GPL outlines $120M five-year development and expansion plan
Kaieteur News
July 16, 2004
The Guyana Power and Light (GPL) has prepared a five-year development plan that requires the investment of US$120 million and demands the contributions and commitment of everyone.
Representatives of the Board and Management of GPL presented the plan to Prime Minister Samuel Hinds who carries responsibilities for the energy sector.
In the plan, GPL recommended that Government continue to forego the return on its equity in GPL over the period 2004-2008, so that rate increases may be kept low. To ensure reliable generation, the company sees the need to install a total of 60 -65 MW of new electricity generating units in various locations according to a phased schedule.
It also envisages that the steam generating station at Kingston and a number of old diesel generating sets, as well as a number of small sets, will be retired as the new generation units become available.
The company will seek to avoid having to finance directly all of the estimated US$70 million in new generation by contracting IPPs, (Independent Power Producers) including GUYSUCO’S planned cogeneration facility at Skeldon and DELTA’s Wind Power farm at Hope Beach.
GPL hopes that the cost of electricity purchased from IPP’s would be no greater than the cost incurred by the sets being replaced.
According to Prime Minister Hinds, the company reported that loss reduction continues to be one of its major concerns and it projects reducing total losses to 30 percent over this period.
The company proposes to expend US$21 million in improvements in its Transmission and Distribution Systems, including the construction of a number of substations. This will reduce technical losses and also improve voltage levels, thereby reducing the occurrence of low voltages.
Further, the company plans to complete the conversion of 50 cycle areas in the Georgetown area to 60 cycles, and then retire the frequency conversion station at Sophia. The reduction of commercial losses or theft of electricity will be addressed primarily by checking all meters, replacing all defective ones and changing all meter installations to the new standard.
GPL projects an investment of US$2.3 million in meter upgrading. The power company has recognised that billing problems is a major issue with customers and proposes to invest about US$2 million in an improved billing system. Included in the company’s development plan is the expenditure of US$23.5 million, US$21 million coming from an IDB funded programme of US$27.4 million, to extend electricity to more than 30,000 households in more than 200 low income areas across Guyana.
The company sees the legal provision of electricity as eliminating excuses to seek electricity illegally and contributing to the reduction in commercial losses. The Board and Management recognised that this level of minimum investment, whilst it will bring improvements in reliability, eventually stabilising or reducing rates, would initially bring additional financing costs.
According to the Prime Minister, the Board and Management of GPL expressed concern that the returns to new equity, whether local or foreign, at usual commercial rates of return, would add significant costs to the company, which costs would need to be met from the electricity rates.
The Company, therefore, sought the Government’s assistance in pursuing the maximum amount of sufficiently concessionary financing from multilateral agencies and bilateral assistance, including credit lines.
It was, however, noted that GPL may nevertheless need to raise directly, significant amounts of new equity to complete the financing of this programme. It was recommended that the Government continue to forego the return on its equity and debentures of about US$50 million that it currently holds in GPL.
Thus, tariffs will continue to be relieved of a charge of about U8$10 million per year and there is a good chance that the company will be able to hold increases in the average rate to a minimum.
Prime Minister thanked the Board and Management for their presentation, recognising their struggles to continue the development, improvement and expansion of electricity supply at zero or minimum increase in average rates, with the Government foregoing the returns on its equity.
He urged that four essentials be observed to ensure the success of the programme
and for a reliable electricity supply with which consumers can be happy. These are:
i) Widespread local participation in providing the financing of this programme. The Prime Minister advocates the acceptance of a modest return of local Treasury Bill rate plus 30 percent investments in our electricity utility;
ii) Zero tolerance for any stealing of electricity: zero tolerance with respect to any consumer, or any employee of GPL or of its contractors, or anyone in the public who arranges for theft of electricity;
iii) A renewed sense of responsibility and commitment of each of the 1200 employees of GPL to providing courteous, lawful service to the public, that is as efficient, and as effective as possible and hence incurring the lowest possible costs.
iv) Consumers utilising electricity more thoughtfully and more sparingly so that they use only as much electricity as they have budgeted for. To this end, consumers should learn to read their meters and record the readings regularly so as to keep themselves in check.
The power company, by law, is required to submit a five-year plan that will be reviewed annually.
According to the Prime Minister, GPL is in a competitive situation and if the company does not recover its cost, production cannot be sustained.
He noted that cross-subsidy is posing a problem both for consumers and the power company.
The Prime Minister explained that it costs much more to supply a number of domestic or small consumers with an equivalent quantity of electricity than it would cost to supply a single industrial consumer.
This is taking into account factors such as billing, monitoring, maintenance and supply.
He noted that persons have the right to self-generate and many large companies have opted to do so, removing their consumption requirements from GPL’s system.
Some individuals have also opted not to source their power supply from GPL going for wind and battery power instead.
According to the Prime Minister, if the large consumers are to come off the system, small consumers will have to pay more because they will have to absorb the full cost of production.
According to Prime Minister Hinds, it is anticipated that over time, GPL may need to re-balance its tariffs so as to allow industrial consumers to stay on the system. He explained that even if small consumers then have to pay more, the cost would still be less than if they have to bear the full brunt of production costs.
At present, the government, by foregoing its return on equity in the power company, is losing close to US$10 million in income per year.