The Future of the Electric Sector in Guatemala

The subsidiary role of the State can be translated in that it does not practice any business activity that is, or can be, developed by private entities. The normative role with respect to energy is delegated to the National Commission of Electric Energy. The managerial role, or the actual provision of the service, must be delegated to the private sector.

The shared utilization of the transmission systems is a valuable tool in a competitive policy at the generation level and, given its importance, clauses on tolls and on its regulation are an essential part of the law.

The law considers the provision of a private distribution service whose price is not regulated, with the exception of distribution to small users, who will be charged according to a consumption limit that will be set by the law.

However, if the system employs political prices, without increasing the efficiency of the electric entities that utilize public resources, this sector will become stagnant. Any businessman knows that if what he sells has a lower price than its cost, he will never be able to improve or grow in his business.

The intervention of the Human Rights Ombudsman must also cease, for it has caused the exact opposite effect of what is desired.

It has been said that the government has started to disassemble the federal stock of the electric sector which will be auctioned to an investment bank, who in turn will sell the generating plant. The objective of this sale is to push EEGSA away from generation, and leave it only with distribution. However, this strategy will only compromise a mixed entity with the future payment of prices that will possibly be higher than those that could be contracted in a competitive environment.

If the objective of the reform is to essentially increase the coverage of this primary service, then the next step that must be taken is the one regarding tariffs. Tariffs must respond to market mechanisms, for them to be realistic. This is the only way to create an electric sub-sector that is financially sound and efficient.