The national electric system was created in 1928, when, through a presidential decree, the establishment of the Electric Company of Santo Domingo was authorized. This Electric Company was responsible for generating, building, rehabilitating and extending the transmission and distribution networks of the electric energy.
Later in 1954, the National Congress approved Law 4018, in which declared as of high national interest the acquisition by the State of all the companies that were then producing, transmitting and distributing electricity to the public in general. In 1955, the Dominican Government modified the energy sector by acquiring the Electric Company of Santo Domingo. Also, through Decree No. 555 dated 19 January 1955, the Corporación Dominicana de Electricidad (hereinafter, “CDE”) (Dominican Electricity Corporation) was created, which was assigned the responsibility of maintaining, expanding and generating all the electric energy in the country. In order to formulate a legal framework to regulate the electric sector, on 21 April 1955, the National Congress approved the Organic Law of the Corporación Dominicana de Electricidad (hereinafter, the “Law No. 4115”), which granted jurisdiction and autonomy to the CDE to exercise authority in the electric field within the territory of the Dominican Republic in an exclusive manner.
After several modifications to Law No. 4115, in 1966 the Organic Law of the Ministry of State of Industry and Commerce No. 290-66 was issued. This created an echelon higher than the CDE, a Ministry of State, which became responsible for the energy policy of the country. Later the Decree No. 584 of 1979 issued by the Executive Power, created the National Energy Commission, which under the direction of the Ministry of State of Industry and Commerce was given the duties to formulate and propose to the Executive Power the investment programs for the generation of energy.
For the purpose of stimulating the energy sector, Law 14-90 on Incentives to National Electric Development (hereinafter, the “Law 14-90”) was promulgated in 1990. The purpose of this law was to foster and stimulate generation of energy through the establishment of incentives and cancellation of assessed taxes to those companies committed to the production of electric energy.
The Law 14-90 was revoked in 1992 with the enactment of Law 11-92 which created the Tax Code. During that same year of 1992, the restructuring process of the CDE was initiated, when the Dominican Government promoted consultations with international organizations to design a reform and restructuring project of the Dominican electric system. As a result of these
However, the modifications introduced by the National Congress altered basic aspects of the new vision contemplated for the electric market. Since it was practically impossible to develop a bill that would satisfy the interests of all the parties who participate in the Dominican electric system, in 1997 the Dominican Government started a restructuring process of the energy sector in conjunction with other State-owned enterprises. To this end, General Law for the Reform of Government Enterprises No. 141-97 was put into force (hereinafter, the “Law No. 141-97”); a legal framework which served as a basis for the capitalization of the CDE.
For the capitalization process established under Law No. 141-97, five new companies were created with the contributions from the assets of CDE’s properties. Two of these companies are engaged in generation of electricity, as it follows: (i) Empresa Generadora de Electricidad ITABO; and, (ii) Empresa Generadora de Electricidad Haina. The other three companies are in charge of the business as electricity suppliers, as it follows: (i) Empresa Distribuidora de Electricidad del Norte; (ii) Empresa Distribuidora de Electricidad del Este; and, (iii) Empresa Distribuidora de Electricidad del Sur. Each one of these companies received from CDE the assets that were affected by the activities assigned to these new companies, when they use to function as a part of the only corporate unit of CDE. All other assets, including those of transmission and hydroelectric generation systems, remain assigned to CDE.
As a consequence of not having in 1997 a new General Law of Electricity, it was necessary to use the legislation then in force, to establish the regulatory framework that would govern the capitalized industries. In order to complement the lack of adequate electricity law, through the Decree No. 118/98, was created the Superintendence of Electricity (hereinafter, the “Superintendence”) under the direction of the Ministry of State of Industry and Commerce.
The new General Law of Electricity No. 125/01 recognizes the importance of the private sector in the activities of generation, distribution and commercialization of electric energy, in an effort to achieve expansion of the sector and a more efficient service, while the government maintains the exclusive right to regulate the sector. It was later modified on August 6, 207 by the Law No. 186-07.
The present law is divided as it follows: Title I: Definitions; Title II: Scope and Objectives; Title III: Institutions of the Electric Sub-sector; Title IV: Installation of Electric Services; Title V: Rights of Way; Title VI: Implementation and Exploitation of Works and Electric Services; Title VII: Electricity Pricing Systems; Title VIII: Sanctions; Title IX: Other Regulations; Title X without a title and Title XI on Repeals.
Following is an overview of the basic aspects of the Law in order to provide the reader with a general outlook of the regulations that will be applied to the Dominican electric industry.
II. BASIC PRINCIPLES, OBJECTIVES AND BASIC DEFINITIONS
The General Electricity Law No. 125-01, as amended, and its implementing regulations No. 555-02, as amended in 2002 and 2007, constitutes the legal framework which regulates all phases related to the production, transmission, distribution and commercialization of electricity, as well as the functions of State agencies created by this Law and related to these matters.
The referred law defines throughout its text, the essential terms for adequate interpretation. Following are some of the most important, namely:
- Agent Wholesale Electricity Market: Any business of generation, transmission, distribution, self-producer and cogenerator that sells its remaining in the interconnected system, unregulated users and the Corporación Dominicana de Empresas Eléctricas Estatales (CDEEE), meanwhile while managing power purchase agreements signed with the producers.
- Bar: Point in the power system ready to deliver and withdraw electricity.
- Blocks Times: These are the periods in which generation costs are similar and determined according to the technical and economic characteristics of the system.
- Commercialization Activity: Provision of service marketing of electricity by a Trading Company to the final users.
- Customer or consumer of a public service: It is the natural or legal person whose maximum power demand is less than that stipulated in Article 108, and therefore is subject to price regulation.
- Definitive Concession: Authorization from the Executive Branch, which grants those interested the right to build and exploit electric works in accordance with the present law or any other related law.
- Distribution Activity: Provision of electricity distribution service by a distribution company, to the final customers.
- Distribution Company: Electric Company whose main objective is to operate a distribution system and is responsible for supplying electric energy to final users.
- Non-regulated Consumer: Is one whose monthly demand excess the limits established by the Superintendence to qualify as a public service consumer and one who complies with the requirements established in the regulations for application of the law.
- Permit: Is the authorization granted by relevant authority, prior approval having been granted by the Superintendence to use and occupy with electric works national or municipal goods of public use.
- Provisional Concession: Administrative resolution of the Superintendence, which grants the authorization to enter public or private property to carry out studies and surveys, related to electric works.
- Public Distribution Service: Supply, at regulated prices, by a distribution company to final users located in their concession zones, or that connect to the concessionaire’s facilities through their own lines or third party lines.
- Rationing: A condition declared by the Superintendence by means of a resolution when the electric system is not capable of supplying demand due to fault causes prolonged by thermal units, droughts or other causes that have not been previously considered and sensitively affecting the development of the interconnected electric national system (SENI).
- Regulated Consumer: Users who receive the public distribution service at prices regulated by the Superintendence.
- Right of Use: Payment to which the owners of lines and substations of the transmission system have the right to receive for allowing use of said systems by third parties.
- Self-Producers: are those entities or companies which generate their own electricity for their own consumption independently of their productive process and eventually sell surplus power or electric energy to others.
- Sistema Eléctrico Nacional Interconectado (SENI): Set of electrical units generating facilities, transmission lines, substations and distribution lines interconnected, which allows to generate, transport and distribute electricity under the programming operations of the Coordinating Agency.
- Transmission Toll: Payment to which the owners of lines and substations of the transmission system have the right to receive for use and connection rights.
- Typical Areas of Distribution: Areas in which the value added by the activity distribution for each of them are similar.
- User or Final Consumer: Corresponds to the person or company, customer of the supplying company, which uses electric energy for its consumption.
Please note that in accordance to the Regulation for the application of the Law No. 125-01, enacted through Decree No. 255-02, and it shall promote the achievement of the objectives expressed under Title II of the Law No. 125-01.
The basic objectives of Law No. 125-01 are the following:
- Promote and guarantee the electricity supply required by the country under adequate conditions of quality, safety and continuity, with optimum use of resources and due consideration to environmental aspects;
- Promote private participation in the development of the electricity sub-sector;
- Promote competition in the generating area, stimulating investment and prices for that item to be free and determined by the market;
- Regulate transmission and distribution prices based on economic criteria of efficiency and equity;
- Ensure that electricity supply is carried out with neutrality and without discrimination; and,
- Ensure protection of consumer’s rights and compliance with their duties.
It is important to point out that the Law No. 125-01 establishes that the regulatory, promoting, and monitoring character, which shall be exercised by the State through the specialized institutions, creates the essential functions of the State.
In addition, the Law establishes that private activities and entrepreneurial actions of the State in this sub-sector shall be subject to the same regulations as other companies of the sector and to the decisions adopted by relevant institutions.