Power company tariff change should be lower - regulatory body
By Gitanjali Singh
Stabroek News
June 12, 2002
The Public Utilities Commission (PUC) says that its calculations show that the power company should be applying a lower tariff change than the one it recently instituted.
The regulatory body conceded that the law does not allow it to adjust the rate setting mechanism for the power company but says it has a duty and obligation to query figures presented to it by GPL and it has questioned the integrity of data submitted by the company.
In an invited comment to Stabroek News, PUC Chairman Prem Persaud says the integrity of the figures presented by the Guyana Power and Light (GPL) is crucial to any determination the Commission may make.
The power company published a statement last week in response to earlier remarks made by Persaud to the effect that the company would not be able to institute new rates from June 1 because the commission still has queries over the issue.
But in the statement, GPL’s chief executive officer, John Lynn said there is no legal or other basis known to the company for a delay in the implementation of new rates arising from its filing of its final return certificate with the commission.
Lynn says that the company complied with the provisions of the Electricity Sector Reform Act (ESRA) of 1999. "There is no provision in the regulations for the approval by the Commission," Lynn said in that statement. The new rate has since been instituted.
Lynn said the PUC has made a great number of requests for information from GPL during the early part of 2002 and the company had to put in a considerable amount of work to provide this.
"To the best of our knowledge, all material requests for information relevant to the interim and final return certificates have been provided to the commission. The company will continue to assist the commission in this regard," Lynn said.
He noted that GPL has complied with the regulations and the tariff changes will result in a modest but "worthwhile" reduction in rates billed from this month as against those billed from April 1.
Lynn said GPL was awaiting the commission’s current review of its operations and urged that the PUC have regard to the impact its deliberations has on GPL’s ability to raise finance.
"GPL’s existing difficulties in raising finance will be aggravated if lenders are not confident that the company will be able to repay capital and interest and provide a return to shareholders," said Lynn, underscoring that funding is key for GPL’s investment and development programmes.
He said GPL looks forward to the PUC taking a position which supports the efforts of the company to raise financing and implement the development programme to benefit the economy.
But Persaud told Stabroek News that in the PUC’s calculation, a lower rate than the one being implemented by the company is required.
He reiterated that the PUC has challenged some of the figures submitted by GPL and it is still seeking answers to its concerns.
Persaud pointed out that administrative expenses in 2001 increased by 76% over the previous year and one item of increase was insurance from $24M to $105.7M. The commission, he said, has asked for copies of the insurance policies but these have not been submitted.
Further, Persaud said that sales in 2001 showed an increase of only 2.9% over 2000 and the PUC wants to know why it was such a marginal rise when the rates were much higher. He said that figures have been requested from the company to substantiate its explanation on this issue.
Additionally, he said that the commission wants a breakdown of directors’ expenses and a reconciliation of their expenses and the fees paid.
Fees of $7M and expenses of $21M were recorded for 2001 but no breakdown was provided. Persaud said there were discrepancies between the figures submitted and the audited financial report.
He further referred to the report of the GPL auditors which said that an "accurate separation of the balances in the billing system is not available" and as such the firm could not substantiate the receivables shown in the financial statements and had no other satisfactory audit procedures to confirm that the receivables were properly stated.
Persaud said despite this statement from the auditors (Ram & McRae), the final return certificate was certified by GPL’s independent firm of accountants KPMG Peat Marwick.
He conceded that it is true that by virtue of the ESRA, the PUC is not required to make a determination on the rates to be charged by the power company.
The final rate being charged to consumers on bills issued from June 1 is 12.85%.