Prime Minister Samuel Hinds has written to Managing Director of the Commonwealth Development Corporation (CDC), Jim Romanos, proposing that the increase in electricity tariffs be delayed for three months until a determination is made that these rates are justifiable.

"As shareholders, we do have an obligation to ensure that consumers do not pay for inefficiencies. As shareholders, we chose the manager and we have the responsibility to ensure that the manager delivers," Hinds told Romanos in the letter of February 18. Hinds referred to a number of the performance targets not met by the management team in the letter to the CDC, the lead partner in the consortium with which the government entered a joint-venture arrangement for the power company.

Hinds advised Romanos that the three months would allow for the completion of the audited accounts of the Guyana Power and Light (GPL) and confirmation of the rate revision calculation. "Our directors [on the GPL board] have enquired into some of the numbers and have not been able to satisfy themselves on the accuracy of certain numbers, ie, construction work in progress," Hinds told the CDC.

He said further that the delay would allow for the PUC's hearing into the issue of performance targets as it was being argued in the public and if the licence requirement of 29% for technical and commercial losses had been achieved by the end of year two, then no tariff increases may have been required.

"Some have estimated that GPL's expense may have been reduced by as much as $1.9 billion if the targets were achieved. When compared to the deficiency of $1.6 billion, the argument is made that there should be no increases," Hinds told Romanos, assuring that the government understood that the issue was complicated.

He further posited the argument in the public that if the losses had been reduced, there would have been more power available to meet demand and GPL's investment in emergency generation additions might not have been required.

Hinds noted that while the sets had improved the electricity service, they added to the rate base. He furthered that GPL was to have installed ten megawatts of base load capacity in 2001 but instead installed ten megawatts as medium speed sets.

The Prime Minister said that while the technical loss reduction programme required investment over the medium term, most of the targeted loss reduction in 2000 and 2001 should have come from a reduction in commercial losses.

The delay, Hinds said, would also allow for resolution of the issue of the retained accounts, which has implications for the old GEC and GPL receivables given the lack of separation of these two. He said the matter had been overdue for eight months with no evidence of reconciliation. He added that GPL showed significant receivables on its books for GEC, but could not attach any value to date to GEC. The government in the interim paid all of its subsidy commitments, Hinds noted.

Hinds' letter came after the government reconciled its position on the rate increases.

President Bharrat Jagdeo, commenting on the issue yesterday, reiterated the government's position on the issue and noted that the Public Utilities Commission (PUC) had jurisdiction and could decide on penalties which could go back to consumers once it found that the management team did not meet its performance target. (GITANJALI SINGH)