GUATEMALA: REFORMS IN THE BALANCE
is unlikely to cover more than a portion of the contract price,48 it would be necessary to distribute the capacity costs derived from the PPAs through other measures, such as a universal stranded-cost charge, or— perhaps more unrealistically—the buy-down of all PPAs (making all IPPs merchant plants) by the government.49 The same applies to the subsidy that INDE gives DEOCSA-DEORSA to keep the price of generation low. The pricing readjustment would have to be scaled until INDE no longer granted different generation prices according to geographic area, and EEGSA and DEOCSA-DEORSA received their energy at the same prices. In preparing for the next round of contracting for regulated consumers, CNEE must define the conditions for such contracts to avoid repeating problems caused by the PPAs and potential vertical integration. The commission must address a variety of issues in a transparent way, including contract lengths and major terms and conditions (e.g., price and price adjustments, generation technologies, risk-management provisions, and contract-bidding procedures). In this regard, implementation of retail competition would facilitate CNEE’s task by drastically curtailing the number of contracting conditions to be defined and monitored; for example, it would be possible to let marketers offer consumers different supply options, whereby CNEE’s role would be limited to ensuring that marketers are properly capitalized or backed by physical resources to meet consumer commitments. It would also be wise for MEM and CNEE, with the support of distribution companies, to launch an extensive information campaign on new energy-efficient technologies. It would not be necessary to reach the subsidy stage, which would risk capture by higher-income strata; however, users should be informed about lower-consumption light bulbs and appliances. In relation to rate volatility, several measures are possible. One is to include a working-capital adjustment factor in regulated rates and move 48
For 2003, the projected average cost of excess capacity is $20 per kW-month, while excess capacity currently sold by EEGSA under social-rate terms is $4 per kW-month.
49
This measure could be combined with eliminating the INDE subsidy to the social rate by requiring a new tender for supply contracts with all regulated consumers and the subsequent privatization of INDE (with proceeds going to cover PPA buy-downs and a low-income electricity subsidy).
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