Sections of the business community may approach government in an effort to discuss ways of mitigating the effects of continually rising energy costs on the local productive sector in the wake of the recently announced increases in electricity charges.
The Guyana Power and Light Company (GPL) announced on December 28 that with effect from January this year electricity tariffs will be increased by between 6 per cent and 20 per cent for varying categories of electricity consumers, a circumstance which company Chairman Winston Brassington has attributed to continually rising fuel prices.
A private sector source has told Stabroek Business that the electricity tariffs hike “will pose a challenge for the country’s productive sector, particularly the manufacturing sector” and will create concerns about the impact of the tariff hikes on the prices of locally manufactured goods on the domestic market as well as the competitiveness of those goods on the regional and global markets.
The source said that while the increase in electricity tariffs may not have been “altogether surprising” sections of the business community are contemplating the formulation of proposals to take to government – through the local private sector bodies – to spare the productive sector the worst effects of the electricity tariff hikes. “Nothing has been formalized as yet but the proposed initiative seeks to respond to concerns that have implications for both domestic and commercial consumers,” the source said.
Both Brassington and Finance Minister Dr. Ashni Singh have noted that up until now government has taken steps to cushion the effects of rising fuel prices on electricity charges. At a press conference held last Friday Brassington said that the current increases had come two and a half years after the last electricity rate hike in July 2005 and were still well below GPL’s operating costs. He said that while the company’s budget had factored in fuel costs at US$60 per barrel, it was paying an average of $95 per barrel in November/December 2007.
The electricity tariff hikes announced by Brassington range from 6 per cent for residential consumers using up to 75 Kwh per month to 15 per cent for commercial and industrial customers. Government agencies will have to pay a 20 per cent increase.
The private sector source told Stabroek Business that while no specific proposals have as yet been formulated for “easing the squeeze” on domestic and commercial consumers that will result from increased electricity tariffs, there was concern that operating inefficiencies within the GPL may, to some extent, have forced the tariff increase. The source added that the loss of more than $1 billion which the GPL reportedly suffered in 2007 may have been due to more than higher fuel prices. According to the source that shortfall may well be due in part to problems associated with inefficiencies in the electricity generation system as well as in its failure to collect a substantial portion of tariffs due for electricity consumption. Asked to comment on the assertion that there may be serious deficiencies in the GPL’s tariff collection system the source would only say that this deficiency was attributable to “critical deficiencies in the GPL’s operating culture.” The source declined to comment on whether the reference to the company’s “operating culture” was an allusion to persistent charges of corrupt practices within the GPL and the high incidence of evasion of tariffs. The source would only say that it was the view of “sections of the private sector” that there were issues governing the operations of the GPL that warranted investigation as part of the wider attempt to render the service more efficient.
At his December 28 press conference Brassington said that the GPL had held tariffs below the rate that it had acquired under its licence and that since 2005 the Government of Guyana, the sole shareholder in the GPL, had lowered the return on equity from 23 per cent to 8 per cent.
According to the source both the Private Sector Commission and the Georgetown Chamber of Commerce are likely to be formally approached to lend their support to the initiative to government on the electricity tariff increase.