VZCZCXYZ0009
RR RUEHWEB

DE RUEHSJ #0823/01 2682006
ZNR UUUUU ZZH
R 252006Z SEP 09
FM AMEMBASSY SAN JOSE
TO RUEHC/SECSTATE WASHDC 1244
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RHMCSUU/DEPT OF ENERGY WASHINGTON DC

UNCLAS SAN JOSE 000823 
 
SIPDIS 
 
DEPT FOR WHA/CEN, WHA/EPSC:MROONEY, SGARRO AND FCORNEILLE, 
EEB/TTP/BT:RMANOGUE, EEB/ESC/IEC/EPC 
 
E.O. 12958: N/A 
TAGS: ECON ENRG EINV PGOV PREL CS
SUBJECT: COSTA RICA: POSSIBLE PATHWAYS TO REGIONAL ENERGY 
PROSPERITY 
 
¶1.  SUMMARY. In their September 16-17 trip to Costa Rica, the 
Pathways to Prosperity team of WHA/EPSC Director Matt Rooney, 
WHA/EPSC Trade Officer Susan Garro and EEB/TPP/BT Director Robert 
Manogue met with three energy-sector leaders: Pedro Pablo Quiros, 
executive President of the Costa Rican Institute of Electricity 
(ICE); Mario Alvarado, executive director of the private energy 
producers' association ACOPE; and Julio Matamorros, Vice Minister of 
the Ministry of Energy, Environment and Telecommunications (MINAET). 
 All three experts discussed the Central American Power 
Interconnection Program (SIEPAC, reportedly operational within 18 
months) and the future of the electricity market in Costa Rica.  Key 
concerns included the reliability of SIEPAC generated supply, Costa 
Rican development of excess capacity, and energy reform.  Julio 
Matamorros also spoke of successive measures that Costa Rica will be 
taking in coming years to convert the transport sector from 
hydrocarbon fuels to electricity and hydrogen.  Costa Rica has 
admirable vision for its domestic energy future; U.S. diplomacy can 
help them be similarly visionary about the potential regional 
market.  End summary. 
 
---------------------- 
MANAGING SIEPAC SUPPLY 
---------------------- 
 
¶2.  ACOPE's Mario Alvarado emphasized private industry's desire to 
join ICE as party to SIEPAC and enter into long-term cross-border 
supply contracts.  ICE's Quiros' view seemed to center on SIEPAC as 
a mechanism available to the grid operator (ICE) to facilitate 
exports of excess Costa Rican electrical power.  Quiros, focused on 
instability among Costa Rica's northern neighbors, clearly did not 
feel that regional power market integration could contribute to 
Costa Rican security in any other way.  He did acknowledge the 
interest of a proposed sea link from Panama to Colombia (and hence 
to Venezuela and Ecuador).  Alvarado's take on SIEPAC was less 
focused on the instability of Costa Rica's northern neighbors; he 
emphasized that a strong regional regulator would have to be in 
place to ensure that national regulators have the power and the will 
to force generators under their jurisdiction to honor cross-border 
contracts, even when prices are rising in their national market.  In 
this regard, Alvarado referred to an incident in 2007 when Panama's 
energy regulator exacerbated a Costa Rican power shortage by 
prohibiting export of energy to Costa Rica, despite a signed 
contract, because Panama was short on electricity. 
 
------------------------- 
WHO BENEFITS FROM SIEPAC? 
------------------------- 
 
¶3.  Vice Minister Matamorros commented that the Costa Rican consumer 
needs to benefit from SIEPAC, with the clear implication that the 
system needs to be managed properly in order for this to be the 
case.  COMMENT: We note that Laura Chinchilla, front-runner in Costa 
Rica's upcoming presidential elections, wrote an opinion piece on 
September 19, 2009 in which she advocated the construction of excess 
hydroelectric capacity and export of that energy until such time as 
drought-reduced supply meets national demand.  This appears 
consistent with Quiros' and Matamorros' vision of SIEPAC's role. End 
Comment. 
 
--------------------------------------------- 
REFORM IS DESIRED BUT WHEN IS THE RIGHT TIME? 
--------------------------------------------- 
 
¶4.  In reference to a recently introduced Energy Bill designed to 
begin the unbundling of the Costa Rican power sector and increase 
the role of private electricity generators in the market, Quiros 
stated that he isn't opposed to a more liberal model of energy 
generation but doesn't believe that the timing is right for reform 
in Costa Rica.  He cited the fact that this is an election year and 
that the ICE unions are already upset with the Telecom market reform 
established by CAFTA-DR.  Matamorros, who has been the principal 
official advocate of this legislation, also acknowledged that the 
proposal will not be addressed until the next administration.  Both 
Quiros and Matamorros emphasized the importance of fomenting local 
research and development in the energy sector.  Furthermore, they 
emphasized the attractiveness of cooperation with U.S. research and 
development entities through mechanisms such as the Energy and 
Climate Partnership of the Americas, noting that Costa Rica had 
written to the U.S. Department of Energy in support of a proposal 
for a regional energy efficiency center made by the Natural 
Resources Defense Council.  The proposed center, to be located in 
San Jose, would build on the Central American experience with 
electricity market integration and promote broader knowledge of best 
practices in efficiency and reliability of grid management. 
 
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COMMENT 
------- 
 
 
¶5.  These conversations show the core challenge of successful 
completion of the SIEPAC process:  SIEPAC can only succeed if the 
Central Americans come to see the market as a truly integrated 
regional whole.  A regional market that each party sees as a dumping 
ground for cheap excess power will not result in renewable energy 
investment which is needed to secure the economic and climate 
benefits that are possible.  U.S. diplomacy under the banner of ECPA 
can help the parties achieve more. 
 
BRENNAN