The Guyana Power and Light Inc (GPL) yesterday stuck to its claims that the $5.2 billion in subsidies for the company cut from the national budget would necessitate higher tariffs to fund plans to curb losses, while dismissing criticism that it is engaged in “scare tactics” as ignorance.
“The investments which are finally being made in GPL now, some of which should have been done over 38 years ago, are critical to the future of the company and a reliable and efficient supply to all our consumers,” GPL said, in a harshly-worded statement in response to several criticisms of its operations and management by accountant Christopher Ram.
Ram, in a letter published in yesterday’s Stabroek News, noted that only $1 billion was requested and approved in full for GPL’s operations and he suggested that GPL Board Chairman Winston Brassington’s suggestion that tariffs could be hiked by 17% was nothing but a scare tactic in wake of the opposition-led cut.
His letter followed warnings by both Brassington and GPL CEO Bharat Dindyal about the likely impact on consumers as a result of the cut.
However, GPL said the insinuation that since the $1 billion was approved it could not increase its tariff to fund its capital programme is a demonstration of “gross ignorance” of its licence. “Ram should know that GPL has foregone revenues of over $27 billion to the end of this year. GPL can increase its tariff to recover all $27 billion and can utilise the money for operations or capital works, if it so wishes,” it said, while adding that Ram’s statements were “shocking” in the light of the fact that his firm audited GPL’s financial statements for six years and he should have therefore been very knowledgeable of the company’s licence.
And while Ram pointed out that it is the Public Utilities Commission (PUC) and not GPL that has the authority to approve increased rates and only after public hearings, GPL noted that it has never said that it does not need the PUC’s approval. “We are saying we have the provision in our licence and the justification to increase tariffs. We have always followed due process and will continue to do so,” it added.
At a news conference on Monday, Dindyal suggested that the opposition’s decision to cut its subsidies was as a result of a poor understanding of the company’s operations.
Ram called it a “reckless” accusation in the light of the company’s poor operations and management as well as its failure to account for $6 billion in subsidies provided by government last year. But GPL said the opposition parties raised serious questions by cutting funds for interventions intended to address high losses and inefficiencies that were the very source of their concerns about the company’s operations. It added that its management was questioning whether the opposition understood that for the first time in the history of either GPL or its predecessor, the Guyana Electricity Corporation (GEC), money was secured from the Exim Bank of China, the Inter-American Development Bank and from PetroCaribe resources to fund technical loss reduction programmes. Many of the major projects to reduce technical losses are slated for completion this year while some were completed in December last year, it further said.
According to GPL, both the AFC, in its column in last Sunday’s Kaieteur News, and Ram, in his letter, incorrectly cite lines losses at 30% and 32%, respectively. Ram also said that over the approximately six years of the Brassington-Dindyal partnership at the helm of GPL, line losses remained at around 32% when they should be no more that 15% to18%, which he attributed to “inappropriate policies and inept management” at GPL.
But the company said its total losses in 2006 were 37.6% (12-months rolling average) and were 31.7% at the end of 2012. “So much for lack of progress,” it added, while emphasising that line losses were 14.65% at the end of 2012 and non-technical losses were 17.05%.
It further noted that reducing losses involves more than management. “Reduction of line losses is capital intensive and the IDB has approved US$3.7 million for a pilot project in GPL to address maybe 7% of our problem. Unfortunately $500 million of this has been cut now,” it observed, while suggesting that Ram speak to the IDB about the over US$300 million being spent in the Dominican Republic now on loss reduction as well as the loans available to government for GPL’s loss reduction programmes.
Since last year, it also pointed out, the investments have been targeting loss reduction and further generation capacity as demand maintained its growth trajectory. “Between 1993 and present our peak demand has almost tripled and continues to grow. Commercial and industrial demand is now approaching our domestic peak showing that our stable tariffs, in spite of high fuel prices, are encouraging these users to expand,” it said.
In response to Ram’s concern over GPL’s growing indebtedness to the government, the company said that past loans were warranted since GPL’s tariffs are being intentionally suppressed in the face of skyrocketing fuel prices to avoid passing the burden directly to consumers. The projected cost for fuel in 2013 is at $24.7 billion, as opposed to $24.2 billion last year, it noted, while questioning a contrary claim by Ram. “Any accountant would know that in the absence of internally generated funds, companies generally utilise long-term loans to fund long-term capital programmes and would seek the cheapest possible source of funding. The government secures these loans on highly concessional terms and on-lend them to GPL. This is where the allocations in the 2013 capital budget were coming from,” it added.
GPL also claimed that it has always accounted fully for all sums provided by government. Its 2012 audit, it said, is completed and would be issued by the end of this month. “The clean audit opinion would act as testimony to our accountability,” it added, while boasting that this has been the case since 2004.
Ram also noted that the company has failed to table its 2011 Annual Report in the National Assembly, although it was due in the middle of last year and he said the House should have asked that the Prime Minister, who has sectoral responsibility, present the report before it entertained any request for funding. GPL did not deny missing the deadline, saying only that the report is complete and awaiting the shareholder’s approval.
GPL also accused Ram of engaging in “plain old-school politics,” in response to his labelling the management “incompetent” even as he lamented that the staff was “overpaid” based on the $271 million plus perks paid out to 29 members of management staff up to three years ago. “This works out at $9,400,000 per year per person,” he said, while pointing out that the payouts would have gone up in the two years since.
The company said a comparison of the management staffers’ remuneration with those of similar positions within sister Caribbean utility companies would be instructive. “If the GPL management is so overpaid, why it is that the high turnover at this level mirrors that of other large companies in the country?” it also questioned.
