Gov’t defends power company’s proposed tariff hike

Ignoring calls by the combined opposition for the Guyana Power and Light Inc (GPL) to hold off on any tariff increases, Prime Minister Samuel Hinds on Monday insisted that the company must be able to go ahead with the hike, saying this was coming after five years of no adjustment during which time oil prices had risen by about 60 per cent.
He said the cost of oil constitutes about 80 per cent of the cost of providing electricity. According to a Government Information Agency (GINA) release, the power company has been facing dire financial constraints over the past few years as a result of high technical and commercial losses, and this position has been compounded with the slashing of its Gy$ 5.2 billion subsidy by the parliamentary opposition during the consideration of the 2013 national budget.
As such, it has made a proposal to institute a 26.7 per cent tariff increase, which has been submitted to the Public Utilities Commission (PUC). The new rates have not yet taken effect, but the GPL board is actively engaged in planning its implementation.
At present, the average price per kilo watt hour is Gy$ 63 and with the 26.7 per cent increase, the new rate will be about Gy$ 80 per kilowatt hour.
Speaking on a programme on the National Communications Network (NCN), Hinds, who has responsibility for the electricity sector, said GPL has been foregoing the increase in tariffs that it ought to have been receiving.
The company has calculated over Gy$ 20 billion of foregone income. The prime minister said that while this increase will be very demanding on people, this adjustment should have been coming in smaller steps of about five per cent per annum.
“This 26.7 per cent is a big step, but it comes after five years of no increases and five years of greatly increased cost, especially for oil… the alternative for the future is for the annual review to be put into effect, in which case one would probably see increases of no more than five per cent per year,” he said.
Prime Minister Samuel Hinds said the annual government subsidy has been meeting a lot of the shortfalls in the income required by the company.
It has been part of the government’s efforts to ensure that customers are not made to bear the burden of the high cost. The prime minister said the utility needs to have enough money to keep its operations running, and if this tariff is suppressed, then ultimately, the level and quality of service will be degraded.
Commercial losses
With regards to commercial losses, the prime minister said that one in every 10 customers is billed for less electricity than they use. At present, the company suffers a technical loss of 31.5 per cent and there have been times when it has been as high as 41 per cent.
“The commercial losses require investments, but most of all it requires a culture change from people… it is essential that we have a culture change in Guyana with respect to paying for less electricity than one uses,” the prime minister said.
He explained that the budget cut that GPL suffered has reinforced the argument that the company should have been charging a tariff each year that is established in its licence.
With regards to the Alliance For Change (AFC) comments that the tariff hike can provoke unrest, the prime minister said that this action could lead to a complete deterioration of the system as it did in 1978 when there was no power in Georgetown for about three days.
“We have been giving great consideration to the issue of electricity tariffs, but costs eventually have to be met… our hope was that we could somehow manage until Amaila came along,” the prime minister said.
The 26.7 per cent is calculated in accordance with the 1999 Electricity Sector Reform Act (ESRA) and its licence. GPL’s 2012 audited accounts showed that the company suffered a loss of Gy$7.6 billion in 2012. Only two increases have been implemented by the company in the last 10 years.