GPL tariffs up sharply
-to pay for 2.6B shortfall
By Gitanjali Singh
Stabroek News
January 29, 2003
The power company yesterday announced a 21.68% increase in tariffs over the rates set in 2002 to make up for a $2.6B shortfall in last year's revenue requirement.
The company's revenues for 2002 were $12B. While customers will feel the brunt of a 21.68% hike on their December bill, the actual rate of increase would be 13.9% for residential customers and a 16.6% for business customers.
A GPL press release states: "The tariffs now filed with the PUC are 21.68% higher than the tariffs associated with the filing of the final return certificate in 2002. The difference between this percentage figure and (the 13.9% and 16.6%) is explained mainly by the separate fuel surcharge (approx 7%) which applied during the Q4 2002 (no surcharges apply during the first quarter of the year."
Customers receiving bills from the start of February will see the 21.68% increase reflected in both their fixed charge per month as well as the variable charge per kilowatt hour.
Residential customers using less than 100 kilowatt hours per month will now pay a fixed charge of $359.50 per month, an increase of $64.05. The energy charge has been increased to $38.13 or by $6.79. That is, if a person burns 75 kilowatts of power per month, his or her total charges will now be $3219.25 per month, an increase of $573.30 on the effective rate in 2002.
The same fixed charge applies to residential customers using over 100 kilowatt hour of power per month. However the variable rate per kilowatt hour moves from $34.73 to $42.26, an increase of $7.53 per kilowatt hour. That is, if a consumer burns 200 units of power per month, his bill would reflect total charges of $8811.50, an increase of $570.05.
According to John Lynn, Chief Executive Officer of the Guyana Power and Light (GPL), 52,000 households (45%), because of their consumption pattern, would experience increases in their bills below $300 per month. And 74,000 households (65%) would see an increase of $550 per month or less.
Fixed rates for commercial customers are now $2,394.59 per month whilst the energy charge per kilowatt hour moves up by almost $10 to $55.08.
Industrial customers' fixed energy charge is now $1708.55 and their variable charge is at $48.47 and $45.86 per kilowatt hour.
The public lighting charge moves from $31.99 per kilowatt hour to $38.93.
The new rates are based on the interim return certificate filed by the power company yesterday afternoon with the Public Utilities Commission and may be subject to change when the company submits its final return certificate.
Since October 1, 1999 when AC Power took control of the management of the power company, electricity rates have almost doubled. Residential rates have increased by 96% and business rates by 76%.
Lynn yesterday told reporters that the rate increases would reflect 6.6% for increases in generation related costs including fuel; a 6.1% increase for customers who have failed to pay their bills, 1.9% for wages and benefit increases negotiated last year and 1.9% for increases in miscellaneous costs including insurance and collection costs.
He said it was the custom of utility companies worldwide to charge all customers for those who have defaulted in their payments and not a new custom here.
However, the Guyana Power and Light incurred over $2 billion in expenses in 2002 because it did not curb line losses to the required level. Because of the level of technical and commercial losses within the system - estimated by Lynn as 15% and 25% respectively - the company had to over-generate close to 160,000 megawatt hours of power to satisfy a demand of about 300,000 megawatt hours.
Asked to justify the increases in face of this over-generation and the company's inability to stem the losses, Lynn told Stabroek News that GPL had been making progress since early last year in curbing thefts by a concentration of large customers.
He said more needed to be done and GPL was doing the best it could in the circumstances. He also insisted that the increases are as a result of the application of the rate base formula enshrined in the agreements between the government and AC Power which gives it a 23% return on equity.
Lynn said that there was never sufficient funds to invest in the transmission and distribution system and benefits in this system were to have been a by-product of investment in restructuring the network to reduce loads on the line and improve voltage stability among other issues. He said that the 3500 to 4000 new poles planted have resulted in some improvements in the system.
Asked about AC Powers' guarantee to the government at the time of privatisation that it had the ability to raise the financing to invest in the utility, Lynn said the investor has the ability but GPL's condition does not allow it to do so. He referred to the European Investment Bank demand for matching funds to be raised for GPL to secure a US$20M loan, which GPL has been unable to do.
He insisted that it all boiled down to concerns about the company being able to secure the tariffs necessary to meet its financial commitments and as a result, GPL is considered a high risk debtor.
Lynn said the investors were willing to inject fresh equity into GPL but this would all be discussed in the talks between the government and the Commonwealth Development Corporation currently underway.
As to the US$3.45M final tranche payment for 50% shares in GPL by AC Power - held in an irrevocable letter of credit with CitiBank - which has been put on hold, Lynn said that arbitration would settle this issue. He confirmed that AC Power is saying that the PUC's order requiring $1.3 billion in compensation by GPL to customers is being used as one of the conditions the government was deemed not to have fulfilled to have this tranche released.
Asked about the efficiency of the GPL operation Lynn said that the company was run "as efficiently as it could have been run" in the last three years.
