Dear Editor,
GPL would like to respond to the letter from Christopher Ram in the Stabroek News issue of April 24 titled ‘Only $1,000M was requested for GPL’s operations and the National Assembly approved that; the warning of a tariff increase is nothing but scare tactics.’ The letter from Mr Ram evidences even greater ignorance of GPL than the AFC column in last Sunday’s Kaieteur News.
At our press conference last Monday we set out to explain that:
While the joint opposition was strong in their condemnation of our high losses and the fact that consumers were paying for this, they cut the allocation for investments that were intended to address the same losses. We were wondering whether they understood that for the first time in the history of GEC and GPL that money was secured from the Exim Bank of China, IDB and from PetroCaribe resources to fund technical loss reduction and many of the major projects are well advanced and now are threatened with suspension when completion is within sight.
The AFC column in last Sunday’s issue of the Kaieteur News exposed how little is known about the realities of GPL. In the column, the AFC claims that 30% of the power we generate is lost in the lines before it gets to our consumers. When this level of misunderstanding exists and it is the basis on which a major decision is made then one has to seriously wonder.
Many of the major projects to reduce technical losses are slated for completion this year while some were completed in December last year. This includes:
New substations at Sophia, North Ruimveldt, Good Hope, Golden Grove, Vreed-en-Hoop, Edinburgh and Columbia and modification to substations at Sophia, Kingston and Onverwagt.
Transmission links between Kingston and Vreed-en-Hoop, Vreed-En-Hoop and Edinburgh, Sophia and North Ruimveldt, and Sophia and Onverwagt.
All these interventions are being made to reduce line losses and improve efficiencies, which the Prime Minister spoke about in Parliament.
We would like to respond to each point raised by Mr Ram.
Mr Dindyal was reckless to accuse the opposition of a poor understanding of the company’s operations – When the AFC is saying that GPL’s line losses are 30% (it’s actually 14.65%) and that this is a burden to the tariff and needs to be reduced then turn around and cut allocations, which are available for the first time to reduce the same losses, and most of the major projects are well advanced, one has to seriously question if they know what GPL is doing.
The $6B approved in 2012 has not been accounted for to date – GPL has always accounted fully for all sums provided by government. Our 2012 audit is completed and would be issued by the end of this month. The clean audit opinion would act as testimony to our accountability.
They comingle money so they do not even realize that only $1,000M was requested for GPL’s operations, which was approved in full. It is nothing but scare tactics for Mr Brassington to warn about a potential tariff increase –
The insinuation that since the $ IB was approved, GPL cannot increase its tariff to fund its capital programme is a demonstration of gross ignorance of GPL’s licence. Mr Ram should know that GPL has foregone revenues of over $27B to the end of this year. GPL can increase its tariff to recover all $27B and can utilize the money for operations or capital works, if it so wishes. The statements by Mr Ram are shocking, as Ram & McRae audited GPL’s financial statements for six years and he should have therefore been very knowledgeable about GPL’s licence.
GPL owes Government $10,626 at the end of 2010 and this would have increased over 2011 and 2012 – Prime Minister mentioned on numerous occasions in Parliament that GPL’s tariffs are being intentionally suppressed even as fuel prices have skyrocketed since 2008, in Government’s efforts not to pass the burden directly to consumers. Government therefore has to provide loans to fund capital investment.
Any accountant would know that in the absence of internally generated funds, companies generally utilize 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.
Over the approximately six years of the Brassington-Dindyal partnership at the helm of GPL, line losses have remained stuck at 32% when they should be no more than 15 – 18%. This he attributes to inept management. – We are seeing the same gross ignorance with respect to losses displayed here by Mr Ram. Our 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. We would like to reiterate that line losses were 14.65% at the end of 2012 and non-technical losses were 17.05%.
More importantly, Mr Ram thinks reducing losses has everything to do with management. Reduction of line losses is capital intensive and the IDB has approved US$3.7M for a pilot project in GPL to address maybe 7% of our problem. Unfortunately $500M of this has been cut now.
He should speak to the IDB and ask what the over US$300M that is being spent in the Dominican Republic now on loss reduction is being used for. He should also ask the IDB why they continue to make loans available to Government for GPL’s loss reduction programmes. Mr Ram seems to know more about the challenges of loss reduction in GPL than the experts at the IDB.
GPL has failed to table its 2011 Annual Report in the National Assembly – In all the years after Ram & McRae’s tenure of auditing GPL’s financial statements, subsequent audit firms have completed their audits long before the company’s Final Return Certificate is due for filing. Moreover, since 2004 GPL has always had and continues to have clean audit opinions. The 2011 Annual Report is complete and awaiting the shareholder’s approval.
The cost of fuel in 2013 is projected to be lower than in 2012 – It’s hard to imagine how Mr Ram has discerned that the projected cost for fuel in 2013 is lower than in 2012 when the 2012 expenditure was $24.2B and in 2013 is projected at $24.7B.
Management is not only incompetent but overpaid. In 2010, 29 management staff was paid a total of $271 plus perks – With Mr Ram being so ignorant of GPL, one would wonder what yardstick he used to gauge management’s competence. This sounds like plain old-school politics. In terms of remuneration for management, it would be useful if he could compare their remuneration to those of similar positions within CARILEC (Sister Caribbean Utilities). 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?
GPL does not have the ability to increase rates but only the PUC – GPL has never said that it does not need PUC 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.
General Comments
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.
Between 1993 and 1997, all the investments in GEC addressed some generation capacity. From 2004 to 2008, all the investments were directed at extending networks to accommodate potentially 50,000 new customers. 2009 to 2011 saw further investments to increase mainly generation capacity as unprecedented accelerated growth in demand had threatened to outstrip supply.
Since last year the investments are targeting loss reduction and further generation capacity as demand maintained its growth trajectory. Between 1993 and the 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.
Mr Ram should know that for the first time in the history of GEC and GPL resources are being made available to reduce technical losses, but unfortunately the joint opposition has seen it fit to cut the allocation. This is perhaps due to poor advice from ‘experts’ like Mr Ram, or ignorance.
Ignorance takes the dictionary meaning ‘lack of knowledge,’ not ‘stupidity’ as suggested by Mr Ram. GPL has the utmost respect for all members of the National Assembly, indeed all Guyanese.
Mr Ram, who wants to portray himself as an expert on all matters under the sun should know that sometimes he would be confronted and exposed. A little knowledge could be a dangerous thing.
Yours faithfully,
Wadecia Donald
Asst Public Relations
and Communications
Officer GPL
