GPL to raise ‘light-bill’ by 26.7% effective May --proposal still with PUC
Written by Sunday, 09 June 2013 01:15 THE Guyana Power and Light (GPL) Company (GPL) is putting consumers on notice that arrangements are being fine-tuned for the company to levy a 26.7 per cent tariff increase to take effect from May 2013.
“The new rates have not taken effect, but the GPL Board is actively engaged in planning its implementation,” a press release issued by its Public Relations Department said yesterday. Saying that the increase was calculated based on losses it is incurring, GPL noted that its 2012 audited accounts show that for 2012 alone, the company lost $7.6 billion. The release outlined that “on May 15, 2013, GPL submitted its Final Return Certificate (FRC) to the Public Utilities Commission (PUC) that allows GPL to charge an increase in tariffs of 26.7 % effective May, 2013. The new rates have not taken effect, but the GPL Board is actively engaged in planning its implementation. “The GPL FRC was accompanied by a Notice of Compliance issued by an independent firm of accountants and GPL’s 2012 audited accounts that shows GPL losing $7.6 B in 2012,” the statement reiterated. It added that GPL last increased tariffs in 2008, over 5 years ago. The power company pointed out that “the allowable increase of 26.7% is calculated in accordance with the 1999 Electricity Sector Reform Act (ESRA) and its licence.” It said the tariff filing, called the Final Return Certificate (FRC), computes annually how much GPL may increase (or decrease) its tariffs using an internationally acceptable methodology that is based on a rate of return basis. That methodology, GPL explained, calculates the tariffs looking at GPL’s income and expenses, assets, debt and equity in the prior year (in this case 2012). The computed increase in tariffs, as stated in the 2013 FRC, is based on a deficit of $5. 2B and a headline tariff or service tariff increase of 26.7%, which is computed to recover the deficit over an 8-month period (May-Dec, 2013). GPL has published its 2013 FRC, its 2012 audited accounts, and other information on its website: www.gplinc.com Attempting to further justify its intention to introduce the steep increase, GPL -- apart from citing increased fuel cost and other variables -- blamed its decision on the recent move by the Opposition in Parliament which resulted in a cut of GPL’s capital budget by over $5.2B. The release stated categorically, “GPL regrets that as a result of funding denied (to them) it has no other option but to move in the direction to raise revenue to remain financially viable.”
And in a 6-point explanation, GPL said that the ‘permitted increase’, can be reviewed against the following:
I. The Opposition in Parliament has recently cut GPL’s capital budget by over $5.2B, despite available funding from loans provided by Venezuela, China and the IADB. All these loans would be repaid by GPL over a period of time; II. A recent CARILEC report shows GPL residential tariffs to be one of the lowest in the region (with only Trinidad, Suriname, and the Bahamas having lower rates); III. GPL’s last increase in tariffs was announced in 2007 and effected in February 2008, over 5 years ago; the average increase then was 14%, with residential customers facing only 6% and 9% and Government covering a 20% increase; IV. GPL’s fuel cost has risen from a weighted average of US$ 64 /barrel in 2006, to US$108, in 2012; in 2006, GPL’s fuel bill was $12.4 B; in 2012, this had doubled to $24.2 B; in 2012, fuel alone accounted for 83% of GPL’s tariff revenue; V. GPL has delayed implementing full tariff increases (implementing increases in only 2 of the last 10 years), resulting in GPL having foregone revenue of over $21.7 B (after taking account of the $5. 2B to be recovered from the 26.7 % increase.) VI. GPL projects that the Amaila Fall project, expected to start construction at end of 2013, will not be ready until 2017; at which time GPL expects generation costs to be reduced to half of the current version. The Amaila Falls project is therefore critical to GPL reducing its costs of generation and the impact of fuel costs on increasing tariffs.
GPL projects that within the next 5 years, at least US$ 90M will be required for investment, with considerably more needed if the power company is to make substantial reductions in technical and commercial losses.
The release concluded that GPL is expected to shortly highlight its current position and the challenges it faces, particularly given the reduction of access to loan financing for GPL from its shareholder (the Government of Guyana) to invest in critical improvements in its infrastructure.
