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Saturday, August 30 2014 @ 06:28 AM EDT

Government Dialing Back Electricity Subsidies

Money MattersStarting next July 1, Panamanians will have to pay more for electricity consumption in the absence of resources to maintain the Tariff Stabilization Fund. This was announced by the Minister of Economy and Finance, Frank De Lima, who said there have been no increases in this area since 2009. He said the situation has become "untenable" for the state, due to the amount of money needed to keep subsidizing the electricity tariff. De Lima said during 2011 the government spent about $241 million dollars on subsidies for electricity. While the head of the Ministry of Economy and Finance (MEF) said they have not defined the percentage of this increase, he said those affected will be those consumers who exceed 400 kilowatt hours (kw / h) usage per month.

It will affect tourism - The rising cost of electricity could also send the tourism sector reeling. Entrepreneur Cesar Tribaldos, President of the Panamanian Association of Hotels (Apatel), said this increase will gradually make the hotel market noncompetitive. He said Panama has a very high cost of electricity for the tourism industry. Poultry production will also be severely hit, since this sector depends between 90% and 100% on electrical energy. It is feared that because of this, chicken prices could continue to rise. (Mi Diario)

Editor's Comment: The government has been keeping the cost of electricity artificially low through the use of subsidies. They're going to dial that back somewhat. Hopefully falling oil prices will help offset the increases somewhat, at least in the short term. This is why the government is building all of those hydro electric plants all over the country. Panama has mountains, rivers, and a lot of rainfall - perfect combinations for hydro electric power solutions. Electricity generated by hydro plants is about half as expensive as that generated by burning bunker or coal. There's also a plan to build a new plant fired by LPG, which is cheaper.

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