Last month a customer of Union Fenosa (Gas Natural), the private electricity company in Nicaragua, was the victim of fraudulent charging. According to neighbors who witnessed the incident, Union Fenosa’s contractors manipulated her meter without her presence or permission and two weeks later she was fined for an “illegal connection.” The customer, whose identity is protected, later learned that the contractors who report illegal connections get 60% of the fine imposed. “Thus, you can see who has the motive to find (or make) illegal connections,” she explained. Even though she tried to appeal, she found herself unprotected and the Government institution that plays a regulating role sided with the transnational Spanish company.
Another Union Fenosa customer, Sergio Dinarte, a working class man in Managua who earns $150 dollars US a month to feed his family of six, shared his own experience with the electricity company. He explained how from one month to the next his electricity bill changed from 150 cordobas (about six dollars) to 1000 cordobas (forty-three dollars) even though they had not changed their energy consumption at home. Because he could not pay the bill, the company cut off his electricity supply. Even though he has not been connected to the grid for almost a year he continues to receive monthly bills amounting to thousands and thousands of cordobas. “Unfortunately, there is nowhere to go to denounce these kinds of injustices,” he said.
The breach of contract by the management of Union Fenosa is notorious. Such abuses against consumers as reported above are the norm. They range from unfunded charges, to the change of meters without previous authorization, to death caused by damaged wiring systems. Additionally, there is a lack of investment in the basic energy infrastructure. Contrary to the rhetoric that was pushed forward at the time of the privatization of the energy sector in 2000 – promises of improvement of the service, the broadening of the coverage, affordable rates, among others – the results are far from what was expected. In 2010, after ten years of privatization, the evaluation of the performance of Union Fenosa in Nicaragua was described in a national newspaper as a “decade of martyrdom,” making reference to the bad service, breach of contract and overcharged electricity bills. One might ask, how did this unchecked power of Union Fenosa evolve?
In early 1990s, International Financial Institutions (IFIs) such as the World Bank (WB) and the Inter-American Development Bank (IADB) discontinued financing for public investments in energy infrastructure. In the past, these two institutions had been the biggest funders of the energy sector. They not only backed away from investment in this sector but also established a policy that made investment in the energy sector dependent fundamentally on foreign investment, especially through privatization of state enterprises and the granting of concessions.
In 1990, Nicaragua’s foreign debt reached $10,745,000 million dollars US and it became one of the most indebted countries in the world. In1995, debt payment represented 38.1% of all exports, which made it unsustainable for the country. This situation resulted in Nicaragua being included in the initiative promoted by the World Bank and the International Monetary Fund known as HIPC (Heavily Indebted Poor Countries).
In order for Nicaragua to be a part of this debt relief initiative, the country had to subject itself to certain conditions established by the WB and IMF. Those conditions included the implementation of neoliberal economic policies in the country, such as the Structural Adjustment Programs, which started a process of privatization and reduction of public spending, following the Washington Consensus guidelines. The Washington Consensus was a set of policies that the US government and the International Financial Institutions based in Washington, D.C., believed “that all countries should adopt to increase economic growth”. Some of the prescriptions established in this framework for countries like Nicaragua were: financial liberalization, privatization of state enterprises, trade liberalization and reduced role for the state.
The restructuring of the energy sector in Nicaragua was executed under the advisory of the IADB which also offered financing for oil dependent thermal power generators. On the other hand, the IMF along the WB requested the privatization of basic public services such as water, electricity, and telecommunications as a condition for Nicaragua to access new loans and as part of debt relief programs.
As result of the Structural Adjustment Programs, the energy sector in Nicaragua was privatized. The distribution and commercialization of energy was awarded to a Spanish transnational company: Union Fenosa (now Gas Natural). The privatization process was broadly considered corrupted and many conflicts of interest came to light. For example, in 1987-1988 Union Fenosa had performed an audit on the Nicaragua State Enterprise ENEL (Nicaraguan Electricity Company) as part of the modernization process that the governmental institution was undergoing. Once the Spanish transnational company finished the audit and installed new information systems, it had privileged information regarding Nicaraguan systems and its electric company. Also, it is important to notice that in 2000 the bidding contest for privatization of the electricity service took place with one and only one bidder: Union Fenosa. The process of privatization was financed by the IADB, which received a payment of $650,000 dollars US for its services.
Nicaraguan people have been helpless in facing the fraudulent policies of this company, since the government institution in charge of regulating the energy sector has always complied with bidding of the private company. Moreover, in 2008 Daniel Ortega’s government signed a “protocol of understanding” with the Spanish transnational company, which annulled several legal procedures that benefited consumer’s rights. This agreement also mandated that the Nicaraguan government have control over a 16% share in the distributions, as well as board representation.
More Energy: For Whom and for What?
Nicaragua National Human Development Plan 2008-2012 considers broadening the electric transmission line in the country. The plan prioritizes negotiations to find funding for the construction of this infrastructure and is part of a regional project called SIEPAC (Central American Electrical Interconnection System). SIEPAC is, in turn, part of a larger project called the Mesoamerica Project (before known as Plan Puebla Panama). Nicaragua expects to sell energy in the Regional Electricity Market (MER) once it starts operations.
Nicaragua’s energy generation matrix currently depends on fossil fuels (70%). The government’s objective is to reduce this dependency by the year 2017 when they expect to be generating 96% of energy from renewable resources. One of the largest projects promoted by the government is the construction of the hydropower plant Tumarin Dam at an estimated cost of one billion dollars. This project is being financed by BNDES (Brazilian Development Bank) and CABEI (Central American Bank for Economic Integration). It is worth noting that BNDES has been strongly questioned for a lack of transparency and for financing projects that violate the human rights of communities affected by the those projects. Also, CABEI is the regional bank in Central America and one of the funders of the Mesoamerica Project, whose main objective is to create the adequate infrastructure for transnational corporations to easily establish their operations in the region, thereby supporting the reinforcement of the free market economy.
According to diverse resistance social movements across the region, behind the Mesoamerica Project are the interests of large, transnational corporations which seek to develop infrastructure at low cost, cheap raw materials, good transportation and connections for their goods, cheap labor, tax exemptions and access to energy and resources like water, land, oil, etc. The investments of this regional project focus on the construction of large highways, high-voltage electric wiring, dams and hydropower plants, and shipping ports. A document published by the IADB revealed that 94% of the resources for the Mesoamerica Project are allocated for the construction of highways and high-voltage electric wiring, with only 2% of resources going to human development projects. The investments in Central America, including Nicaragua, are lead by the guidelines of this regional integration strategy which includes a great component in the energy sector.
Energy Democracy vs. Energy Monopoly
In recent years with the climate change crisis and more scientific data showing the link between the use of fossil fuels and increased climate change, alternatives to the corporate high scale model of production and distribution of energy have arisen. One of those alternatives offered is one that uses the term “energy democracy,” which seeks to establish locally based renewable energy systems. This approach is in opposition to the monopoly created by transnational energy companies like Union Fenosa in Nicaragua. Another concept developed to address the need of changing the current energy production-consumption model in the world is what activists and organizations around the world called energy sovereignty: “A rights-based, people-centered, approach to sustainable energy generation, distribution and consumption”. There are also those who are working towards the acknowledgment of energy as a human right.
Here Comes the Sun
Nicaragua, because of its geographical position, receives a lot of solar energy. Nevertheless, most new energy projects are focused on hydropower, wind or geothermal generation. The Ministry of Energy and Mines has in the pipeline many hydroelectric projects in different areas of the country, the largest being the Tumarin Dam mentioned earlier. One of the reasons to prioritize renewable energy projects, according to government officials, is to decrease the dependency on oil and protect the planet from green house gas emissions, the main cause of climate change. However, in 2007 scientists found evidence that large dams around the world emit about 115 million tons of methane gas every year and contribute more than 4 percent of the warming impact linked to human activities.
For small, non-profit organizations trying to promote the use of cleaner energy sources like solar energy, especially in rural areas where the grid does not reach, it is necessary to have more support from governmental authorities in order to implement these projects on a larger scale, especially for residential electrification.
Cooperative Christine King is a small cooperative located in northern Nicaragua. It provides diverse services to surroundings communities, including night school for adults, computer classes, legal advice for women, ceramics workshops, preventive health programs, and arts and crafts. Last year it received support from a group of Japanese volunteers who provided training on the use of solar energy and the making of solar panels. Two young men from the co-op, Wilson and Alberto, had the opportunity to attend this workshop where they learned how to build solar panels at a much lower cost than those found in retail stores that sell these products commercially. Because the cooperative received a donation from the Japanese people, it now has the necessary equipment to make solar panels. Wilson and Alberto recently attended a workshop in Managua, the capital, to learn how to install the solar panels, too. They have been educating people in different communities in their area about the importance of shifting to the use of renewable energies and hope to reproduce the knowledge they have received with as many people as possible. Wilson and Alberto emphasize that they want to share and offer people opportunities to free themselves from the monopolistic energy business and highlight the non-profit motivation that is moving their work. “We want to share with those who cannot afford the thousand dollars they would need to install solar energy system in their homes,” Wilson explains.
As a small organization the cooperative faces the problem of a lack of resources to launch a pilot project in some communities they already have identified in the north-center region of Nicaragua. Even though they now have the knowledge and equipment –thanks to the solidarity of a Japanese organization– to forward the use of solar energy in marginalized communities, they do not have the resources to launch a pilot project to start promoting the use of this renewable energy on a larger scale. They hope to submit a proposal to work in coordination with the municipal government to bring electricity to remote communities that do not have access to the grid.
This cooperative is just one example of one small organization working to promote the use of solar energy. It is joined by other small organizations in Nicaragua that view the development of solar energy as a way of empowering people economically, making them more independent of the forces of the corporation that has been controlling the distribution and commercialization of energy in Nicaragua for the last eleven years.
This article is part of a writing assignment for Voices of Our Future a program of World Pulse that provides rigorous new media and citizen journalism training for grassroots women leaders. World Pulse lifts and unites the voices of women from some of the most unheard regions of the world.
Take action! This post was submitted in response to Voices of Our Future 2012 Assignments: Feature Stories.