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The Guyana Power and Light Inc. (GPL) yesterday submitted to the watchdog Public Utilities Commission (PUC), prescribed information showing that energy (kWh) rates will be increased by between 13.9% for residential customers and 16.6% for commercial customers from February 1, compared to rates billed in December last year.
GPL said this proposed increase is in accordance with rules specified in the Electricity Sector Reform Act 1999 (ESRA) and the GPL Licence which govern the annual tariff revision process.
"While no one likes to see a tariff increase, we wish to note that the increases are needed to permit GPL to meet expenditures essential to the maintenance and improvement of electricity supply to our customers," Chief Executive Officer of GPL, Mr. John Lynn told a news conference at the Main Street Plaza Hotel, Georgetown.
"For 65% of residential customers (about 74,000 households), the revised tariff will add $550 or less to their monthly electricity bill," he said, adding that this includes 45% of customers - about 52,000 households - who will experience an increase below $300 per month.
According to him, the papers filed with the PUC specify the basis on which the 2003 electricity tariffs will initially be determined. Lynn noted that the annual rate review process was provided in legislation and the licence so that GPL would have sufficient funds, including the ability to raise funds, required to develop the company and to improve Guyana's electricity system.
But the Georgetown Chamber of Commerce and Industry was quick to denounce the hikes, arguing that GPL cannot justify the sharp increases. (See other story)
It is understood that 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.
Lynn indicated that the rate increase is mainly the result of the following factors:
** 6.6% for generation related costs including fuel
** 1.9% for wage and benefit increases negotiated in 2002
** 6.1% arising from customers who have failed to pay bills, and
** 1.9% due to miscellaneous cost increases including insurance costs.
Mr. Joseph O'Lall, Head of the Guyana Energy Agency (GEA) told the Chronicle in an invited comment that the increases were illegal and amounted to blackmail.
"It is unconscionable and needs to be rectified. This is a clear case of GPL being rewarded for inefficiency in their system which they don't care to rectify," he argued.
He charged, too, that the tariff increase was tantamount to extortion of consumers.
"Look at any country in the world or a series of countries and look at the consumption of energy per capita then look at the standard of living of that country. The correlation is high in all cases.
"This is the only sector of any economy with such consistency. However, while the supply of affordable and sustainable energy is a necessary requirement, it is not a sufficient parameter. We will need the vertical integration of especially the industrial sector", O'Lall said.
Lynn contended that there have been improvements in the operations of GPL in recent times but "it's just that we haven't been able to do the investments that we had originally planned because of the shortage of capital".
During 2002, sales by GPL reached about G$12 billion of which about 94% was collected. In 2001, 87% of the sales was collected, which, according to Lynn, was a significant improvement.
"Right now the company has to provide for the non-payments of bills; this is a standard electricity practice all over the world," he said.
"Having said that, failure to pay bills is still at a reasonably high level...(and) those costs would have to go on to other customers," the CEO of the power company asserted.
Lynn also noted that GPL has approached international financial institutions to assist the power company in its current financial problems.
He, however, pointed out that for various reasons, these international financial institutions were not comfortable with doing that right now.
A statement from the GPL Public Relations Office noted that the power company is a fully integrated Guyanese electrical energy generation, transmission and distribution utility. It said the management and staff of GPL seek to provide customers with reliable and fairly priced power and to expand service to as many new customers as possible.
As such, GPL said it was proud to take a leading role in the economic development and the social well being of Guyana.
On the question of how tariff increases or decreases are calculated, GPL said that in January each year, if the difference between GPL revenues and GPL costs (including depreciation) for the previous year is less than the Allowable Return, then electricity rates for the year are increased by the percentage necessary to achieve the return in that year.
Similarly, if the difference between revenues and costs is more than the allowable return, the rates for the year are decreased.
On the question of what authority allows GPL to increase tariffs, the company indicated that its licence and ESRA provide for an annual review of GPL tariffs. As well, adjustments up or down to provide for fuel and currency movements are allowed quarterly, the company said.
In negotiating the formation of GPL, it was agreed between the Government and the strategic investors that GPL would need a stable, predictable tariff environment to ensure that it had the best chance of raising funds to develop the company and improve the electricity system thus ensuring enhanced services to customers.
There have been claims that GPL's tariff changes are unregulated, but GPL yesterday assured that this was not true since the company was subject to strict regulations.
Also at yesterday's news conference were Mr. Philip Jacques, Chief Financial Officer, GPL; Ms. Marjorie Chester, Public Relations Officer, GPL; and Executive Director of Guyenterprise, Mr. Vic Insanally.