Private sector wants thorough audit of GPL
March 7, 2003
The Private Sector Commis-sion (PSC) says any increases in electricity tariffs should be based on a break-even position for Guyana Power and Light (GPL) as well as upon an independent audit of GPL’s operations.
The umbrella private sector body also says all utilities must be regulated in a fair manner, free from government interference.
Unveiling its position on the higher electricity rates announced in January to Prime Minister Sam Hinds yesterday, the PSC said the cash-strapped power company should consider asking the Public Utilities Commission (PUC) to defer or review the $1.3B compensation order it levied on the utility until such time as it could pay.
The PSC also said that in cases where tariff increases were subject to court action, the government must ensure that the public interest was protected at all costs in terms of reliable power generation.
“The PSC believes that it is the responsibility of the government of Guyana to ensure that the country is provided with a reliable supply of electricity at an affordable cost and in a measurably efficient manner.”
GPL has claimed a negative cash flow since its interim increases in tariffs were blocked by a court order and subsequently shut down the Kingston steam plant, which supplies power to the commercial centre. Since then, hitches in the generation system have caused prolonged blackouts.
However, whilst the company is claiming losses of $475M for 2002 (which will determine the level of recoveries in increased tariffs), it wrote off $1.1B in bad debt from its accounts. This is a move which has been questioned by consumer advocate, Ramon Gaskin. In previous years the company did not write off even half of this amount.
Meanwhile, AC Power has indicated to the government that it is willing to walk from the investment and Stabroek News understands that in a letter to Prime Minister Sam Hinds, on Monday, AC Power said if it lost the arbitration hearing on the payment of the final US$3.45M tranche, the only way it would stay on in Guyana would be if the PUC order was revoked and higher rates effected. The government has already indicated that it would not interfere in the judicial process.
The PSC, which was briefed by Hinds in early February on the negotiations and the financial status of GPL, has found that GPL failed to meets its targets and obligations under the agreements.
“We also believe that Government, as equal shareholders in GPL, is equally accountable for the proper and effective management of the company,” the PSC said, noting that the failure of GPL came as a result of a lack of capitalisation.
The commission said any agreement the government entered into for the continuing operation of GPL should provide for the company to initially be brought to a “break-even” position. It said the government should provide no guarantee of a return on investment via the payment on dividends until the system losses of 44% were considerably reduced and were in line with new targets and timeframes to be set.
The statement said the government had to immediately order an independent audit of GPL’s operation focussing equally on financial and technical operations. It said the scope of the technical audit must include a review of the current system to ascertain the true commercial and technical losses that presently exist and establish what could be considered as an acceptable rate of technical and commercial loss.
The government also needs to address capitalisation in an agreed development and expansion programme, including funding for the modernisation of GPL’s transmission and distribution facilities.
The PSC said that any management contract entered into by the government for GPL should be performance-based and the government must share responsibility for the selection and appointment of the management firm.
“The government as equal shareholders must, as a condition of any restructured agreement, be equally accountable through government for the performance of GPL’s management and should have directors who are qualified to have an opinion on the operations.”