Pressure mounts on GPL
-as residential tariffs almost doubled in 3 years
Stabroek News
January 21, 2003
Since privatisation, charges for the use of electricity have almost doubled and concern is mounting that the situation could only get worse unless immediate measures are instituted to cut technical losses and theft.
Another 15% increase is looming from February 1 and already a number of businesses have indicated that it may make better sense to unhook from the grid and invest in self-generation. Since AC Power took over management of the Guyana Power and Light on October 1st, 1999, residential rates per kilowatt hour have increased by 96% and business rates by 76%. Fuel and foreign currency surcharges and rebates have also entered the equation.
These increases provide no incentive to stop thefts by businesses or residents and there are many incidents of residents stealing current off the main line before it enters the meter.
Whilst there has been greater stability in the supply of electricity since privatisation, the benefits anticipated with the reduction of losses (via transmission and thefts) to offset the need for raising tariffs have not materialised. The government is currently re-negotiating aspects of its agreement with AC Power for the joint-venture power operation and hopes to be able to keep electricity charges from escalating.
But there is some scepticism over this process since among the demands by the Commonwealth Development Corporation (CDC), the government’s lead-partner in the power company, is a reported request to further dilute the powers of the Public Utilities Commission. Sources say the CDC wants the Public Utilities Act to be further amended to circumscribe the penalty that can be levied by the Public Utilities Commiss-ion (PUC).
The PUC recently ruled that the Guyana Power and Light (GPL) pay $1.3B in compensation to customers in the form of a $4.70 per kilowatt hour rebate from October 1st. This was because the PUC had deemed that the company had failed to reduce line and commercial losses as it had undertaken to do in its contract. The company appealed the decision in the courts.
CDC in its proposal to shake up the management of the company proposes that the power of the PUC be trimmed so that it cannot impose a fine of more than $20M or 20% of the average dividends paid. No dividends have been paid to date.
Technical and commercial losses at the end of 2001 were 13 per cent above the 29% target. The target for 2003 was to bring the losses down to 20%. Stabroek News has learnt that the negotiations between the government and CDC include readjusting these targets with a longer time-period.
The required investment to help curb the technical losses has not been made and because of GPL’s finances, the firm is reported to be in a difficult position to secure funding by itself. CDC/ESBI has brought in US$20M of its equity, most of which was used to pay off debt owed by the old corporation. However, the final tranche of US$3.4M which was due on October 1st, 2001 has not been paid over and is still in the escrow account at Citibank.
Sources said the CDC has put a hold on the irrevocable letter of credit to Citibank and is holding out on this sum claiming that the PUC’s compensation-ruling has affected the guaranteed tariff-setting mechanism of the joint-venture agreement.
In the negotiations, the current management team of 16 is to be replaced by four top managers to be hired by CDC while the others will be recruited by GPL, eliminating the management contract and annual management fee of US$3.6M. The four managers hired by the CDC are expected to be paid $4M each per month. CDC is also asking that ESBI be paid US$1.2M in fees to be released from the joint-venture arrangement and to retire from the management of GPL.
Another issue on the cards is the public offering of 20% of the shares of GPL. Initially, this was to happen three years after privatisation with the government’s and AC Power’s stakes diluted to 40% each. Stabroek News was told this initiative is being postponed by four years.
The government and CDC expect to reach agreement by the end of this month on the way forward for GPL. Failure to reach agreement could see the invoking of the arbitration mechanisms under the contract, sources say. (GITANJALI SINGH)
