New CEO of ICE in Costa Rica committed to geothermal energy development

Irene Cañas Díaz, CEO of ICE, Costa Rica at the IRENA General Assembly 2018 (source: IRENA)

Alexander Richter 24 May 2018

Earlier this month, Irene Cañas Díaz, civil engineer with a background in renewable energy and urban electric transport, arrived in her new role as CEO of the Instituto Costarricense de Electricidad (ICE). ICE is the Costa Rican government-run electricity and telecommunications services provider.

Before joining ICE as CEO, she was the Vice Minister of Energy of the Republic of Costa Rica. She worked more than seventeen years in the Process of Electric Generation Technologies at the Costa Rica Institute of Electricity, making different technical and feasibility studies for hydroelectric power projects. Later on, she focused her professional career at ICE in the development of studies about non-conventional renewable energies.

Her focus will be on rejuvenating the business of the institution, as she highlighted in a recent interview with La Nacion. Here below a translation of that interview.

Rejuvenate, however, does not imply new developments such as putting the Costa Rican Electricity Institute (ICE) to build a highway, an objective that the previous administration was promoting.

For Cañas, the business restoration that is proposed involves generating income in the form of new business, but within the natural area of ICE. It clarifies that this does not mean raising the rates either.

She sees possibilities in the sale of services in Central America and in regaining her subscribers with better attention.

This is part of its strategy to face indebtedness that reached ¢ 3.3 billion as of September 2017, between commitments with financial entities and with its own savings fund. It must also face the sustained drop in domestic demand for electricity.

Cañas also promises to “calmly analyze” the claims of little transparency about the health of its finances, which has been raised by the Comptroller General of the Republic (CGR) and some deputies of the previous Congress.

This is an extract from a conversation with Cañas two days before she put on “the helmet and the yellow cape”, as she said, the first woman to assume the presidency of that public company.

What is your priority agenda?

Strengthen communication channels with all sectors. It is very important to continue sitting with the Public Services Regulatory Authority (Aresep) and seek solutions to different issues together.

“We need to speak the same language, but with more fluency because sometimes it costs us to sit down with the Comptroller General of the Republic, with the consumer sectors, it is very important that we see the consumer as our priority. ”

Hereda an entity whose financial health is unknown in detail; with a debt estimated at ¢ 3.3 billion. How do you see yourself trying to manage such a level of indebtedness without losing sight of your consumers?

ICE is an institution that has given a lot to the country and I have always commented that, in the case of telecommunications, the technology advanced much faster compared to the area of energy. In telecommunications, the institution adjusted to the changes by leaps and bounds and continues in that process. In energy already happens to us. One of my goals is to see how we reinvent the electricity business. Already worldwide, large companies similar to ICE, rethink their business.

“With the arrival of distributed generation, it is no longer possible to think that the only important income is to sell energy, other services must be sold and that goes in the line of smart grids to regulate energy according to demand, that is the transformation that The important thing is to look for those new business schemes that generate other income that is not just the tariff.

And what would it be ? Public work?

I do not see it in public works, I see it more in other areas and associated with the topic of intelligent networks. With the arrival of electric vehicles, ICE now has the great task of coordinating with the rest of the distribution companies a recharging network for these vehicles throughout the country and that subject will be given a lot of momentum. Today we have a very traditional scheme with a control center that dispatches energy and consumers using it at different times.

“With distributed generators that inject energy, and a fleet of electric cars, it is logical to go towards a smart grid scheme to manage supply and demand during the day, this allows me to better know the consumer and such knowledge would allow me to design service packages. Tailor-made, so I teach him how to handle the demand so that neither harm him, nor the system.

“This scheme is totally innovative with respect to the classic ICE route and will allow the entity and the National Electric System (SEN) to achieve significant savings.”

That innovation happens to drop classic businesses such as generation, transmission and distribution of energy?

Not so much like that. ICE historically corresponded to distribute, transmit and generate.With so many technological changes, what can ICE do? Manage resources better and this requires technology and, therefore, investments. This has already been discussed within the framework of the National Energy Conservation Commission (Conace) where all the distribution companies and Aresep itself are in line with improving the conditions in the National Electric System (SEN), promoting it to be more efficient . It is not necessarily a radical change.

Leave the usual business and add others and, thus, get more money?

Exactly. For example, there is a topic about which I have always said that we must venture: how we improve customer service, how to enhance that service in other areas.ICE breakdowns are often called from a house because of some type of problem. The technician arrives, reviews and tells the owner that there is internal damage to his house.Then we get to the point where we suggest that person hire someone they trust for such a repair.

“We have to go further. If the damage is internal, if it is not from the ICE, perhaps the ICE technician can suggest other services there and provide data there of estimates for the cost of the arrangement and labor. ”

And that modernization happens because the National Center of Control of Energy, from where the supply is administered ? Do you become independent from ICE?

That is a subject that must be analyzed more thoroughly. First you have to take other steps before that. I would focus first on how to implement new services and first order the house.

For such a large, complex and traditional company you propose something that sounds challenging. In that adventure, will you keep the corporate management structure that you inherit from Carlos Obregón or make changes? These posts have been publicly denounced by ICE unions and deputies who perceive them as a move to tie officials to positions before the change of administration.

I have to analyze it calmly. I have been [here] in the Ministry of Environment until today (May 7th) working 24/7 and I must meditate it in depth. Yes, I would like to tell you about the experience I have had with that topic in the board of directors of Recope (Costa Rican Petroleum Refinery). There, we also inherited from the past administration the intention of Costa Rica joining the Organization for Economic Cooperation and Development.

“From Minae, the two defenses that were made in Paris to evaluate the environment and energy issues, they corresponded to me, I know very well the process for joining the Organization for Economic Cooperation and Development (OECD) and, in In this sense, I rescued that our ears have been pulled on issues where we are lagging behind such as digital procedures and data transparency.The other challenge for that income is everything related to corporate governance.The entire corporate governance process at Recope has been also done at ICE, now I have to go to know in depth how it has been. ”

You are reminded that the Comptroller’s Office denounced in the Legislative Assembly that ICE has a problem with transparency in its finances and that Claudio Dittel, the company’s ex-manager of Finance and Administration, also said in that forum that ICE maintains salary privileges for “bosses” without headship “and that has him kidnapped” a leading clique that does not allow anything to move without his consent “. So he said it literally.

In that subject I would not dare to advance criteria. It’s something that, once I’m sitting there starting on Wednesday, I’ll have to analyze it in depth. I have the possibility of carrying a support team and I am still completing it with that vision of going to reinvent the business model and help direct the company to new areas. Faced with that specific question, I still do not dare to advance criteria. I prefer to be there inside and know well what is happening.

As soon as its name was announced to the front of the ICE, the unions asked for changes in the organizational chart of the entity which they qualify as a “care network”. What answers them?

I prefer to call the dialogue with the unions first and that it is not by means of a general post that my concerns arise. I prefer it to be at a table talking where they transmit their concerns. As I said, I do not know what has been done to date in terms of corporate governance, but that is a priority issue for me as of this week. I want to first sit down to listen to the unions and form my own criteria.

The Board of Directors of ICE filed a lawsuit against Marta Acosta, the Comptroller General, in 2015, feeling that the Comptroller interfered in her autonomy and independence regime by giving her orders through an inspection report. Will she keep that demand?

That is another issue that I have to analyze in depth and, again, I prefer not to advance criteria. It is an issue that I have to put in my head and understand it. I had that same experience when I joined the Board of Directors of Recope and had to study everything about the issue of the refinery with China, about Soresco and there was a lawsuit against the Comptroller. I am in the same position, I must enter and soak in the matter before referring me.

And would you tell me the same if I ask you if you will implement the International Financial Reporting Standards (IFRS)? Or would it preserve the line followed by Don Carlos Obregon to postpone its full application?

Definitely, this topic is a priority, but we must analyze the term and the management on how we will do it well because applying IFRS norms, depending on how it is done, can negatively or positively impact the rates. In that sense, the priority is that the improvements are for the benefit of the population. Then we must, with great care, analyze what the rules involve in the tariff issue. What I will do is sit down with the Aresep and the Treasury to analyze very well how to execute this implementation so that the rates are not negatively affected.

ICE registers four plants as operating leases. Under this modality, all operating expenses of these plants are transferred to the monthly electricity bill. If they were reclassified as financial leases under IFRS, only the interest rate of the trust would be included in the rate and the amortization of those assets would be excluded. This would force the Aresep to lower rates, I do not know if I knew it?

Yes Yes Yes. That’s why I said that we have to analyze it well, so that we can see what is best for the country. It depends on how we do it and at what speed.

How do you intend to make electricity tariffs more competitive than those offered by other countries to your companies? He already explained how he expects to generate more income for ICE, but what would be the route to lower the price of electricity.

That issue is one that, with the Vice Minister’s hat that he had, has been analyzed within the framework of Conace and we have been working together with the Ministry of Finance, Aresep, Minae and the private sector. Several exercises and analyzes have been done in these four years, indicating that this is an integral solution that falls outside the competence of ICE. With Aresep, we have discussed that the tariff structures are already obsolete and should be changed. Also, like Minae, it is necessary to improve the analysis made by the expansion plan in generation.

“There are distribution companies and municipalities that in recent years have developed projects for their coverage areas, so in the end, we do not have an optimal integrated planning that was what the Comptrollership told us.” The projects that are being carried out are not the best national”.

Do those in ICE also fall into that category? The Aresep and the Comptroller’s Office have made direct accusations to ICE due to cost overruns and poor planning of works such as Balsa Inferior, Central Wind Farm and even the Reventazón hydroelectric plant, whose costs are transferred to the receipt.

The Aresep today no longer recognizes certain cost overruns of projects after the experience that was had with some. This is what happens today and they no longer recognize themselves. A new methodology is being implemented within Conace, according to which controls are imposed and the Aresep is requested to fix more filters before building. All the projects are going to be measured with the same rule, whether from the ICE, the municipalities, private developers or the distribution cooperatives.

It means that, in the last analysis, the will to build a hydroelectric power plant like El Diquís will no longer depend only on the ICE?

That’s how it is.

The planning and development manager at ICE, Javier Orozco, recently stated that [today] it is not necessary to add more plants to the SEN, but insists on building the El Diquís hydroelectric power plant to be a “great backup battery” for Central American works based in sun and wind. Let the Ticos pay for our Central American brothers. Do you share that vision?

I consider that to the studies that have been made of El Diquís, it is necessary today to add other variables. It is necessary to analyze the benefits that it would give under the scheme of auxiliary services not only for Costa Rica, but for the region. I do not say yes or no. With Diquís, it is necessary to evaluate the appearance of new services, which were not initially considered a few years ago.

“At a regional level, Honduras acknowledges that it made a mistake by adding an intensive amount of solar panels in the same area, who has given stability to that system? Costa Rica, but that service remains unrecognized as it should be. necessarily the cost of Diquís would go to the tariffs of the Costa Ricans because they can appear possibilities of selling services to Central America and define how they would be recognized “.

So if you see future to launch the construction of El Diquís in his administration?

I would not say that. First you have to make numbers with new variables that are now on the table.

There is a clear international tendency to privilege clean generation sources based on sun and wind and much less on water sources. Having this clear, would you point a little more solar where we have little installed capacity?

In solar, totally in agreement. What I see is that the demand does not grow and we have an expansion plan with private generation projects on the way and I am more interested in developing those 100 MW that the Borinquen I and II geothermal plants would give us. That is the most reliable renewable energy we have, geothermal energy is always there.

“Solar is important, but if demand does not grow, I would not commit to filling the country with solar plants if I do not have anyone to sell it to, and I have a bottleneck in Nicaragua with the regional transmission line to export. a solar plant rises in six months, at this moment the SEN does not need it, especially if I have wind and geothermal projects on the way, everything will depend on how the demand behaves “.

But perhaps it is not contradictory to discard solar plants in this way but to continue caressing the possibility of making a hydroelectric plant of more than $ 3,700 million, such as Diquís; in this situation of falling energy demand only because of the possibility of selling in the region hypothetical energy support services and having transmission problems in Nicaragua, as you yourself acknowledge.

That’s why he said that neither yes, nor no. It is a matter of analyzing everything in a comprehensive manner. Here I am not discriminating against any form of technology, everything depends on whether our society will consume more or less.

“My point of view is that it will be less consumption because energy efficiency policies are getting stronger and electricity-based devices are becoming more efficient, I am not discriminating by source, everything will depend on the demand and what will be the way optimal to meet the demand “.

The ICE has been making efforts to cut its form looking for savings and efficiency. That staff today could be around 19,000 officials and right now the Institute lacks large construction projects where to put its workers. Would you value cutting the payroll further to better support your financial health?

The data I have is 13,800 employees in the ICE.

And that data includes the project form?

No, that is independent and fluctuates if there are projects or not.

And how much is the ICE form that today is dedicated only to do works?

I could not tell. I asked a few days ago and the data I received was that of 13,800 people. I believe that the data of the project schedule did not ask for it. I walk with a thousand things in my head. However, when businesses are diversified, one removes functions and puts others in place and thus decreases the daily costs that are financed from the rates.

“I can not get to ICE and throw 7,000 officials on-the-street. I have to first offer them a ‘Plan B’ because the social cost of such an action would be huge, if I reinvent businesses and create other income, the pressure on a regulated business. ”

Source: La Nacion