A five-year development and expansion (D&E) plan for Guyana Power and Light (GPL) assumes no increases in tariffs next year but forecasts an 8% increase in 2005, 0.4% in 2006 and then a reduction of 6% in tariffs in 2007.
The US$31M plan requiring an additional US$50M in new generation from independent power producers, equivalent to about 45 megawatts(MW) of new generation, was submitted recently to the Public Utilities Commission(PUC) for approval.
the plan acknowledges that high tariff rates have pushed businesses off the grid and into self-generation and confirms that peak demand in the Demerara Interconnected System dropped by 15% in the last three years while gross generation has been increasing.
"The tariff currently charged by the company has resulted in a number of customers moving to self-generation as the primary source of power," the plan says. It also states that efforts to correct deficiencies in the metering of large customers have resulted in a number of large customers "switching to self-generation when confronted with the actual cost of electricity provided by the GPL.This has resulted in a decline in gross generation and sales."
Since 2000, GPL has lost 27 industrial customers, 21 of whom left the grid last year. The company also lost 375 commercial customers since 2000 with 259 departing in 2002. Against this loss of 402 business clients, 12,683 new residential customers were added to the grid in the same period.
As a result of the loss of business customers, GPL electricity sales are projected to drop from the $12.15B in 2002 to $11.75B this year before increasing to $13.4B next year, followed by a projection for $14.9B in sales in 2005 and then $16B in 2006/2007.
"Sales growth [from] 2004 to 2007 shows a modest increase based on the expectation that commercial losses will be brought down from 25% in 2003 to 21% in 2007 and that the `recovery' will translate fully into sales," the plan says. It anticipates that the loss reduction will translate into sales, realising US$8M over the period and is also premised on the customer base increasing from 126,000 this year to reach 177, 310 in 2007.
But the major challenges still confronting the power company are financing and system losses. System losses are now at 43% instead of the 24% projected at the time of privatisation and compared with 40% in 1999.
The D&E plan projects to deal with commercial losses in the first instance as part of the company's stabilisation phase through replacement of defective meters and going after the 18,000 customers whose meters record zero consumption of electricity as well as fraudulent adjustment to meters.
The plan anticipates that by the end of the fifth year, at least 50% of the needs for electricity in Berbice will be met from renewable sources of energy and 5% in the Demerara system.
The aim of the plan, according to the designers, is to maintain electricity supply to customers at "reasonable" levels, to reduce system losses to avoid steep tariff increases and to generate sufficient cash to fund the capital investment programme, which would include a contribution to the Unserved Areas Electrification Programme (UAEP).
"The D&E programme seeks to ensure that tariffs are stabilized and even reversed in the long term to maintain its current customer base and to encourage customers to return to the system," the plan crafted by the new managers says. GPL intends to review studies on tariff rebalancing to allow for a revenue- neutral position. Tariff rebalancing was a condition of the US$27M loan from the Inter-American Development Bank (IADB) for the UAEP but this loan is in jeopardy because of the change in ownership of GPL. However, the government is expected to pick up the slack in order for the project to move ahead.
Generation expansion
In the Demerara Interconnected System (DIS), GPL forecasts a need for 22MW of new generation of which 14MW will be replacing existing capacity. This is expected to be met by independent power producers given GPL's restriction on commercial borrowing. Concessionary funding has not been ruled out for GPL. The utility has been in discussions with the Amaila Falls Hydro Project as well as Delta Caribbean, which is exploring wind energy, as a possible renewable source of power supply.
But because larger consumers have indicated their intention to self-generate, GPL says its forecasts for the gross generation requirements in the five years are uncertain. "In fact the company is likely to experience a decline in gross energy for this system in 2003 compared to 2002," the plan says and assumes no growth next year and modest growth thereafter.
Peak demand in the DIS is expected to decline from 68.30-megawatt hours in 2002 (74 MW in 2001) to 61.9 MWh this year but will gradually climb to 67.86 MWh in 2007, still below the 2001 generation.
GPL expects to see the Kingston Power Station retired in 2006, subject to the findings of a feasibility study of refurbishing two of the Kingston units for 60-hertz operations. The two Niigata units at the Versailles power station are to be retired by the end of 2005 as well as the Crossley engines at the Garden of Eden.
The plan projects for 15 MWh of reserved capacity which when catered for, realises a generation shortfall of 0.93 MW this year and peaking at 20.86MW in 2007.
To cater for this shortfall, the plan provides for the company to secure four 5.5 MW units to meet the DIS needs. The first unit will be installed next year, two units in 2006 and a fourth in 2007.
Berbice Interconnected System (BIS)
The plan projects for a greater generation growth rate of 4%in the BIS. The forecast is for peak demand in the BIS to increase from the current 15.25 MW to 18.55 MW by 2007 and as such sees the need for 20 MW of additional generating capacity before the end of 2007.
The BIS has a total of 12.5 MW in fixed plant and a number of mobile units to provide additional generation support (16.5 MW). These mobile units, the plan states, are not ideally suited as base load units.
Canefield has 10-MW capacity installed but one 5-MW set has been damaged and repairs are not considered feasible. The other unit, the 5-MW Mirrlees Blackstone Unit is to be retired. The plan forecasts zero output from Canefield from 2004, which will realise a shortfall of 6.49MW in generation that year followed by 11.15MW, 15.84MW and 18.55MW in the succeeding years.
GPL is currently reviewing bids for the supply of 5MW of power from an independent power producer, which will form part of the 20MW requirements for the system in the next five years. This investment is expected to kick in next year.
GPL's plan is to purchase 10 megawatts of power in renewable energy supplies for the Berbice Interconnected System within the next three years. (Guysuco's co-generation project is expected to meet this need.) The other 10MW will replace capacity and would be secured through direct purchases in 2005 and 2007.
GPL will raise US$9M from internal resources to finance its generation requirements outside of the anticipated US$50M from independent power producers.
In the case of Essequibo, the plan proposes to install a new 325KW set at Leguan and a 2MW set at Anna Regina in 2005 via direct purchases by GPL.
Transmission and Distribution (T&D) refurbishment and expansion
The T&D plan covers the UAEP, the T&D lines in the Demerara and Berbice system as well as a major system expansion programme valued at US$17M.
This component is premised on the UAEP project restarting next year with US$1M to be provided by the government and with GPL meeting their contribution of US$1M per annum from 2005-2007.
Refurbishment of transmission lines will mainly consist of insulator replacements and would be phased over 2004/2005. The total cost of the UAEP and refurbishment over the period would be US$5.45M.
Major system expansion will cost GPL US$11.1M and will comprise frequency conversion and distribution upgrades in Demerara; the construction of a 69 kV transmission line linking Garden of Eden and Versailles and terminating at a substation at Leonora; installation of additional transformer capacity at Garden of Eden and Sophia as well as replacement of some breakers at these locations and Canefield; the construction of 69 kV substations at Eccles and Williamsburg in Berbice and the construction of a 138 kV transmission line from Sophia to Onverwagt with a substation at Coldingen. All of these had formed parts of earlier business plans that never materialised.
The frequency conversion mainly in the city and its environs will allow for the upgrading of older distribution circuits and will facilitate the decommissioning of the frequency converters which are a source of significant technical losses. This will require that the Wartsila station at Kingston operate at 60 Hz.
The transmission link between east and west Demerara will allow for the sharing of generation capacity and improve the reliability of supply to West Demerara where a deficiency currently exists. The 69kV substation at Leonora will also allow for a more reliable and secure supply of electricity to the West Coast of Demerara and will also reduce technical losses.
Increasing the transmission capacity in East Berbice to improve reliability of supply is expected to be dealt with in arrangements with independent power producers, according to the D&E plan. GPL plans to improve the transfer of power with substations at Eccles and Williamsburg in East Berbice.
System losses
Commercial and technical losses continue to be an issue of major concern, standing at some 43% of gross generation. Technical losses are currently estimated at 18% of gross generation and commercial losses at 25%. The system losses had increased from 40% in 2000 to 44% last year, instead of declining to the projected 24% as stipulated in the licence issued to the power company, which also enshrines the formula for rate increases.
The company sees total losses moving down by seven percentage points by the end of 2007 with commercial losses closing at 21% and technical losses at 15%.
The firm will establish a new division, headed by a manager, and will comprise 67 staff members, the majority of whom would be temporarily employed to go after the 18,000 meters recording zero consumption. This represents 14% of the customer base. This exercise is to be completed in six months and will cost G$27M.
GPL will also seek to conduct further analysis of consumption patterns with the aim to check and selectively replace defective meters. Once the meter inspection is completed for the 600 large customers and the 18,000 recording zero consumption, GPL will then shift focus to replace 10,000 meter installations per year from 2005, initially concentrating on small business customers and then progressing to residential customers. However, a major constraint will be financing.
The plan will also seek to utilise the government electrical inspector to have all customers change their interface with GPL in the next five years to the current standard, to curb theft. Theft, the company says, has been facilitated through the historical design of the metering service, which is easy for consumers to effect illegal connections. GPL also plans to review legislation to deal with illegal connections.
GPL says that it intends to undertake a rigorous exercise of checking old consumers' accounts and premises and existing customers' accounts to identify low or erratic consumption patterns. More advanced methods of detecting theft such as grid metering equipment cannot be afforded by the company. The company says it plans to sensitise stakeholders on the effect of thefts on the company and will seek their support to curb it. The company also intends to look at demand side management strategy to educate consumers on the economic use of electricity. The plan is also to deal with GPL's customers who collude with thieves of electricity.
A customer verification exercise and updating of the billing database is also to start in this quarter and continue next year. This is to validate customer data as a preparatory measure to institute a new billing system in 2005.
Efforts in the recent past to combat the system losses had been concentrated on verifying the accuracy and suitability of the metering of large consumers. A concentrated effort to change meters of large customers in a small part of the city had also been attempted but the losses increased as a percentage of gross generation.
GPL recognises that there needs to be about a 28 percentage points reduction in system losses for the company to meet acceptable standards of performance.
GPL had negotiated a 20 million Euros loan from the European Investment Bank for major capital expansion but has been unable to secure matching funds to proceed with the transaction. In addition, the company was unable to provide US$1M annually in matching funds for a five-year Unserved Areas Electrification Programme, stalling that project approved since January last year.