Better Electricity Services in the Dominican Republic

Challenge

Throughout the 1990s, the electricity sector in Dominican Republic provided substandard service, with inadequate generation capacity and frequent power cuts. The historical roots were a combination of politics, corruption and the inefficiencies of a state-owned monopoly. At times, the problems boiled over into national crises. Over the past decade, the Government restructured the sector and made major progress in most areas, including the professionalization of senior management of the distribution companies, better targeting of the subsidies, the revival in investments to rehabilitate the energy grids, and the strengthening of regulations. The service improved with an increasing number of clients receiving electricity 24 hours (around 791,000 or 35% of the market). 

Solution

The World Bank-financed Electricity Distribution Rehabilitation Project in the Dominican Republic helped the Government to improve the quality of electricity service in the three electricity distribution companies. The project was successful in reaching 101,197 households, increasing the number of hours of service in the three distribution companies, and reducing the number and frequency, as well as the duration, of blackouts.

The activity supported the increase of the electricity quality services by ensuring that the electricity distribution companies prepared and executed grid rehabilitation projects. The projects increased the performance of the companies by

(a) achieving economies of scale and more competition in procurement,

(b) introducing “supply and installation” contracts,

(c) incorporating the best practices of the three Distribution Energy Companies (EDEs) in terms of both investments and community outreach, and

(d) having robust monitoring and evaluation so that lessons are learned and mistakes corrected faster.

Results

The project achieved two main results through rehabilitating the circuits, introducing innovative community outreach and strengthening the management of the EDEs:

• The project interventions from 2011 to 2013 helped to increase the average service availability index (ASAI) in each EDE as a whole (EdeNorte by 1.2%, EdeEste by 13.5% and EdeSur by 22%), and to increase the Cash Recovery Index (CRI) in two of the three companies (EdeNorte by 10.7% and EdeEste by 15.5%)
• It is estimated that the project increased the quality and availability of electricity for a total of 101,197 households in the three companies.

In addition, the project won two prizes on sustainability in the Shared Prosperity Days (Delivering jobs, inclusion and sustainability – December 3 and 4, 2013).

Bank Group Contribution

The World Bank contributed a loan of US$42 million to cover investments, and technical assistance for this project. A second loan for US$120 million is currently under preparation.

Partners

The Bank supported the Dominican Corporation of State Electricity Companies (CDEEE) and its coordinating unit in the design and implementation of the Project. A strong partnership was built during implementation among the Bank and the three distribution companies of the Dominican Republic (EdeEste, EdeNorte, and EdeSur), as well as with the Holding Company CDEEE.

The total project cost was $152 million, and the project was co-financed by the Inter-American Development Bank (IADB) (US$42 million), Organization of the Petroleum Exporting Countries (OPEC) Fund (US$30 million), and the Government’s own funds. There were several joint missions with IADB and close collaboration has been maintained through project implementation and supervision  

Moving Forward

There is a Distribution Networks Rehabilitation IBRD loan for US$120 million currently under preparation. It aims to increase the Cash Recovery Index of the three electricity distribution companies in selected areas and improve the quality of electricity service, and is a continuation of the project that closed in September 2013.

Additionally, the Bank is developing an Energy Sector Management Assistance Program ESMAP activity (technical assistance US$50,000) with the objective “to strengthen the Government's capacity to design and implement a commodity risk management strategy that could, in combination with other structural reforms in the power sector, help strengthen the Government’s capacity to manage fuel price volatility and its fiscal impact.”

Beneficiaries

Direct beneficiaries are those connected to the rehabilitated distribution circuits, and were a total of 101,197 households. Indirect beneficiaries are the total customers of the three distribution companies through a reduction in losses, reduction on the customer’s energy bills, and increase in the quality of electricity service measured by the average service availability index (ASAI) per circuit, that had a substantial improvement in the EDEs, and less black outs.