do business in the Dominican Republic - Pellerano & Herrera

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DOING BUSINESS INTHE DOMINICAN REPUBLICOVERVIEW AND PERSPECTIVESDuring the year 2002,the sector grew 7.6%,backed up by a 6.7% increase in energyproduction, the improvement of transmission and distribution networks, theinstallation of sub-stations to increase voltage and the inclusion of low-incomesectors in consumption measuring.The Government is carrying out several hydroelectric projects to increase energyproduction, and is also giving priority to encouraging the development ofalternate sources of energy.In 1999, it signed a Wind Power Supply Agreement with a US company, whichstarted in 2001 the construction of a project in the Northern part of the countrythat will generate 115,000 Kw/h, with an investment of approximately US$160million.During the first semester of 2004, the growth rate of electricity and water wasstill negative, of -19.6%, due chiefly to the deficit in the production and supply ofelectricity.In order to ensure continuity of the service, the Dominican government executedan agreement with the Venezuelan government,the Caracas Agreement,aimedat guaranteeing the supply of fuel while ensuring a financing of up to 25% of theinvoice.The Dominican Congress has already ratified this agreement.Furthermore, on 6th January 2005 the Dominican government appointed a highlevelcommission with the task of executing the plan outlined with the assistanceof the IDB and USAID, in order to reduce substantially in the short-term thedeficit of the sector and ensure its feasibility in the medium-term.Finally, the letter of intention that the Dominican government addressed to theInternational Monetary Fund on 14th January 2005, plays particular attention tothe electricity sector. Among the seven key elements conforming the programaimed at restoring fiscal discipline and financial stability, there is one that reads:“A plan to improve the efficiency of the energy sector in order to ensure its financialviability”.Legal Framework: Law 125-01Law 125-01 maintains the exclusive right of the State to regulate the sector,whilerecognizing the importance of the private sector in the activities of generation,distribution and commercialization of electricity, in an effort to promote theexpansion of the sector and the efficiency of the service.This statute establishes also that electricity transmission and hydroelectric generationshall always remain in public hands,and that private activities of the Statein the electricity sector shall be subject to the same regulations as private companies.a) Objectives. Law 125-01 regulates all phases of the production, transmission,distribution and commercialization of electricity, as well as the functions of thecompetent State agencies.The main objectives of the law are the following:70
Pellerano & HerreraAttorneys at lawTo promote and guarantee the electricity supply required by the countryunder adequate conditions of quality, safety and continuity, with optimal useof resources and due consideration of environmental aspects.To promote private participation in the development of the electricity sector.To promote competition in the generation of electricity, fostering investmentand freedom of prices.To regulate transmission and distribution prices based on economic criteriaof efficiency and fairness.To ensure that electricity supply is carried out without discrimination.To ensure consumer protection.b) Public Bodies. The institutions endowed with the attribution of monitoring thesector and seeing to the compliance of Law 125-01 are the National EnergyCommission, the policy-making organ, and the Superintendence of Electricity,whose main function is to see to the compliance of the respective laws and regulations.The law sets forth the necessary guarantees of independence and qualificationsof their members in order to ensure the proper functioning of these agencies.Furthermore, Law 125-01 provided for the transformation of CorporaciónDominicana de Electricidad (CDE) into three different entities that will carry outthe Government activities in the energy sector:Empresa de Transmisión Eléctrica Dominicana (ETED), or DominicanElectricity Transmission company, to which all electricity lines and transmissionsystems shall be transferred.Empresa de Generación Hidroeléctrica Dominicana (EGEHID), or DominicanHydroelectric Generation Company, to which all property and managementof hydroelectric generating systems will be transferred.Corporación Dominicana de Empresas Eléctricas Estatales (CDEEE), orDominican Corporation of State Electricity Companies, with the mission ofco-coordinating the activities of such companies, implementing publicprograms of rural electrification and managing energy supply contracts withprivate producers.71c) Provision of Electricity Services. The generation and distribution of electricityrequires the granting of a concession. However, where the maximum powerdemand is inferior to the levels established in the regulations, only a permit isrequired.Law 125-01 provides for provisional and definitive concessions. Definitive concessionsmust be granted by the Executive Branch via the National EnergyCommission, and are valid for a renewable period of forty years. In the event ofplurality of requests in relation to the same concession, the respective concessionshall be granted by public bidding.The law includes also provisions defining the obligation of interconnection.Theuse of transmission lines is subject to the payment of a transmission toll that is
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FOREWORDA place to invest ...The Do
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