and why ICE isn’t working to free itself from dependence on expensive fossil fuels.

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Filed under: Costa Rica News on September 26th, 2008