Who’s to Blame?
Utila’s Energy Company Hikes Prices to Record Levels. Utilans Cry ‘Foul’

August 1st, 2008
by Thomas Tomczyk

[private]

Rusting desalinization machinery at UPCO power plant.

Rusting desalinization machinery at UPCO power plant.

A case of displaced anger has hit the 2,870 permanent Utila inhabitants. Customers of Utila Power Company (UPCO), the islands sole energy generator, are unable to figure out whom to blame for their skyrocketing energy prices. Utilans in July paid 9.55 Lps. per Kilowatt-hour. While in 2002 UPCO’s energy price to customers was 19 US cents per Kilowatt-hour, July’s price approaches 50.3 US cents, and at the moment Utila has the highest energy prices of any island in the Caribbean. Even Guanaja’s BELCO, for several years the most expensive energy producer in the Bay Islands, was left in the dust.

Amongst all the finger pointing few people realize that high energy prices are a consequence of high world fuel prices and basic mistakes made while UPCO was setting up its operations on the island in 2001. Utilans and UPCO investors have no-one-but-themselves to blame for failure to scrutinize the decisions about the UPCO’s financing structure, UPCO power plant’s location, fuel supply inefficiencies, unrealistic plans for wind generation and desalination, pre-paid meters and inefficient energy grid.

In its 2001 business plan UPCO estimated its capital project at $4.1 with 75% of that sum coming from Honduran banks. According to Jack Yeh, a Yale University graduate student conducting research on Utila’s energy habits, one gallon of fuel is used for every 12 kilowatts of electricity produced. According to Ron Turner, UPCO’s GM, the company looses around 20% on their distribution lines. Another disadvantage Utilans face is that UPCO never managed to secure a government subsidy for consumers using less than 300kw a month. Roatan’s RECO and Guanaja’s BELCO both pass this government subsidy to its customers.

While Robert Blenker, the original UPCO GM, who with Tennesse Valley Authority presented UPCO as a company looking in to the future yet failed to resolve some basic, but critical to the company’s operation fundamentals.

The prepaid meter and an additional 1.5% commission at the bank were never fully accepted by the consumers. “The problem with pre-paid meters [in quickly escalating fuel prices] is that if you pre-paid at the beginning of the month and price increases in the middle of the month, the customer looses money,” said Richard Warren, President of RECO.

Around 1,500 gallons of diesel a day are needed to keep the plant operating and every month UPCO customers spend around $200,000 paying for their electricity. One of the beneficiaries of the pre-paid system is the HSBC bank that picks up a 1.5% fee. HSBC who also holds around $1.3 million UPCO debt, is not ready to give up its monthly commission estimated at around $3,000.

This inefficient shipping method made energy on Utila even more expensive than on the more remote Guanaja. UPCO fuel is brought in from Cortez on a truck, then shipped via boat to Utila, then trucked to UPCO’s generating facility’s small fuel storage tank some four kilometers away.

As a symbol of UPCO’s wasteful and unrealistic spending and lack of planning a galvanized water storage tank is now used to store brooms and building materials. Desalination equipment, worth tens of thousand of dollars, stands unused, rusting away. The UPCO’s idea of bringing in wind power has blown away and wind turbines never arrived.

While a few Expats invested in solar energy, escalating energy prices have failed to attract entrepreneurs offering to lower energy consumption and generate options for individual energy consumers. No government program supports the import, purchase or installation of solar panels, solar water heaters, etc. Several Utila residents have invested in alternate power despite these difficulties.

Jan Masella, an American Expat living by the old airport, has invested $10,000 in setting up her own solar system to become less dependent on UPCO. Masella has nine 180 amp solar panels and a dozen deep cycle batteries, a system set up by Chris Howard, owner of Utila’s cinema.

In 2005 UPCO was bought out and the new owners have been struggling to keep the company going and on track. The original two .750 Megawatt generators purchased by UPCC have now all disintegrated. A 1.5 Megawatt and in February 1.25 Megawatt machines were brought in by Commercial Laize.

According to Turner, after 30 years of UPCO operation, in 2032, the Utila Municipality will have an option to purchase UPCO and take over its management. Whether UPCO will manage to make it to 2032 is a matter of speculation. “If the UPCO management can’t provide electricity at better prices, let someone else manage it- that is what people tell me,” says Julia Keller, member of the Citizen Help Committee, owner of Jade Seahorse restaurant and liberal party internal candidate for mayor. Keller believes that a UPCO collapse is unavoidable.

A ten member Citizen Help Committee organized by Keller asked the Commicion Nacional de Energia, a controlling and regulating body of energy producers in Honduras, to come to Utila for an audit and inspection of the UPCO books and accounts. On July 2 thru 4, the five members of the commission toured UPCO facilities and looked at the company’s accounts.

In general energy generation situation in Honduras is complicated and getting worse. In a country with ample and fast running rivers has the best potential for hydro power in Central America. According to Turner, who constructed and operates a hydro power plant in La Esperanza, Intibuca, there are 70 renewable energy plants permits waiting for approval at the ministry of the environment. Only six are operating, four of them bio-mass, and not a single renewable plant license has been granted in six years. While ENEE pays 6.7 US cents per kilowatt to his Hydro Electric plant, a fossil fuel plant in San Pedro Sula will get 33 US cents. “It takes three months to set up a bunker fuel plant and three-and-a-half years to set up a hydro electric plant,” says Turner. [/private]

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