REPORT #639 May 2003

Produced by the Belize Development Trust

With the announcement that the GOB will start, or has started construction on the additional Chalillo Hydro Dam on the Macal River, the opposition have been talking court cases again. It is easy to get lost in the debate on the electrical supply in Belize, due to our reliance on Mexican electricity from over the border, over which we have no control and eats foreign exchange. Throw in a few red herrings to do with canoeing, lack of water in the dry season, earthquakes, Mayan ruins, alleged kickbacks, endangered species of parrots and payoffs and exorbitant profits for the Canadian Fortis electrical managing monopoly in Belize and it is hard to seperate the wheat from the chaff with the various opposing arguments.

So I decided to do a straight forward economic study of my own. A layman's attempt to sort out the conflicting arguments from both sides.

An engineer has calculated the daily production of electricity from the Mollejon Dam now existing and the additional dam they wish to build at an average 5 megawatts of electricity, daily on an annual basis. We do not get that of course, because during the dry season there is no electricity from the existing Mollejon Dam, and this will not change with two dams. Mother nature respects not the wishes and dreams of mortals. During the rainy season more electricity is produced, but this is only for half the year.

Nucleur powered electricity in South Florida from the Turkey Point power plant on Biscayne Bay sells retail to the customer for 9 cents USA per kwh. The actual cost of the electricity is around 4 cents per kwh, but taxes, service fees and other charges up the ante.

The Belizean customer is currently paying 18 cents USA per kwh for electricity in Belize, from a combination of moderately high speed diesel plants, Mexican imported power and some from the Mollejon Hydro Dam. Double the cost of electricity at retail customer prices of South Florida.

Most of Central America are rapidly converting to low rpm Finnish crude oil Wartsila 30 year diesel locked in price contracts. A combination of state, or private and foreign banking institutions like the World Bank are importing and signing 30 year contracts with local entrepreneurs to sell electricity and report over in neighboring Honduras; that they are making a handsome profit selling electricity to the Honduran National Grid for instance at 6 cents US per kwh. Presumably their production cost is around 3.5 cents to 4 cents USA per kwh? I don't know what the retail price is in Honduras for electricity to the customer, by the time service and distribution charges and government taxes are added on, but usually such prices are slightly double the wholesale transmission grid supply cost. This would put the retail customer in Honduras paying around 13 to 14 cents US per kwh. Considerably less than the current cost of electricity in Belize the neighboring country at 18 cents US per kwh and proposed after the Chalillo Dam at around 24 cents US per kwh.

The argumentative Chalillo Dam project on a 50 year deal in Belize, is argued as profitable only to Fortis the Canadian Management company, of the Belize transmission grid monopoly; because coming from a hydro dam it would pretty much be solid profit and increase their dividends to around 25% to 35% for a utility company. The GOB supports the Fortis monopoly and there is a very uneasy feeling in the public's mind that the Minister of Finance and the cabal in GOB has some sort of hidden secret deal to collect baksheesh from this new dam? True or not, there is wide speculation of the screw up, Ralph Fonseca, has made over the electrical supply in the country of Belize, over three terms in elected office.

It would seem on logical reflection that with the Chalillo Dam, the retail price of electricity in Belize to the customer would not go lower than the present 18 cents per kwh, double the price in South Florida, or more than a third higher than in neighboring Central American countries. And actually, most probably increase to 24 cents US a kwh to the retail customer in Belize, or 266% higher than the cost to the retail customer in South Florida and 185% higher than the cost of electricity to the retail customer in Honduras, or other Central American countries now rapidly converting to crude oil, low rpm Finnish Wartsila 30 year fixed contracts at basic 6 cents US per kwh, or 13 cents US per kwh to the retail house customer.

The hydro dam of Chalillo to be built therefore, does not seem like an economically logical construction? It has been pointed out that transmission line losses for electricity for a fixed production facility like the Chalillo hydro dam proposal run 15% to 30% over distance. Whereas the Wartsila crude oil cheaper low rpm diesel capital costs can be distributed at different points along the transmission grid in Belize and be more efficient to less electrical losses in transmission, due to seperated supply plants. An added bonus being hurricane and disaster protection through diversified locations.

From a Capital Investment argument, the Wartsila diesel 30 year contract wins hands down. For the same cost of the Challilo dam that will produce 7 megawatts in the rainy season and only increase production at the Mollejon Dam downstream for a week from the reservoir; the same Capital Investment will buy 44 megawatts of electricity for a 30 year contract from Wartsila crude oil low rpm diesels. This 44 megawatts can be distributed in smaller plants along the transmission grid in Belize to lessen line losses and increase efficiency, unlike a fixed position Chalillo hydro dam.

There is the problem of foreign exchange supply to pay for an offshore operated entity electrical production at 6 cents US per kwh to Wartsila. But in Puerto Cortez, Honduras they bought their Wartsila plant from the Finnish operator in 8.5 years of operation themselves. This plant is a mixed stock ownership of private investors and international banking institutions like the World Bank. They are making a handsome profit at 6 cents US per kwh they say?

This layman's logic says the Wartsila deal is a better deal, given the economic facts that we know. Accompany that with new legislation i Belize, to make private operators/entrepreneurs capabile of installing Wartsila contracts and sell to the Belize Transmission Grid and have Fortis continue to deal with the wholesale transmission and retail aspects of electricity; you have a profitable winner for the retail customer in Belize, also profitable, albeit lower expected somewhat greedy profits for Fortis the Canadian operating management company and also the private investor syndicates covering the capital investment. The Belizean customer would shave 4 to 5 cents USA at least, off his or her, kwh electrical bill. Even with the GOB still getting all the taxes required.

What do you think of this analysis?

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