The Public Utilities Commission (PUC) has told the Guyana Power and Light Inc (GPL) that it is engendering consumer dissatisfaction with its deplorable billing system and that instead of a decrease in losses, these have increased since it took over the power company.

GPL had said that its ability to deliver on its obligations depended on the availability of funds to support its improvement programmes. It highlighted its inability to raise debt finance as key to its incapacity to meet all of the targets as specified under the terms of agreement entered into with government at the time of the company’s privatization.

However the PUC, in a letter to GPL’s Chief Executive Officer John Lynn dated April 19, said it was of the view that the company was attempting to use these criteria as a means of excusing its inadequacy to undertake agreed improvements in the power sector.

The PUC sought to bring to the company’s attention the fact that the main worry of consumers was that it continued to insist on earning the 23% on equity as set out in the agreement.

According to the PUC’s correspondence, in response to the company statement at a recently convened hearing that there was no linkage between its performance and that of the licence tariff setting arrangements, it had not seen the agreement mention that the rate of return was not dependent on productivity or achieving targets set.

In defence of the company’s record at a public hearing of the Public Utilities Com-mission (PUC) on April 16, Lynn, reading from a prepared statement said that at no time had the company been in the financial position originally projected in the agreement.

Only marginal profits had been made, he said, with cash being in relative short supply as compared to operational and investment requirements with no dividends being paid to shareholders. Tariff charges, which have continued to rise steadily since the power company’s privatization form the basis of GPL’s capital expenditure to date.

He said that the company had managed to raise debt in the sum of US$7.3 million from Republic Bank of Trinidad/NBIC; funds for new generation amounting to US$3 million from Banco de Credito (Panama); and funding from the European Investment Bank to the tune of US$17 million, which were on favourable terms but subject to matching funds being raised.

According to the CEO despite these successes, a lot more funds needed to be raised which the company was aggressively working on while also working on a review to see if the capital investment requirements could be reduced while still achieving the performance target probably over a somewhat longer time.

This, Lynn said, might have the dual effect of lowering the funding requirement and reducing the dependence on tariffs, which might otherwise be higher.

According to Lynn, the company has plans for the future, which will quickly build on progress to date but that these were dependent on its ability to raise debt finance.

This ability was contingent on the revenue stream provided by the tariff setting mechanism enshrined in GPL’s licence, which provides for cash generation to repay loan capital plus interest and also provides a return on investor equity.

According to the PUC’s letter, in consideration of the company receiving the stipulated rate of return it must make good on its undertaking. It said that if GPL’s interpretation in relation to the agreement was correct then it meant that it could close down operations and still look to recover a 23% rate of return.

The PUC also highlighted that the company would have done a due diligence test and based upon the advice of experts would have gone into the bargain and thus made undertakings. But while having agreed in its response that many of the objectives have not been fulfilled it continued to defer them year after year.

The PUC acknowledged that political and economic conditions in the country might have an influence on investments, but said an incumbent ought not to blame these conditions for its non performance on an existing venture. The organisation noted that these factors were not unknown at the time the agreement was negotiated and finalised.