Congress rejects fast track bill

Ecuador's congress has voted against the government's fast track power bill to guarantee that hydroelectric generators get paid for their power, because it could make state distributors less efficient, local newspapers reported. Sixty-one of the 78 lawmakers present voted against the bill. Under the proposal, the economy ministry would have ensured that companies bringing new hydroelectric capacity on line would be paid by distributors, on the condition that the prices are below the reference price established by power sector regulator Conelec. The guarantee would have immediate effect and last through 2025. However, the congressional economic committee said in its report that the state cannot guarantee payment to any company at a price over the cost of production, and if it does "it is encouraging the inefficiency of distributors at the cost of the majority of the population." Ecuador's President Lucio Gutiérrez proposed creating a power sector development fund, known as Fonsel, to receive revenues from state distributors and pay generators to avoid running up debts that in the past have made private companies slow to invest in new plants. The government would issue up to US$500mn in 12-year bonds to create the trust, which would be managed by the central bank. The economic committee questioned the order of payments, which would prioritize payments to private and state generators and then transmission companies, leaving the payment of distribution costs until last. The idea was to provide an incentive for state-owned distributors to improve their collection of payments to ensure they get paid at the end, but legislators worried that this would make distributors less efficient. Legislators also said the government should not be allowed to increase the debt burden in a nation already saddled with debt, Reuters reported. "This bill is a lie that tricks people. It won't help to reduce electricity rates or help solve companies' problems," Reuters quoted congressman Rodrigo García, of the left-leaning Pachakutik party, as saying. Gutiérrez has touted the electricity reform bill as part of his government's economic program in meetings to obtain credits from multilateral lenders like the World Bank and IDB to finance next year's budget. Ecuador is hoping to win a US$500mn loan package once it reaches a broad agreement for the International Monetary Fund to monitor its economic program throughout next year.