Power rates re-balancing needed to ease burden on businesses
-Hinds tells manufacturers’ luncheon
June 24, 2003
Prime Minister Sam Hinds says electricity tariffs should be re-balanced so as to take the burden of subsidising residential customers off the back of the business sector.
Hinds was speaking at the Guyana Manufacturers’ Association’s (GMA) annual luncheon yesterday after guest speaker Ronald Alli, chairman of the power company was unable to show for the feature address because of flight problems. Hinds said re-balancing had to be looked at as the 70,000-odd residential customers were each being subsidised by almost $1,000 a month, a total of $70M. This subsidy, he said, was being borne by businesses.
Hinds said Guyana had to move more rapidly towards rate re-balancing and prices which were cost-based, although he did not set any time limits for this.
President of the GMA, Ramesh Dookhoo, lamented that the comparative advantage of manufacturers was being stripped away by the high cost of electricity in Guyana.
Tara Singh of Esso had cautioned Hinds that the movement away from the grid by businesses would exacerbate technical losses. This he later explained to Stabroek News had to do with the insufficiency of the inductive load once businesses moved away. Singh suggests that one way to correct for this loss in inductive load is for the company to purchase power from self-generators for the national grid. This offer was not commented on by Hinds who agreed that the movement of businesses away from the grid would increase the financial difficulties. He said it would not exacerbate the technical loss situation.
Hinds added that it was everyone’s right to self-generate and this would be protected by the government. He also said that tariffs were necessary for GPL to pay its way and the rates compared favourably with what had historically been in place.
The much-publicised GMA luncheon was to have been addressed by Alli but at 9.17 am yesterday the GMA was notified that the chairman had not arrived in the country the previous night as scheduled. The GMA then managed to persuade Hinds to deliver the address instead.
Hinds detailed some of the problems which had confronted the utility in recent months with the dissolution of the joint venture between the government and AC Power. He noted the reasons for the increases in rates since privatisation including the removal of the government subsidy and the need to provide a return to private capital and management fees, which took 17% of collections in 1999 and 8% last year. Increases were largely influenced by fuel price increases.
He also noted the need for capital injection to restore the system in light of technical and commercial losses. He again challenged local institutional investors and pension funds to invest in the power company.
He said a modest programme of improvement would require a US$10M cash injection a year over the next three years. He proposed a debenture and bond issue attracting the treasury bill rate plus three per cent interest over a period of five years at the end of which the debt is converted into equity.
Singh, who was the only businessperson on the floor to make remarks because of time constraints, also asked Hinds why the Independent Power Producer being sought for Berbice was only being granted a three-year contract in a US dollar investment, which could not be recovered in that period.
Hinds said the system in Berbice was overdue for overhaul and the situation with relation to supply in that region was vulnerable.