Honduras responded to the United States for its questioning of the energy reform project

Honduras responded to the United States after the US ambassador questioned a bill to reform the energy sector which plans to guarantee the electricity service as a public good. The project also proposes to review the contracts with power generation companies and the National Electric Power Company (ENEE). According to the US diplomat, she is concerned about the effect of the reform on foreign investment.

ill-advised diplomacy

The Honduran Foreign Minister, Enrique Reina, questioned the intervention of Laura Dogu, US ambassador, in the debate on energy reform. “Mrs. Ambassador. You have been received with open arms. The energy reform is urgent as a State, combat an inherited situation of corruption and poverty”the foreign minister wrote on his Twitter account.

“We are concerned about his misguided opinion on domestic politics, which does not contribute to good relations with the US”, warned in response to the tweet from the Washington diplomat who had assured that she was analyzing the Castro government’s proposal and had “concerns” about it. “The energy reform is critical for economic development. We are analyzing the energy proposal and as I have written we are concerned about the effect it will have on foreign investment and the independence of the regulatory agency” for energy, Dogu wrote on Twitter.

The structural reform questioned by the US ambassador was presented a few days ago by the president of Honduras, Xiomara Castro. The project sent by the president entitled Special Law to guarantee the electricity service as a public good of national security and a human right of an economic and social natureprovides subsidies to low-income, unemployed or disabled sectors and the review of contracts with thermal, wind and other generators so that they lower the price per kilowatt hour. In this sense, the project establishes that in the event that a renegotiation is not possible “it is authorized to propose the termination of the contractual relationship and the acquisition by the State prior to the fair price.”

Law of 2014: towards the privatization of the ENEE

The current law of the Electricity Industry was enacted in May 2014, in the first term of Juan Orlando Hernández at the head of the Executive after exercising the presidency of the Honduran Congress. That legislation opened the doors of the state-owned energy company to private investment that two years later would have the Honduras Energy Company (EEH) at the forefront of energy distribution in the country. This was reflected in an increase in the kilowatt rate and the price of meters. While the ENEE maintains a millionaire debt with the private company to whom it must transfer more than 10 million dollars per month. In addition, since 2017 the payment should have increased to 15 million dollars. “All this to operate a network that is totally neglected and destroyed”denounced a worker of the state company to the Honduran news portal countercurrent.

As for energy generation projects, according to the portal countercurrentthe deputy of the Salvador Honduras Party (PSH), Ligia Ramos, member of the Energy Commission in the parliament, recalled that On January 20, 2014, when renewable energy contracts were approved, the hemicycle then directed by former President Hernández was not in office. “There they left 99 renewable energy contracts, exaggerated in terms of what they charge, they gave trusts and the EEH was approved,” Ramos said, quoted by the Central American media. The Honduran legislator also denounced that the looting of the state company dates back to 1994. “They have wanted to privatize it. The private company has profited from the needs of the population and the ENEE; They practically broke it.”

Reaction to the Xiomara Castro project

However, the review of contracts alerted the main energy generators that they even threatened a major supply cut after the bill was sent. The Secretary of Energy, Erick Tejada, assured that the Lufussa thermal company threatened the ENEE and the government with suspending the supply of energy. “We are experiencing an unprecedented crisis, not only in the ENEE, but also in the country. Twelve years where a model of corruption was entrenched”, assured the public television of Honduras. roof too He questioned that despite the fact that since March 2021 the state company owed around 800 million lempiras to Lufussa, only now, 45 days after the Castro administration, does the private company attack with threats.

“We are not going to negotiate with a gun to our heads”, sentenced the Honduran official. In addition, he recalled that the renegotiation of the contracts with these companies is one of the campaign promises of the president of Honduras. “Most of these contracts are harmful to the public interest and it is impossible to conceive of rescuing ENEE without renegotiating those contracts”, he added in reference to the terms that the JOH government negotiated and that set prices well above those of the countries of the Central American region. According to Tejada, since 2010 the state has paid Lufussa $2.6 billion. For its part, the private company assured that it did not threaten the state company, and that “it is simply being notified that we do not have the financial resources to purchase fuel that guarantees maximum energy production.”

The country’s energy demand is about 1,700 megawatts and 60 percent is generated by thermal plants that work with petroleum derivatives. From these contracts with private generators (about twenty companies) that supply 60 percent of the country’s energy demand, the State of Honduras drags a debt of more than 3 billion dollars. In the project, Castro also reports that since the 2009 coup the losses have increased and only in the distribution area (since 2016 in charge of the EEH) they increased from 20.8 percent to 30.75 percent at 31 December 2021.

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