Subsidies on Residential
Electrical Rates To Be
Removed
The Autoridad Reguladora
de Servicios Públicos (Aresep)
- regulator of public
prices and services -
announced yesterday that
it will remove subsidies
for electrical service
to residential
customers, increasing
the cost of energy to
consumers, while the
cost to industrial
customers will decrease.
Fernando Herrero, the
regulador general, said
yesterday that the
policy will be phased in
gradually over the
coming months so as not
to give consumers a big
hit at all once.
Herrero said that
industrial and
commercial customers
have been shouldering
the the cost of the
subsidy that is applied
to some 1.1 million
residential customers
who pay on average ¢43
colones per kilowatt
hour, while commercial
customers have been
paying ¢55 colones p/Kwh.
The cost in terms on
consumption is ¢21.500
colones for a
residential home that
uses 500 KWh, while the
cost for a commercial is
¢27.500, according to
information released by
the Aresep.
Industrial and
commercial customers
make up 35% of the
national electrical
bill, even though they
use up only 30% of the
production, while
residential customers
use up 40% and only pay
37% of the bill.
Herrero maintains that
the formula affects the
poor as the higher cost
paid by industry is
reflected on the price
of goods and services
while those in the
higher income bracket
take advantage of the
subsidies that is
shouldered by the
170.000 industrial
users.
Álvaro Barrantes,
director de Energía at
the Aresep, added that
under the current
formula the more the
higher the residential
consumption the higher
the subsidy.
The removal of the
residential subsidy is
coming at a time when
the Aresep is analyzing
a rate increase of 20%
for electrical energy by
the Instituto
Costarricense de
Electricidad (ICE) - the
state monopoly on
electrical energy
production and
distribution.
The percentage amount of
the residential subsidy
was not available as
Herrero said that ICE
does not have a clear
accounting done and it
will be up to the Aresep
technicians to delve
into the data.
"What we do know is that
residential electrical
rates should be much
higher", said Herrero.
Herrero added that the
removal of the
residential subsidy is
not new, it has been in
effect for some years,
but at a very, very slow
pace. The regulator said
that at the current pace
it would take 100 years
to completely remove the
subsidy. Thus, the
Aresep is really only
speeding up the process
and not changing its
policy, according to
Herrero.
Once the subsidies have
been eliminated and the
distortions removed, the
Aresep is expected to
reduce the cost of
electrical service to
the poor, which will be
subsidized by
residential customers
with greater income.
One of the options the
Aresep is analyzing is
defining "areas of low
income", using data from
the Ministerio de Lucha
contra la Pobreza
(ministry in the fight
against poverty).
Francisco Garro, the
person in charge of
rates at ICE, said that
the Aresep decision is
in keeping with ICE's
policy only that it will
be applied at a fast
rate.
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