MANAGUA – What earlier this year appeared to be a return to normalcy of power and water services has revealed itself in past weeks to be little more than smoke and mirrors.

With an energy deficit hovering between 20-30% of the nation's demand, embattled power-distribution company Unión Fenosa in mid-June began again implementing rolling blackouts across the country, shutting down whole cities for 6-10 hours at a time.

Some offices in Managua, faced with morning blackouts that make production impossible, changed their nine-to-five work schedules to 2-8 p.m.

In cities such as Granada, meanwhile, the blackouts have been scheduled from midnight until 6 a.m., making for fitful and sweaty sleeping conditions in a hot tropical climate without a fan or air-conditioning.

Unión Fenosa, facing energy deficits that range from 60-170 megawatt hours, has been trying to compensate for the power deficit by purchasing surplus energy from abroad at the exorbitant international rate of $190 per megawatt hour, compared to the normal domestic rate of $111. That situation, Unión Fenosa claims, translates into major economic losses for the company.

Unión Fenosa's president, José Ley Lau, said he estimates the company's losses for June to be around $4.5 million, and estimates the same for July.

Purchasing energy abroad is not without complications. In addition to a limited amount of surplus energy available from countries such as Guatemala and Panama, there have also been “technical” problems reported in neighboring Costa Rica and Honduras that have prevented the import of energy from those countries.

For example, the June 19 purchase of 20 megawatt hours from Panama was blocked by Costa Rica due to unspecified “technical restrictions,” exacerbating the energy deficit here, according to Unión Fenosa. The energy deficit that day – 170 megawatts, or 30% of the country's energy demand – was the worst recorded deficit to date.

Sandinista leaders in the past have been very critical of Unión Fenosa, and when Daniel Ortega returned to the presidency earlier this year there was speculation that the Spanish company would be handed its walking papers.

In recent months, however, relations between the company and the government, although still not chummy, appear to have improved somewhat. Even comandante Bayardo Arce, a hardline Sandinista and economic advisor to Ortega, recently defended Unión Fenosa, saying that the country's energy problems were not the company's fault because it has more to do with production than distribution.

In fact, of the country's 14 power plants, only two are producing at 100% capacity. Looking at the chart of the power plants' installed capacity versus their current power output is like looking at the scorecard of a last-place baseball team (see table on page 2).

Of the 571.3 megawatts of installed energy, Nicaragua is producing only around 323.48 megawatts.

The Sandinista government, with the help of revolutionary and oil-rich ally Venezuela, has promised to put an end to Nicaragua's energy problems. The timeframe for that, however, has been slower and more complicated than it appeared during sword-waving political rallies at the beginning of the year.

Though Venezuelan President Hugo Chávez has already donated 60 megawatts of installed energy here – two diesel plants are modestly named after him – the plants are not yet running at full capacity. And the other oil-burning plants promised by Venezuela and Cuba will not be online until the beginning of next year, according to Unión Fenosa's calculations.

Though the Venezuelan plants are a help, the problem was enormous to begin with and has gotten worse as older state-run plants have started to fall apart. Unión Fenosa says that the new plants will most likely replace the older state plants, rather than adding to Nicaragua's net energy production. But in a time of crisis, even the older plants, which should have been retired years ago, are being run into the ground to produce what they can.

Consumption and Theft

In Nicaragua, the largest commercial energy consumers represent only 0.62% of the market, yet consume 50% of the country's energy. More than 90% of Unión Fenosa's clients, meanwhile, are domestic users consuming only 32% of the country's energy demand, according to the company.

It is also the “big consumers” who steal the most energy by tampering with meters or by taking advantage of illegal hook-ups, the company claims.

“It is sad that in our country it is those who have the most who steal the most,” said Humberto Reyes, head of Unión Fenosa's anti-theft division.

In 2006, Unión Fenosa reported that nearly 27% of the energy it purchased was lost due to theft and “technical loss” during transmission. This means that the company was able to sell only about 73% of all the energy it purchased last year, resulting in $34.5 million in lost energy sales, the company claims.

“The root problem is fraud and the illicit use of energy,” Unión Fenosa charged. Energy fraud “is great business, there is no cost and no risk. Those who do it don't lose anything because there are no penalties or sanctions against those who steal energy.”

Nicaragua is the only country in Central America where it's not a crime to steal energy.

The legislative National Assembly has recently introduced an article into the forthcoming Penal Code that would make stealing water and energy a crime, but it is currently not classified as a crime, making it hard to curtail illicit use of energy.

Economist Néstor Avendaño calculates that the amount of energy lost in 2006 resulted in $275 million in lost production, an amount that represents 5% of the gross domestic product, or equivalent to the country's annual fiscal deficit.

César Zamora, president of the Corinto power plant, the largest power producer in the country, estimates that if Unión Fenosa were able to reduce its energy loss from 27% to 15%, the problems with energy rationing blackouts would become a thing of the past.

Some, however, are suspicious of Unión Fenosa's theft claims and think that the real loss is due to technical problems resulting from old transformers and a general lack of investment by the Spanish company in new infrastructure. David Castillo, president of the country's energy regulatory body, the Nicaraguan Energy Institute (INE), told reporters last month that he is seeking funding for an international audit of Unión Fenosa to determine the true nature of the energy losses.

Looking Ahead

The energy deficit here is expected to continue until the first quarter of 2008, when the additional Venezuelan/Cuban plants and Taiwan-donated plants come online, and the existing Polaris geothermal plant completes its scheduled increase in power production (NT, May 25).

The blackout problems will most likely continue with some frequency through July and then slowly begin to get better in August, when the rainy season has a chance to fill up the Apanas lake and get the Santa Bárbara and Centroamérica hydroelectric plants running at full-steam, according to Ley Lau.

By March 2008 the country's power problems should be mostly resolved, according to Unión Fenosa.

That's good news for those who are planning to move to or invest in Nicaragua next year, and discouraging news for those who already have.

 

http://www.nicatimes.net/nicaarchive/070607.htm